2001/834/EC: Commission Decision of 18 July 2001 on the State aid implemented by Italy in favour of the port sector (Text with EEA relevance) (notified under document number C(2001) 2346)
Date: 2001-07-18
Institutions: European Commission
Subjects: Italy, State aid, application of EU law, control of State aid, harbour installation

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 18 July 2001

on the State aid implemented by Italy in favour of the port sector

(notified under document number C(2001) 2346)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2001/834/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 detailed rules for
the application of Article 93 of the EC Treaty (1), and in particular Article 14 thereof,

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

Whereas:

I. PROCEDURE

(1)

(2)

The transformation of the Italian port sector has been an ongoing process since 1983. It has required
in-depth structural reform following the abolition of the old regime based on exclusive rights granted
to dock-work companies and to port undertakings formed exclusively of Italian national workers,
which the Court of Justice judged, by preliminary ruling, to be incompatible with the EC Treaty in its
judgment of 10 December 1991 (3), known as the ‘Port of Genoa Judgment’.

Following that judgment the Italian authorities have adopted a series of legislative measures designed
to bring the regime into line with Community law. Compliance of these measures with Articles 82
and 86 of the Treaty has been examined by the Commission under infringement procedure 99/2048
(formerly infringement procedure 92/2221) (4).

(1) OJ L 83, 27.3.1999, p. 1.
(2) OJ C 281, 19.10.1993, p. 10 and OJ C 339, 12.11.1996, p. 6, for Case C-27/93; OJ C 108, 17.4.1999, p. 2, for

Case C-81/98.

(3) Judgment of the Court of 10 December 1991, Case C-179/90 Merci convenzionali porto di Genova SpA v Siderurgica

Gabrielli SpA [1991] ECR I-5889.

(4) Commission Decision (97/744/EC) of 21 October 1997 pursuant to Article 90(3) of the EC Treaty on the provisions

of Italian ports legislation relating to employment (OJ L 301, 5.11.1997, p. 17).

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(3)

(4)

(5)

(6)

(7)

(8)

Under the various legislative acts reforming the port sector, substantial aid has been granted over the
years, notably to facilitate the departure of redundant dock-workers, to bring the social security
arrangements in line with the standard system for employees in Italy and to cover the operating
losses of the port undertakings and dock-work companies.

The Commission has twice initiated the procedure under Article 88(2) of the Treaty in respect of this
aid. The present final decision, based on Article 88 of the Treaty, rules on both proceedings jointly,
since they both concern aid granted to the Italian port sector for the same purposes.

CASE C-27/93 (EX NN 103/92)

By letter of 25 May 1992, Italy notified a draft decree law (5), which was later converted into Law No
428/92 (6), concerning aid in favour of port undertakings and dock-work companies. Supplementary
information was provided by letters of 31 July 1992 and 15 January 1993. Since the Commission
subsequently learnt that most of the aid had in fact already been paid, the measure was considered to
be ‘non-notified aid’. Further aid measures in favour of port undertakings and dock-work companies
were subsequently implemented by Laws 236/93 (7), 84/94 (8), 343/95 (9) and 647/96 (10).

By letters dated 16 February 1994, 16 and 20 January 1995, 31 March 1995, 22 and 24 May 1995,
13 June 1995, 14 July 1995, 23 August 1995, 6 September 1995, 5 and 19 October 1995, 21
December 1995, 26 February 1996, 30 July 1996, 2 March 1996, 14 May 1996, 30 July 1996, 8
August 1996, 7 October 1996, 10 January 1997, 17 January 1997, 27 March 1997 and 6 May
1997, Italy provided the Commission with supplementary information.

Meetings were also held between the Commission and the Italian authorities on 17 June 1992, 4
March 1993, 5 and 6 April 1993, 5 and 11 June 1993, 4 October 1993, 18 January 1994, 8 June
1994, 5 May 1995, 23 November 1995, 12 December 1995, 30 January 1996, 17 April 1996, 19
July 1996, 5 and 6 December 1996, 12 March 1997, 4 June 1997, 11 December 1997 and 18
February 1998.

By letters dated 3 September 1993 and 23 June 1996, the Commission informed Italy of the
decisions to initiate and extend, respectively, the procedure under Article 88(2) (ex Article 93(2)) of
the Treaty in respect of the measures referred to in paragraph 5. Those decisions were duly published
in the Official Journal of the European Communities (11). Interested parties were invited thereby to submit
their comments on the aid.

CASE C-81/98 (EX N-421/97)

(9)

By letter of 27 May 1997, Italy notified the Commission of aid envisaged under a new draft decree
law on other provisions regarding ports (12), which was later converted into Law No 30/98 (13). By
letters dated 27 November 1997, 11 March 1998, 28 May 1998, 10 June 1998, 17 July 1998 and

(5) See footnote 2. Decree-Law No 370 of 7 September 1992 deferring urgent measures provided for by employment

law.

(6) Law converting Decree-Law No 370/92. See footnote 5.
(7) Conversion into law, with amendments, of Decree-Law No 148/93 on urgent measures in support of employment.
(8) Law reforming port legislation.
(9) Conversion into law, with amendments, of Decree-Law No 287/95 on extraordinary and urgent measures in favour of

the port sector and shipping companies.

(10) Conversion into law, with amendments, of Decree-Law No 535/96 on urgent measures for the port, maritime,

dockyard and shipping sectors as well as aid to guarantee certain air connections.

(11) See footnote 2.
(12) See footnote 10.
(13) Conversion into law, with amendments, of Decree-Law No 457/97 on urgent provisions to develop the transport

sector and boost employment.

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17 November 1998, Italy provided the Commission with supplementary information. Meetings took
place on 11 December 1997, 24 July 1998 and 23 September 1998 between the Commission and
the Italian authorities.

(10)

(11)

(12)

By letter of 21 January 1999, the Commission informed Italy of its decision, inter alia, to initiate the
procedure under Article 88(2) of the Treaty in respect of aid to the port undertakings and dock-work
companies, to reserve its position with regard to public support for the port authorities and to
request further details about the public support envisaged for dredging purposes.

The Commission decision to initiate the procedure was published in the Official Journal of the
European Communities (14). The Commission invited interested parties to submit their comments on
the aid.

By letter of 21 April 1999, the Commission asked Italy to provide supplementary information to
that provided in part by letters dated 1 June, 28 September and 25 October 1999. Meetings were
also held between the Commission and the Italian authorities on 17 September 1999 and 26
November 1999.

INFORMATION INJUNCTION

(13)

Further examination of the information received reinforced the Commission's initial doubts, particu-
larly as regards the exact amounts of aid granted and the precise beneficiaries of that aid.

(14) On 12 July 2000, the Commission took the decision to enjoin Italy to submit all the necessary
information to assess the compatibility with the common market of the schemes in favour of the
Italian port sector. Details were requested notably about the amount of public financial support
granted to the port undertakings and dock-work companies under Laws No 428/92, No 236/93, No
84/94, No 343/95, No 647/96 and No 30/98 (see recitals 5 and 9 of this Decision) and the
allocation criteria applied. The information requested was due within one month of notification of
the Commission's decision. After being notified of the decision on 14 August 2000, the Italian
Government asked for an extension of the deadline by one month to reply to the injunction, which
the Commission accepted.

(15)

Italy responded to the information injunction by letter of 12 October 2000. A meeting between the
Commission and the Italian authorities to discuss that letter was also held on 25 October 2000.

(16)

Following representations from the Commission with the Italian authorities, Italy has come into line
with Community law by amending its legislation in the port sector (see recital 25 of this Decision).
Accordingly, the Commission decided, on 23 May 2001, to close the infringement procedure
99/2048 (see recital 2).

II. DESCRIPTION OF THE AID

BACKGROUND

(17)

The aid granted by Italy concerns port handling operations in all Italian ports. Port operations means
the activities listed in Article 16(1) of Law No 84/94, i.e. the loading, unloading, embarkation,
disembarkation, storage and transhipment of all types of goods.

(14) See footnote 2.

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(18) At the time of the Port of Genoa Judgment (15), the market for port operations, as regulated by the

Codice della Navigazione (Italian shipping code), took the form of a dual monopoly in Italy:

— on the one hand, port undertakings (generally controlled by the port authority) had the
monopoly for the organisation of port operations. These undertakings were granted an exclusive
right to carry out port operations; in practice, although several undertakings were granted the
right in each port, the right was always limited to a specific market segment (various goods,
containers, fresh produce, etc.) which justifies the conclusion that it was in effect an exclusive
right (on the reference market); however, these undertakings were not authorised to use their
own workforce to carry out the operations,

— on the other hand, dock-work companies had the monopoly for carrying out port operations: in
each port, an association of dock-workers constituted as a dock-work company was granted the
exclusive right to supply (to the undertakings referred to in the first indent) the necessary labour
to carry out the port operations in question,

— in addition,

it was prohibited for a vessel to load or unload using its own crew.

(19)

(20)

(21)

Furthermore, under Italian social legislation (16), dock-workers were subjected to a particular social
security system which was separate from the general social security system operated by the Istituto
Nazionale di Previdenza Sociale (INPS (National social security institute)). That system was based on a
mutual insurance fund supplied by contributions from the dock-work companies. It established for
the dock-workers social rights and obligations that did not correspond to the general rights and
obligations for employees under the general social security administration in Italy (17).

In the Port of Genoa Judgment, the Court of Justice examined specifically the question of port
operations involving ordinary freight at the Port of Genoa and found that the port undertakings in
question had a legal monopoly over a substantial part of the common market (for the sectors of
organisation and performance of dock work respectively).

It then concluded that the port undertakings enjoying exclusive rights in accordance with the
procedures laid down by the national rules in question had occasion, as a result, either to demand
payment for services which had not been requested, to charge disproportionate prices (infringements
under Article 82(a) of the Treaty), to refuse to employ modern technology (which has the effect of
limiting technical development within the meaning of Article 82(b)), thereby increasing the cost of
operations and lengthening the time, or to grant price reductions to certain consumers and at the
same time to offset such reductions by an increase in the charges to other consumers (18) (which is
contrary to Article 82(c)).

Infringement procedure

(22) After the Port of Genoa Judgment, the Commission,

finding that Italy had not amended its
legislation, sent the Italian Government on 31 July 1992 a letter of formal notice under Article 90(3)
(now 86) of the Treaty requesting it to state the measures it intended to take in this respect.

(23)

In response to the Commission's letter, the Italian Government adopted, in succession, a decree-law,
renewed eight times, as converted into Law No 84/94 on port reform, then a further decree-law
amending that law, which was renewed some fifteen times, most recently on 21 October 1996, as
converted into Law No 647/96 (see recital 5).

(15) See footnote 3.
(16) Law No 26 of 17 February 1981 establishing the Port Management Fund and repealing Law No 161 of 22 March

1967.

(17) Resulting from long-established work and social practices in Italian ports, such as,

inter alia, regulation of working
hours, holidays, professional sicknesses, total wage bills, minimum wages for inactivity periods, pension rights or
reimbursement of social contributions in case of workers' departures.

(18) Port of Genoa Judgment, see footnote 3, point 19.

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(24) On 7 May 1997 the Commission sent a further letter of formal notice to the Italian Government in
view of the fact that the Italian ports legislation referred to in point 23 was still incompatible with
Community law. By Decision 97/744/EC (19) the Commission established that some of the provisions
contained in Law No 84/94 were incompatible with the dual provision of Article 86(3) in conjunc-
tion with Article 82 of the Treaty (20).

(25)

Subsequently, the Italian Government adopted a number of measures for aligning port legislation
with Community law. The new legislative framework for port activities in Italy was completed by
Law No 186 of 30 June 2000 (21), which removes the last remaining exclusive rights conferred on
port undertakings and dock-work companies. On 6 February 2001, the Italian authorities adopted
the implementing regulation of this Law (22). Following the entry into force of this regulation, the
Commission closed the infringement procedure referred to above.

Economic context

(26) At the end of the 1980s, the Italian port sector was in difficulties. On the one hand,

it was
overburdened by the number of active dock-workers (more than 21 000). On the other hand, the
repercussions on the sector of the international crisis in the maritime sector had been particularly
severe. The returns of the port undertakings and dock-work companies were insufficient to maintain
the existing workforce under the prevailing labour intensive working conditions. The economic
situation of the dock-workers' associations and undertaking was further aggravated in 1991 when
the Court of Justice ruled, in the Port of Genoa Judgment, that the Italian legislation on ports was
incompatible with the Treaty. Both factors, the economic crisis and the legal requirement, led the
Italian government in 1992 to undertake a major structural reform of the port sector, a sector vital
for its economy.

(27) Under the Italian Civil Code, the dock-workers companies' were mutual undertakings (labour
cooperatives) with a mission to provide its members with opportunities to work for fair pay and not
to provide a return on shareholders' equity. The protection guaranteed by the exclusive rights
referred to in paragraph 18 allowed the port undertakings and dock-work companies to pursue
labour intensive objectives rather than purely market-oriented ones, with a large number of workers
remaining inactive but whose costs had to be borne by the companies.

(28)

The presence of such a large number of workers, all of them in dock-work companies, was a major
obstacle to the introduction of effective competition in the sector. Simply abrogating the exclusive
rights of the port undertakings and dock-work companies would not have resolved the matter by
itself.

AID MEASURES

(29)

(30)

In the context of the structural reform of the port sector, the Italian government has granted aid to
cover losses of the former port undertakings and groups, reduce the number of dock-workers active
in ports and reimburse the social security charges and benefits of those workers.

The aid measures examined under State aid proceedings C-27/93 and C-81/98 were contained in the
laws opening that sector to competition. The Italian authorities have indicated that those measures
were adopted in the context of that reform and that they were necessary to avoid the economic
collapse of the Italian ports following the abolition of the old legal framework.

(19) See footnote 4.
(20) Articles 90(3) and 86 respectively of the Treaty.
(21) Amending Law No 84/94 on port operations and the supply of temporary port labour.
(22) Decree No 132 of 6 February 2001 ‘Regulation laying down binding criteria for the regulating of port services by
the port and maritime authorities, in line with Article 16 of Law 84/1994’ Italian Official Gazette of 19 April 2001.

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(31)

Furthermore, the Italian authorities argued that, at the time that the aid was granted, the port
undertakings and dock-work companies were not undertakings under private law but cooperatives
under the Italian Civil Law Code without any business function, thus amounting to mutual undertak-
ings. The transformation of the port undertakings and dock-work companies was not achieved until
1995. In so far as the transformation had not yet taken place at the time, the Italian authorities
submit that the port undertakings and dock-work companies should not be considered as undertak-
ings within the meaning of Article 87(1) of the Treaty.

Case C-27/93

(32)

The decision to initiate the procedure under Article 88(2) of the Treaty in 1993 covers measures laid
down in Article 1(2) of Italian Law No 428/92 (23). The procedure concerned ITL 60 000 million to
cover operating losses of the port undertakings as of 31 December 1991, ITL 90 000 million to
wind up the mutual
the
dock-workers. The aid to abolish the mutual fund and to cover social security costs was authorised
on condition that the amount may not be exceeded and that the social security arrangements for
dock-workers had be brought into line with the standard system for employees (24).

fund and ITL 33 000 million to cover the social security costs of

(33)

In the meantime, and without prior notification, Italy provided financial support to the port sector of
ITL 8 510 million under Law 236/93 (25) and ITL 22 000 million under Law No 84/94 (26) for
charges of the Earnings Supplement Fund (Cassa Integrazioni Guadagni (CIG)).

(34) When it became clear that the Italian authorities had provided further aid to the port sector, the
Commission decided, in 1996, to extend the procedure previously initiated, to cover subsequent aid
granted, which included (27):

— ITL 400 billion to assist the transformation process of the port undertakings and dock-work
companies (ITL 300 billion personnel costs in pre-retirement schemes, and ITL 100 billion to
cover operating losses as at 31 December 1994) under Law No 343/95 (28), and

— ITL 1 740 billion for the pre-retirement of 1 050 employees (900 employees of the dock-work
companies and 150 of the port authorities) and various other types of alleged social aid under
Law No 647/96 (29).

Case C-81/98

(35)

(36)

This procedure concerns additional government aid, notified to the Commission under Article 88(3)
of the Treaty (see recital 9 of this Decision),
intended to cover operating losses and personnel
expenses, mostly redundancy (pre-retirement) schemes of the port undertakings and dock-work
companies.

The decision to initiate the procedure under Article 88(2) of the Treaty covers measures laid down in
Articles 8 and 9 of Italian Law No 30/98 (30). As regards Article 8, the Commission did not consider
public financing of ITL 9 000 million to the municipality of Piombino, ITL 20 000 million to the
port authority of Genoa and financing to the port authority of Ancona for port infrastructure as
State aid since the beneficiaries do not constitute undertakings under Article 87(1) of the Treaty.

(23) See footnote 6. The criteria and ways of implementing the aid measures contained in Law No 428/92 were esta-

blished by Ministerial Decree of 29 January 1993.

(24) Commission Decision to initiate the procedure in case C-27/93 (ex NN 103/92). See footnote 2.
(25) See footnote 7.
(26) See footnote 8.
(27) At the time of the extension of the procedure, the exact amount of aid granted under the various legislative instru-

ments was unclear.

(28) See footnote 9. The aid measures are established in Article 1(2)(a) and (b) and 1(2)(c) respectively of the Law. The
criteria and ways of implementing the aid measures under Article 1(2)c, cancellation of operating losses, were esta-
blished by Ministerial Decree of 13 May 1996.

(29) See footnote 10.
(30) See footnote 13. The criteria and ways of implementing the aid measures under Article 9 of that Law were esta-
blished by Ministerial Decrees of 2 April, 23 September and 19 October 1998, 21 April and 14 December 1999
and 5 October 2000.

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(37) As regards Article 9 of Italian Law No 30/98, the Commission initiated the procedure with regard to
new aid granted to the port undertakings and dock-work companies, reserved its position regarding
financial support to port authorities for personnel redundancies and requested more information
about the ITL 120 billion allocated to individual ports for dredging activities.

(38)

(39)

In the above proceedings, the Commission repeatedly asked the Italian authorities to provide detailed
information about the recipients of the aid, the purposes of that aid and the exact amounts granted
for the different purposes. The Commission also asked the Italian authorities to provide information
about the different measures undertaken in the reform of the port sector, and, in particular, the
restructuring plan guiding that reform, in order to examine the compatibility of the aid measures
linked to the reform with the common market.

In response to the Commission's requests for an overall and detailed description of the reform and of
the measures adopted thereby, the Italian authorities provided at this stage information that was
fragmentary and incomplete. A financial report was provided in April 1998 for the five major Italian
ports of La Spezia, Ravenna, Livorno, Trieste and Venice (31).This report provided some information
covering the period 1993 to 1996 which revealed that the past performance of those ports was poor
and that the current economic situation in several port undertakings and dock-work companies was
worrisome. The report, however, did not include any relevant information about the expected future
viability of the port undertakings and dock-work companies, and nor was any information provided
about the situation in the biggest Italian port, Genoa.

(40) Another report, submitted on 1 June 1999, provided some supplementary data for the years 1997
and 1998 and included, for the first time, information about the port of Genoa. Subsequently, a
third document giving an update of the economic outlook for the six major Italian ports (Ravenna,
La Spezia, Trieste, Livorno, Venice and Genoa) until 2001 was transmitted. That report was
accompanied by an opinion from Ernst & Young.

(41)

Concerning the port undertakings and dock-work companies in other Italian ports (32) that have
received aid, the information provided was extremely limited, and no overall description of the
measures intended under the reform was provided.

Outcome of the information injunction

(42) On 12 October 2000, the Italian authorities answered the information injunction launched on 12
July 2000. The information provided in response to the injunction highlighted a number of facts that
were previously unclear. On the basis of that information, it is now possible to establish a detailed
breakdown of the aid amounts actually granted to the different beneficiaries and for the different
purposes foreseen in each of the laws under examination.

(43)

In particular, it is now clear that the aid under those laws was granted not only to port undertakings
and dock-work companies, but also to the port authorities and to the maritime sector. Only the aid
granted to the port undertakings and dock-work companies and port authorities comes into question
in Cases C-27/93 and C-81/98.

(44)

The following tables show the aid amounts suspected at the time of the information injunction and
the aid actually granted by category of aid and beneficiary.

(31) Prepared by the consultant METIS on behalf of ANCIP (Associazione Nazionale Imprese Portuali — National association

of port undertakings and dock-work companies) which represents the above five ports.

(32) There are 140 ports listed for commercial traffic in Italy, 37 of which handle 80 % of total Italian traffic (source:
Report of an Inquiry into the Current Situation in the Major Community Sea Ports by the European Sea Ports
Organisation ESPO; November 1996).

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Schemes in favour of the Italian port sector — aid amounts suspected in the information injunction

Table 1

C-27/93 (Law No 428/92)

C-27/93 (Law No 236/93)

C-27/93 (Law No 84/94)

Million ITL

60 000

8 510

22 000

C-27/93 (Law No 343/95)

400 000

C-27/93 (Law No 647/96)

1 740 000

C-81/98 (Law No 30/98)

288 000

Total

2 518 510

Table 2

(information submitted after the injunction)

Schemes in favour of the Italian port sector — aid amounts foreseen and actually granted (all aid schemes)

Appropriations

Commitments

(in million ITL)

C-27/93 (Law No 428/92)

C-27/93 (Law No 236/93)

C-27/93 (Law No 84/94)

C-27/93 (Law No 343/95)

C-27/93 (Law No 647/96)

C-81/98 (Law No 30/98)

Total

60 000

8 510

22 000

372 000

1 772 482

330 680

2 688 672

Table 3

53 028

8 510

22 000

323 172

1 297 851

203 999

1 908 560

(information submitted after the injunction)

Schemes in favour of the Italian port sector — aid amounts foreseen and actually granted by category of
beneficiary (all aid schemes)

Beneficiary

Port undertakings and dockers asso-
ciations

— Social Security

— Departure of dock-workers

— Operating aid

Port Authorities

Maritime Sector

Appropriations

1 717 137

398 595

1 058 542

260 000

599 535

249 000

(in ITL million)

Commitments

1 350 048

233 174

863 846

253 028

363 278

195 234

Total

2 565 672

1 908 560

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(45)

To sum up, following the information injunction the Commission has established that the aid under
the various laws was granted not only to port undertakings and dock-work companies, but also to
the port authorities and to other beneficiaries in the maritime sector. The overall aid granted to
dock-work companies and to dock-workers between 1992 and 1998 totals ITL 1 350 048 million,
which is substantially lower than the amount (ITL 2 518 510 million) initially estimated by the
Commission. The aid was provided to protect the social security benefits of workers (ITL 233 174
million), to enable reductions in the workforce (ITL 863 846 million) and to cover the operating
losses of the port undertakings (ITL 253 028 million).

(46)

This final decision in Cases C-27/93 and C-81/98 only covers the measures providing financial
assistance to port undertakings, to dock-work companies to which Italian dockers belonged until
1994 and to dock-workers themselves thereafter. This has no bearing on any action taken, or to be
taken, by the Commission regarding the financing provided to port authorities and to beneficiaries in
the maritime sector.

III. COMMENTS FROM INTERESTED PARTIES

Case C-27/93

(47)

Following the decision by the Commission in 1996 to extend the procedure that had been initiated
in 1993, the German Government submitted its comments by letter of 12 December 1996. The
German Government stated that substantial and repeated support by Member States for restructuring
did indeed merit critical examination by the Commission under Article 87 of the Treaty. At the same
time, public support for certain social measures and for the financing of port infrastructure should
not,

in its view, be considered as State aid, unlike the financing of superstructures.

(48)

The Commission forwarded the comments from the German Government to Italy by letter of 16
April 1997. The Italian Government replied to those comments by letter of 13 May 1997.

Case C-81/98

(49)

Following the Commission decision to initiate the procedure, the German Association of Ports
(Zentralverband der Deutschen Seehafenbetriebe (ZDS)) submitted its comments in a letter of 12 May
1999. According to ZDS, the activities of the port authorities, which determine whether they are to
be considered as undertakings under Article 87(1) of the Treaty, are unclear. At the same time, it
supported the Commission's decision to initiate the procedure regarding aid to the port undertakings
and dock-work companies.

(50)

The Commission forwarded the comments of the ZDS to Italy by letter of 27 May 1999. The Italian
Government submitted a reply to those comments by letter of 28 July 1999.

IV. ASSESSMENT OF THE AID

A. Applicability of Article 87(1) of the Treaty

(51) Under Article 87(1) of the Treaty, aid granted by a Member State or through State resources in any
form whatsoever which distorts or threatens to distort competition by favouring certain undertak-
is
ings or the production of certain goods,
incompatible with the common market.

insofar as it affects trade between Member States,

(52)

The successive legislative measures adopted by the Italian authorities in support of the structural
reform of the port sector have included a number of aid measures in respect of which the
Commission twice had to open the procedure provided for by Article 88(2) of the Treaty.

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(53)

The serious doubts surrounding the nature and compatibility with Article 87(1) of the aid imple-
mented by means of Laws No 428/92, No 236/93, No 84/94, No 343/95, No 647/96 and No 30/98
stemmed from the following:

— the aid is financed through State resources, i.e. either by the State itself (central/regional/local
government) or indirectly through the setting-up of funds, such as the Cassa Integrazione Guadagni
Straordinaria, Casa estiva di Dovadole (see recital 74 of this Decision) and the Fondo di gestione (see
recital 81) or payments through private bodies acting upon State guidance, thereby imposing a
burden on the State budget;

— the aid given is selective in its character as it favours the provision of certain services by the
dock-work companies operating in Italian ports. In the field of cargo handling, i.e. loading/
unloading and storage of cargo, undertakings within the same port and in other ports compete
for trade;

— following the Port of Genoa Judgment, other private cargo handling undertakings had to be
allowed to operate in the Italian ports in competition with the port undertakings and dock-work
companies. The aid granted by the State clearly distorts or threatens to distort competition by
favouring those undertakings and companies. Depending on its final destination, there is often a
choice between different ports for the loading and unloading of the cargo carried by the vessels.
As a result, the port undertakings and dock-work companies in the ports concerned, including
those operating in the major Italian ports which handle international traffic, are actually or
potentially competing for
Italian and
in other
Community ports. As such, there is an effect on trade between Member States.

traffic with cargo-handling undertakings

(54)

Furthermore, even if at
the time the aid was granted the port undertakings and dock-work
companies had not faced significant competition from third parties, the Commission is of the
view (33) that one of the likely effects of the aid measures in question was to influence the cost of
port operations. As the Court of Justice found, the distortion of competition arising from the extra
expense of port unloading operations is capable, by reason of its effect on the prices of the goods, of
affecting imports and hence of affecting trade between Member States (34).

Legal status of the port undertakings and dock-work companies

(55)

(56)

Irrespective of the actual legal status of the port undertakings and dock-work companies which, by
providing the manpower, were instrumental
it has to be
remembered that any entity engaged in economic activities of a commercial nature is considered to
be an undertaking under Community competition law (35). Therefore, the argument of the Italian
authorities that State aid rules did not apply to port undertakings and dock-work companies is not
valid and cannot be accepted.

in the activities of port undertakings,

The Italian authorities invoke exemption from competition rules regarding the particular legal status
of dock-work companies, since the exemption under Article 86(2) of the Treaty is clearly not
applicable in this case as port undertakings and/or companies are not entrusted with the operation of
a service of general economic interest because of the lack of specificity in the nature of their
activities (36).

(57) However, the Court of Justice has also ruled that ‘the concept of worker within the meaning of
Article 48 of the Treaty presupposes that for a certain period of time a person performs services for
and under the direction of another person in return for which he receives remuneration. That

(33) As already stated in recital 22 of Decision 97/744/EC (see footnote 4).
(34) Port of Genoa (see footnote 3), point 22.
(35) See Port of Genoa Judgment, point 14 et seq.
(36) See Port of Genoa Judgment, points 27 and 28.

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description is not affected by the fact that the worker, whilst being linked to the undertaking by a
relationship of employment,

is linked to other workers by a relationship of association’ (37).

(58)

It should be noted that workers associated with dock-work companies performed the work in
question for and under the direction of the port undertakings. As interpreted by the case-law of the
Court, those workers must be regarded therefore as workers within the meaning of Article 39 of the
Treaty (38). Dock-workers do not in themselves constitute ‘undertakings’ within the meaning of
Community competition law. Without prejudice to the exact nature of dock-work companies, it has
to be said that, even when taken collectively, dockers recognised as such in a port area cannot be
regarded as constituting an undertaking (39).

Aid categories

(59)

The objectives pursued by the aid measures in question were to:

— ensure social security protection of dock-workers,

— reduce the number of dock-workers in the port sector, and

— write off debts and compensate operating losses of port undertakings and dock-work companies.

Whatever the case, the Court of Justice has consistently held that Article 87(1) of the Treaty does not
distinguish between State aid measures on the basis of their purpose or target, but defines such
measures in terms of their effects.

(60)

(61)

In their reply to the injunction, the Italian authorities claim that the compatibility with State aid rules
of Laws No 428/92, No 236/93, No 84/94, No 343/95, No 647/96 and No 30/98 cannot be
examined in abstract terms, but has to take account of the economic context which led to their
adoption. That context was marked by structural reform, which has eventually resulted in the
gradual introduction of greater competition in the market for the provision of port services in Italy.

In its assessment of the aid measures above, the Commission has taken account of this claim. In the
1996 decision to extend the procedure under Article 88(2) in Case C-27/93, the Commission had
already informed the Italian Government that the competition aspects in the infringement procedure
were closely linked to State aid.

MEASURES TO ENSURE SOCIAL SECURITY PROTECTION OF DOCK-WORKERS

(62) With regard to measures to ensure social security protection of dock-workers, the Commission
considers (40) that selective reductions in social security contributions which favour certain firms in a
particular Member State, whether the selectivity operates at individual, regional or sectoral level,
constitute, for the differential part of the reduction, State aid within the meaning of Article 87(1) of
the Treaty,

i.e. aid which distorts competition and could affect trade between Member States.

(63) At the time the formal investigation procedure under Article 88(2) of the Treaty was initiated, there
was a strong presumption that the exemption from social security contributions enjoyed by the port
undertakings and dock-work companies as a result of the provisions of Laws No 428/92, No
236/93, No 84/94, No 343/95, No 647/96 and No 30/98 constituted a form of State aid that is
prohibited in principle by the Treaty. The Commission generally takes the view that firms must
themselves bear any costs arising from legal obligations and/or from agreements which they
conclude with their employees regardless of whether those obligations and/or agreements relate to
the restructuring of the firm or to other aspects implying extra social security contributions.

(37) See Port of Genoa Judgment, point 13.
(38) Ex Article 48.
(39) Case C-22/98 Jean-Claude Becu et al [1999] ECR 1-5665, point 26.
(40) See Commission Decision of 25 November 1999 on aid to firms in Venice and Chioggia by way of relief from

social security contributions under Laws No 30/1997 and No 206/1995 (OJ L 150, 23.6.2000, p. 50).

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(64)

This exemption also appeared to be selective, as it was not granted to companies in other sectors.
This conclusion was compounded by the fact that the subsequent aid measures were implemented
without previously informing the Commission and that the information provided by the Italian
authorities concerning the restructuring of port undertakings and dock-work companies was found
to be fragmentary and inconsistent.

(65) Only after the information injunction launched on 12 July 2000 (see recital 12) was the Commission
able to determine the exact amounts of aid granted, to establish who had been the recipients of the
aid and to clarify, in particular, the nature of the aid provided to port undertakings and dock-work
companies and dock-workers. From the information received, the Commission had to review its
initial position (41) with respect to the measures implemented to ensure the social security protection
of dock-workers, for the reasons set out in recitals 66 to 75, following.

(66)

(67)

(68)

(69)

(70)

First of all, the measures were not adopted to favour either port undertakings or dock-work
companies as such (the latter were dissolved in 1994), but rather to protect the social security
benefits of dock-workers. Under the old regime, dock-workers were not covered by the Italian
general social security system (INPS), but by an ad hoc system based on a mutual fund (42) linked to
the exclusive rights enjoyed by dock-workers. That system was different in nature to the general INPS
system and its management was completely separated from the INPS system.

In 1992, the mutual fund ensuring the viability of the dock-work companies' social security system
was abolished. Because of the difficulties of the structural reform and, in particular, the number of
workers involved (more than 21 000 dock-workers, around 7 500 of them active, see recital 78,
table 4) and the administrative requirements linked to the management by the INPS of those
workers, the Italian authorities found it impossible to arrange an immediate transfer to the general
social security system. The transfer was further complicated by the litigation brought before the
courts by the port undertakings and dock-work companies against the State.

Secondly, the Italian authorities also confirmed that, since the port undertakings had been trans-
formed into commercial undertakings, they had been subject to general social legislation, which
regulates the contributions that undertakings in Italy are obliged to make for funding the INPS
system.

Thirdly, the measures enacted by the laws in question were aimed at ensuring social security
protection for the majority of workers who, until 1994, belonged to the dock-work companies and
thereafter remained in the port sector as individual workers. Those measures did not lesson the
obligations of the new port undertaking in respect of social charges nor alleviate the charges that
they had to pay to the INPS (43).

The Italian authorities confirmed that these measures were aimed at covering the direct social
including sickness insurance, accident
the dock-workers,
benefits and other fringe benefits of
insurance, insurance against occupational disease, unemployment insurance and maintenance of the
pension rights of retired workers. The amounts granted under the above laws were established on the
basis of the legally binding social security rights and obligations acquired by dock-workers under the
old regime (see recital 19). They cover the period of time between the abolition of the old system for
ensuring social protection of dock-workers and the integration of those workers under the standard
INPS system, regardless of any employment relationship with the port undertakings (see recital 69, in
fine).

(41) The position initially taken by the Commission is contained in the decision to initiate the procedure C-27/93 (see
footnote 2). At that time, the Commission took the view that the social security contributions amounted to State aid
that was compatible with the common market.

(42) Fondo assistenza sociale lavoratori portuali, renamed Fondo gestione istituti contrattuali lavoratori portuali by Law No 23 of

17 February 1981.

(43) The new port undertakings employ dock-workers on a casual basis, as needed according to the workload (i.e. the
number of workers and days worked are determined by the cargo handling activities which fluctuate in and between
ports according to traffic).

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(71) Under the transitional social security arrangements, payment of those benefits to dock-workers was
made in some cases directly by the INPS and, in other cases, through the intermediary of the port
undertakings (before their transformation in 1995) and dock-work companies (before their dissolu-
tion in 1994), which advanced the sums to dock-workers on behalf of
the INPS and were
subsequently reimbursed by that institute (44).

(72)

(73)

Finally, the measures to ensure social security protection of dock-workers were an essential part of
the process of changing the legal status and modus operandi of port undertakings and dock-work
companies and ultimately to enable the gradual opening-up of the market. These measures were
necessary because the Italian general social security scheme did not cover workers in the port sector.
Following the abrogation of the old social legislation in the port sector, the measures in question
helped to ensure dock-workers the same social protection enjoyed by all workers in other economic
sectors.

In this respect it should be recalled that general social security schemes under Member States' labour
legislation are not to be regarded as State aid falling within the Article 87(1) insofar as the State deals
directly with employees and the company is not involved (45). This conclusion is not altered by the
subrogation of workers' rights and causes of action to an organisation other than the social security
general organisation (46).

(74)

For the above reasons, the Commission takes the view that:

— the amounts granted for funding the transitional social security insurance scheme for dock-
totalling

Integrazione Guadagni

straordinaria plus

trattamento

inidoneità),

workers
(Cassa
ITL 231 920 million, and

— the amounts granted for other social costs (such as the casa di Dovadola, a holidays fund),

totalling ITL 1 254 million,

were not of direct benefit to port undertakings and dock-work companies and did not have the effect
of distorting or threatening to distort competition within the meaning of Article 87(1).

(75)

This position is consistent with the Commission's established position (47) with respect to measures
of this type. Furthermore, the Italian authorities confirmed as requested by the Commission at the
moment of initiating the procedure, that the social security arrangements for dock-workers have
been definitively brought into line with the standard system for employees in Italy.

MEASURES TO REDUCE THE NUMBER OF DOCK-WORKERS IN THE PORT SECTOR

(76) According to the Guidelines on State aid for rescuing and restructuring firms in difficulty (48)
Member States'
labour legislation may comprise general social security schemes under which
redundancy benefits and early retirement pensions are paid directly to redundant employees. ‘Where
such schemes are available generally without sectoral limitations to any worker meeting predefined
and automatic eligibility conditions, they are not deemed to involve aid under Article 87(1) for firms
undertaking restructuring. On the other hand, if the schemes are used to support restructuring in
particular industries, they may well involve aid because of the selective way in which they are used’
(point 3.2.5).

(44) Part of the aid in question (ITL 160 000 million) was reimbursed by the INPS to certain port undertakings and
dock-work companies located in the regionally assisted areas in the south of Italy in accordance with a judgment of
the Italian Constitutional Court (Sentenza della Corte Costituzionale n. 261 del 1991).

(45) See point 3.2.5, paragraph 2, of the Guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C

368, 23.12.1994, p. 12).

(46) See Judgment of the Court of 29 April 1999. Case C-342/96 Kingdom of Spain v Commission ‘Fogasa’ [1999] ECR

Ι-2459.

(47) See, for example, Commission decisions in the maritime and port sectors, in cases NN 98/97 Belgium of 21 January
1998 or C-18/96 France of 2 October 1996 (OJ C 357, 26.11.1996). In the first case, the Commission decided not
to raise objections with regard to the ad hoc fund for securing social security benefits of dock-workers.
In the
second, reductions in social security contributions in connection with reorganising working hours were found not to
amount to State aid.

(48) See footnote 45.

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(77)

(78)

(79)

(80)

(81)

The aid measures implemented by the laws under examination consist of large amounts of aid
granted by the Italian authorities to port undertakings and dock-work companies for the declared
purpose of reducing the number of economically active dock-workers, all of them associated
members of the dock-work companies.

The Italian authorities justify the aid granted on social grounds, pointing out that the reform of the
port sector has required a significant reduction in the number of dock-workers. From more than
21 000 active dock-workers in 1983 when the reform begun, the number of active dock-workers
was reduced to fewer than 4 000 by the end of 1999.

Table 4

Trend in the number of active dock-workers in Italian Ports

1983

1992

1993

1994

1995

1996

1997

1998

1999

21 899

7 478

6 891

7 046

5 759

4 812

4 545

4 476

3 880

Port undertakings and dock-work companies could never have undertaken the necessary suppression
of redundant jobs. As a matter of fact, the port undertakings and dock-work companies seriously
resisted attempts by the Italian authorities to reduce their workforce and even went to the courts to
try to stop these measures.

Reform of this kind is in line with policy developments in the Community port sector, as explained
in the Green Paper on seaports and maritime infrastructure (49) and in the draft directive on port
services (50). The trend has been to shift the provision of commercial cargo handling services from
public to private service providers, notably to increase efficiency. To this end, reforms have taken
place in a number of Member States to adjust ports to the new requirements as a result of the
technological development and intensified competition in the sector.

In regard of the compensation paid for early work-contracts termination (Trattamento di fine servizio
or TFS), the Italian authorities explained that this was necessary to meet the contractual arrangement
for retired dock-workers during the 1984 to 1989 period. This had to be paid from the resources of
in accordance with a ministerial circular to cover the financial commitments
the Mutual Fund,
connected with early retirement. Liquidation of the fund gave rise to a protracted dispute brought by
the port undertakings and dock-work companies against the fund liquidators and also against the
Italian administration. Following a judgment of the national courts, the Italian Government had to
adopt Law No 647/96 setting aside the funds necessary to pay the compensation due to retired
dock-workers. This law extends to the profession in question the legal right recognised by Article
2120 of the Italian Civil Code in respect of workers in other sectors.

(82) As indicated in the Community guidelines on State aid for rescuing and restructuring firms in
difficulty, ‘besides direct redundancy benefit and early retirement provision for employees, general
social support schemes are widespread under which the Government covers the cost of benefits that
the company provides to redundant workers and which go beyond its statutory or contractual
obligations’. As already stated in recital 76,
‘where such schemes are available generally without
sectoral limitations to any worker meeting predefined and automatic eligibility conditions, they are
not considered to involve aid’ pursuant to Article 87(1) for firms undertaking restructuring (51).

(49) COM(97) 678 final, 10.12.1997, points 81 and 82.
(50) Proposal for a Directive of the European Parliament and of the Council on market access to port services, COM/

2001/0035 final (OJ C 154 E, 29.5.2001, p. 290).

(51) See footnote 45.

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(83)

(84)

(85)

(86)

(87)

The information provided by Italian authorities indicates, however, that the beneficiaries of the aid to
reduce the number of dockers were the dock-work companies, of which the dockers were associate
members until 1994, and the dock-workers themselves thereafter. As already stated in recital 58,
dock-workers do not in themselves constitute ‘undertakings’ within the meaning of Community
competition law. The aid measures were not intended for port undertakings which, at the time
period the TSF arrangements were concluded, did not have an employment relationship with the
dock-workers themselves.

Furthermore, these aid measures were adopted by way of exception because the general social
security schemes in force in Italy did not cover the port sector. They were necessary in view of the
legal vacuum that affected the sector following the abolishment of the sector-specific social legisla-
tion (52). Even if those measures were implemented outside the framework of the Italian social
security system, they were adopted to protect a category of workers affected by the structural reform
of a whole economic sector.

For the above reasons, the Commission takes the view that the aid measures contained in Laws No
428/92, No 236/93, No 84/94, No 343/95, No 647/96 and No 30/98 aimed at covering the social
costs linked to the departure of dock-workers, as required in the context of the structural reform of
the sector, are not to be regarded as State aid falling within Article 87(1) of the Treaty.

AID TO WRITE OFF DEBTS AND COMPENSATE LOSSES OF THE PORT UNDERTAKINGS

The aid granted for the declared purpose of cancelling debts and compensating losses originating
from the commercial trade of port undertakings is State aid within the meaning of Article 87(1) of
the Treaty.

Such operating aid favoured the port undertakings as it granted relief on costs which undertakings
have to bear as part of their normal activities. For the reasons above, those aid measures risk
distorting competition and affecting trade between Member States.

State aid granted illegally

(88)

By not notifying the aid measures granted to port undertakings, the Italian Government has also
infringed Article 88(3) of the Treaty. The Commission could not present its observations on those
measures before they were applied, from 1992 onwards.

B. COMPATIBILITY OF THE AID MEASURES

(89) Having established that the measures intended to compensate the operating losses of port undertak-
ings constitute State aid within the meaning of Article 87(1) of the Treaty, the Commission has to
examine whether they may be declared compatible with the common market in pursuance of Article
87(2) or (3) of the Treaty. The Court of Justice has already ruled that Article 86(2) of the Treaty must
be interpreted as meaning that the Italian dock-work undertaking and/or company ‘may not be
regarded as being entrusted with the operation of services of general economic interest within the
meaning of that provision’ (53).

(90) As far as Article 87(2) is concerned, the aid does not meet either the conditions laid down in
subparagraph (a), which relates to aid of a social character granted to individual consumers, or, of
course, the conditions laid down in subparagraph (c).

(91) Neither does the aid qualify for exemption under Article 87(2)(b), since the transformation of an
economic sector, required, inter alia, because of the incompatibility with Community legislation of
certain provisions in the national legislation, cannot be regarded as an exceptional occurrence within
the meaning of that provision.

(52) See Commission Decision 97/21/EC, ECSC of 30 July 1996 on State aid granted in favour of Compañía Española de
Tubos por Extrusión SA (OJ 1997 L 8, p. 14). In this instance, the Commission's took the view that the funding of
an ad hoc fund securing workers' social security rights (Fogasa) did not contain elements of State aid. That view was
confirmed by the Court Judgment of 29 April 1999 in Case C-342/96 [1999]ECR I-2459.

(53) See Port of Genoa Judgment, point 28.

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(92) Article 87(3) specifies other forms of aid which may be regarded as compatible with the common
market. Compatibility must be assessed from the standpoint of the Community as a whole and not
in a purely domestic context. For the purposes of the proper functioning of the common market and
consistency with the principle set out in Article 3(g) of the Treaty, the exceptions in Article 87(3)
must be interpreted in the strictest sense.

(93) As regards the exceptions in Article 87(3)(b) and (d), the aid in question is clearly not intended for a
project of common European interest or to promote culture and heritage conservation. Nor did the
Italian authorities attempt to justify the aid on the grounds that it was granted to remedy a serious
disturbance in the Italian economy.

(94) With regard to the derogation in Article 87(3)(a), the Italian authorities did not justify the aid
measures in terms of their contribution to regional development. Nor was there any reference to the
existence of regional handicaps in the port sector that those measures would have seek to alleviate.
Consequently, the conditions for approving the aid measures for regions as referred to in Article
87(3)(a) under the regional guidelines (54) are not fulfilled in the present case.

(95) All things considered, the only exemption that could possibly be considered, as indicated by the
decision to initiate the formal investigation procedures, is the one provided for in Article 87(3)(c) for
‘aid to facilitate the development of certain economic activities [...] where such aid does not adversely
affect trading conditions to an extent contrary to the common interest’.

(96)

The aid to write off debts and compensate the losses of port undertakings was considered necessary
to enable the restructuring of the port undertakings and to enable them to compete under the new
market conditions resulting from the reform of the port sector. Such restructuring aid may be
considered compatible with the common market if the relevant criteria are met. These criteria are set
out in the Community guidelines on State aid for rescuing and restructuring firms in difficulty, which
have been in force since 1994, and in the Commission's Eighth Report on Competition Policy (55) for
the period prior to that. Under both sets of rules, rescue aid may be granted only for the time needed
(generally not exceeding six months) to devise the requisite and feasible recovery plan. Restructuring
aid may be granted only on the basis of an appropriate restructuring plan.

(97) Although the Italian authorities have continuously referred to the difficulties of port undertakings
following the transformation of the port sector (e.g. abolition of dock-work companies, debts
inherited from the past as a result of inefficient labour intensive methods), they have never provided
the Commission with a proper restructuring plan, within the meaning of the aforementioned
Community guidelines, despite numerous letters and requests for information sent to them by the
Commission.

(98)

The Commission has nonetheless examined the information submitted by the Italian authorities to
determine whether the general conditions needed for the Commission to approve the restructuring
aid have been met. It appears from the reports that the changes introduced to port undertakings
consisted essentially of a structural separation of activities. Insofar as information is available, the
port undertakings in each of the five ports (La Spezia, Ravenna, Livorno, Trieste and Venice) covered
by the reports provided by the Italian authorities (see recital 40) have been split into two to four
enterprises with responsibility for assets, labour and operations respectively. Such splitting has not

(54) Community Guidelines on national regional aid, OJ C 74, 10.3.1998, p. 9. In accordance with point 6.1 of these
guidelines, the Commission will assess the compatibility of regional aid with the common market on the basis of the
criteria in force at the time such aid was granted.

(55) See points 177, 227 and 228.

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been undertaken in Genoa. Concerning the five ports, the data for each of these undertakings were
thus examined individually.
It should, however, be noted that in order to carry out loading,
unloading, transhipment, storage and general movement of goods activities, participation of all the
different spinoff enterprises is indispensable and for those purposes they are to be considered as one,
single undertaking. This is also supported by the fact that spinoff enterprises are controlled by the
same majority of shareholders and, according to the information received, the contractual relations
between the spinoff enterprises are clearly not made on arm's length terms.

(99)

In support of the operating aid granted to port undertakings, the Italian authorities, working on the
basis of the data on the six major ports, make a distinction between two time periods:

— in 1993 and 1994, i.e. before the reform, port undertakings and dock-work companies were still
public undertakings looking after workers' access to jobs, in accordance with parameters and
methods under the old legal regime. During those years, the profitability of port undertakings
and dock-work companies was negative in the extreme, with overall losses exceeding ITL 30 000
million even in terms of net result. The Italian authorities justify the settlement of the pre-1995
losses by stating that it was a necessary operation to give the port undertakings and dock-work
companies, once their existing business was dismantled, a sufficiently balanced assets/liabilities
structure to be able to undertake new business activities;

— the period from 1995 to 1998, during which port undertakings and dock-work companies
operated under the new regime as undertakings within the meaning of private law, showed,
according to the Italian authorities, a gradual improvement in terms of production margins and
operating results, indicating a likely restoration of economic viability of port undertakings and
dock-work companies within a few years (56). However, as a matter of fact, port undertakings and
dock-work companies continued to register losses to the extent that the Italian authorities had to
grant further operating aid totalling ITL 100 000 million in 1998.

(100) All in all, the following conclusions can be drawn from the information available for the period
1993 to 1998 as a whole, as provided by the Italian authorities for the six ports examined in more
detail:

— overall, returns on operations among port undertakings are grossly negative and only alleviated
through significant and continuous State funding. In addition, losses seem to be largely underesti-
mated, considering the low and even decreasing level of financing expenses (e.g. interest on
loans), against an increase in indebtedness, also through accumulated losses;

— even after transformation into commercial undertakings, port undertakings appear to have
followed labour intensive practices. Labour costs and social charges constitute an essential part of
the negative results steadily registered by the undertakings since 1995;

— as a result, productivity, measured as the ratio between expenditure on assets compared to
income generated by them showed an overall negative trend for the ports examined. What does
stand out, however, is the considerable increase in assets (mostly purchase of equipment with the
help of State aid), although these are not matched by a commensurate move in income;

— on the whole, most of the companies examined operate on weak financial terms, with little
ability to meet their current liabilities with readily available funds. As to the positive outlook for
the future presented in the reports, this assumption is mostly due to overly optimistic estimates
on increases in traffic (demand), i.e. external factors over which the companies have no great
influence. Furthermore, these traffic forecasts are not confirmed by other independent sources.

(56) Despite repeated attempts by the Commission, it has not been possible to establish a coherent and feasible timespan

for eventual recovery.

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(101)

In view of these facts, the economic viability of most of the undertakings for which data has been
provided has to be considered doubtful to say the least. There are no grounds for thinking that the
operating aid granted has helped to restoring port undertakings to long-term viability.

(102) Nor has it been shown that the other conditions laid down in the Community Guidelines on State
aid for rescuing and restructuring firms in difficulty, notably those relating to undue distortion of
competition and necessity of the aid, have been met. The aid to write off debts and compensate
losses has merely served to maintain the status quo of the port undertakings. It has more likely
affected the competitive position of other port operators trying to establish themselves in Italian
ports. Furthermore, the aid beneficiaries have not made any significant contribution from their own
resources or from external commercial financing to a possible restructuring plan.

(103) For these reasons, the Commission concludes that the criteria provided for in the Community
Guidelines on State aid for rescuing and restructuring firms in difficulty have not been complied
with. Accordingly, the operating aid provided to port undertakings and dock-work companies by
means of:

— Article 1(2) of Law 428/92, totalling ITL 53 028 million,

— Article 1(3) of Law 343/95, totalling ITL 100 000 million, and

— Article 9(4) of Law 30/98, totalling ITL 100 000 million,

is incompatible with the common market, as it does not qualify for exemption under Article 87(3)(c)
of the Treaty.

V. REPAYMENT OF THE AID

(104) On the assumption that effective competition should be restored in the case of aid measures which
are both unlawful and incompatible with the common market, Article 14(1) of Regulation (EC) No
659/1999 provides that ‘where negative decisions are taken in cases of unlawful aid, the Commission
shall decide that the Member State concerned shall take all necessary measures to recover the aid
from the beneficiary’. The Commission has accordingly decided that Italy should recover the aid
from the beneficiary.

(105) Disregarding the changes affecting the legal status of the beneficiary of the aid as of 1995 and in
accordance with Commission practice and the case law of the Court of Justice, aid must be recovered
from the firms (the port undertakings) which actually received it. In this respect, no conflicting
law can stand in the way of the full application of Community law (57).
principle of national

(106) The Commission will look together with the Italian Government at how the aid is to be repaid.

VI. CONCLUSION

(107) The aid measures under Laws No 236/93, No 84/94, No 343/95, No 428/92, No 647/96 and No
30/98 aimed at covering the general social security benefits of port workers following the abolition
of the previously existing mutual scheme do not amount to aid under Article 87(1) of the Treaty.
The overall amount of aid paid under those measures totals ITL 233 174 million. Italy has certified
that the social security arrangements for dock-workers have been brought into line with the standard
system for employees in general.

(108) The aid granted under Laws No 343/95, No 647/96 and No 30/98 to enable the departure of
dock-workers between 1992 and 1998 in the context of the structural reform of the sector does not
fall under Article 87(1) of the Treaty. The overall amount under those measures totals ITL 863 846
million.

(57) See Court judgment of 21 March 1991 in case C-303/88 Italy v Commission [1991] ECR I-1499, point 60.

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(109) The Commission finds that Italy has put into effect, in breach of Article 88(3) of the Treaty, the aid
granted by the Italian authorities to port undertakings to cancel debts and cover operating losses.

(110) The operating aid provided for by Laws No 428/92, No 343/95 and No 30/98 to cancel debts and
settle the losses of port companies and undertakings is incompatible with the common market. A
strict approach concerning repeated and substantial aid for restructuring a certain sector is also
supported by the German government and the German Association of Ports (ZDS), as indicated in
their comments in points 47, 48 and 49. The overall amount of aid paid under those measures totals
ITL 253 028 million.

(111) Where aid granted unlawfully is found to be incompatible with the common market, the Commis-
sion requires the Member State concerned to recover it from the beneficiaries (58)
in order to
re-establish the previously existing situation. This applies to the aid found by this Decision to be
incompatible with the common market, of which the amount already received will have to be
reimbursed by the recipients,

HAS ADOPTED THIS DECISION:

Article 1

The aid of ITL 253 028 million paid to port undertakings by Italy under Article 1(2) of Law No 428/92,
Article 1(2)c of Law No 343/95 and Article 9(4) of Law No 30/98, in the form of direct grants to cancel
debts and cover losses,

is incompatible with the common market.

Article 2

The aid granted by Italy in the form of severance pay and early retirement contributions for the departure
of the dock-workers belonging to dock-work companies provided for by Laws No 343/95, No 647/96 and
No 30/98 does not constitute aid within the meaning of Article 87 of the Treaty.

Article 3

The measures adopted by Italy in respect of the Cassa integrazione guadagni straordinaria (special earnings
supplement fund), the Indennità una tantum a favore di lavoratori inidonei (invalidity severance pay) and the
Casa di soggiorno di Dovadola (holiday fund) to preserve dock-workers social security rights under Laws No
236/96, No 84/94, No 343/95, No 647/96 and No 30/98 do not constitute aid within the meaning of
Article 87 of the Treaty.

Article 4

Italy shall take whatever steps are necessary to recover from the beneficiaries the incompatible aid referred
to in Article 1 and unlawfully made available to them.

Repayment shall be made in accordance with the procedures of Italian law.

The amounts to be repaid shall bear interest from the date on which the aid was made available to the
beneficiaries until the date on which it is effectively repaid.

The interest shall be calculated on the basis of the reference rate used to calculate the grant equivalent of
regional aid.

(58) See Commission communication, published in OJ C 318, 24.11.1983, p. 3.

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Italy shall inform the Commission, within two months of the date of notification of this Decision, of the
measures it has taken to comply with it.

Article 5

This Decision is addressed to the Italian Republic.

Article 6

Done at Brussels, 18 July 2001.

For the Commission

Loyola DE PALACIO

Vice-President