2001/253/: EFTA Surveillance Authority Decision No 253/01/COL of 8 August 2001 on the map of assisted areas and levels of aid in Iceland (Aid No 00-002)
Date: 2001-08-08
Institutions: EFTA Surveillance Authority
Subjects: Iceland, aid system, control of State aid, regional aid

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Official Journal of the European Communities

L 15/49

EFTA SURVEILLANCE AUTHORITY DECISION

No 253/01/COL

of 8 August 2001

on the map of assisted areas and levels of aid in Iceland (Aid No 00-002)

THE EFTA SURVEILLANCE AUTHORITY,

Having regard to the Agreement on the European Economic Area (1), in particular to Articles 61 to 63 and
Protocol 26 thereof,

Having regard to the Agreement between the EFTA States on the establishment of a Surveillance Authority
and a Court of Justice (2),

in particular to Article 24 and Article 1 of Protocol 3 thereof,

Having regard to the Authority's Guidelines (3) on the application and interpretation of Articles 61 and 62
of the EEA Agreement,

Having called on interested parties to submit their comments pursuant to those provisions (4),

Whereas:

I. FACTS

1. Procedure

On 12 July 2000, the EFTA Surveillance Authority decided to open the formal investigation procedure
provided for in Article 1(2) of Protocol 3 to the Surveillance and Court Agreement with regard to State aid
in the form of regional aid in Iceland (Map of assisted areas) (5). The decision was taken after the Icelandic
authorities on several occasions had been reminded that the Authority was obliged to open the procedure if
a notification on the map of assisted areas was not submitted. The decision was published on 21 December
2000 in the Official Journal of the European Communities (6). Interested parties could submit their comments
on the measures in question within one month from the date of publication. The Authority did not receive
any comments.

By letter from the Icelandic Mission to the European Union dated 2 August 2000, received and registered
by the Authority on 4 August 2000 (Doc. No 00-5486-A), the Icelandic authorities notified their proposal
for areas eligible for regional aid in Iceland and the maximum aid ceilings which could be applied.
Reference was made in this letter to Article 1(3) of Protocol 3 to the Surveillance and Court Agreement.

By letter dated 27 March 2001 (Doc. No 01-2146-D), the Authority requested additional statistical
information regarding the municipalities in Iceland, including i.a. a detailed map showing the borders of the
municipalities, the total population and the population density in each municipality.

The Icelandic authorities responded to this request for additional information by letter dated 23 May 2001,
received and registered by the Authority on 23 May 2001 (Doc. No 01-3881-A). This letter contained three
documents: a table with statistical data for each municipality, a map showing the borders of the municipali-
ties in Iceland (with the areas eligible for regional aid marked), and a map showing the municipalities with a
population density lower then 12,5 inhabitants per sq. km.

(1) Hereinafter referred to as the EEA Agreement.
(2) Hereinafter referred to as the Surveillance and Court Agreement.
(3) Procedural and Substantive Rules in the Field of State Aid (State Aid Guidelines), adopted and issued by the EFTA
Surveillance Authority on 19 January 1994. Published in OJ L 231, 3.9.1994, and in the EEA Supplement thereto No
32 on the same date. The Guidelines were last amended 23 May 2001, not yet published.

(4) OJ C 368, 21.12.2000, p. 12.
(5) Dec. No. 135/00/COL.
(6) See footnote 4.

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By letter of 18 June 2001 (Doc. No 01-4602-D), the Authority agreed with the Icelandic authorities that the
country could be divided into two areas, the capital area surrounding the capital Reykjavik and the rural
area, the latter being eligible for regional aid. The Authority also agreed that the population density should
be the major criterion for the selection of the eligible areas. However, the Authority was not convinced that
the capital area should be delimited on the basis of electoral districts, as chosen by the Icelandic authorities
in the notification dated 2 August 2000. Given the geographical and population size of the electoral
districts, the Authority considered it justified that municipalities be used to delimit the rural area from the
capital area. The Authority pointed out that the information at municipal level (submitted in the letter dated
23 May 2001) revealed that there were several municipalities within commuting distance from Reykjavik
included in the proposed regional aid area that have a high population density (above 12,5 inhabitants per
sq.km). Therefore, the Authority suggested to the Icelandic authorities that they exclude some municipalities
with a high population density, and located close to Reykjavik, from the proposed assisted area.

By letter dated 12 July 2001 from the Icelandic Mission to the European Union, received and registered by
the Authority on 13 July 2001 (Doc. No 01-5213-A), the Icelandic authorities submitted amendments to
the earlier notification of 2 August 2000. The Icelandic authorities also provided further statistical and
economic information about municipalities with a relatively high population density surrounding the
capital area.

2. Background

The map of assisted areas applicable to the end of 1999 was approved on 28 August 1996 (7). 40,8 % of
the Icelandic population lived in the assisted area at that time. The average population density of the
assisted areas was 1,1 inhabitants per sq. km. The aid intensity approved was 17 % Net Grant Equivalent
(NGE), with a top-up of 10 % gross for small and medium-sized enterprises (SMEs).

3. The contents of the proposed map

3.1. Methodology and coverage

The notification is based on 3 letters from the Icelandic authorities dated 2 August 2000, received and
registered by the Authority on 4 August 2000 (Doc. No 00-5486-A), 23 May 2001, received and registered
on 23 May 2001 (Doc. No 01-3881-A), and 12 July 2001, received and registered on 13 July 2001 (Doc.
No 01-5213-A).

In their letter dated 2 August 2000, the Icelandic authorities proposed that the country should be divided
into two areas, the capital area and the rural area. The Icelandic authorities suggested that only enterprises
located in the rural area would be eligible for regional aid under the Article 61(3)(c) EEA derogation. The
rural area was to consist of three rural electoral districts: North West Electoral District, North East Electoral
District and South Electoral District. The total population coverage of the proposed regional aid area would
be 38,2 % of the Icelandic population.

By letter of 12 July 2001, the Icelandic authorities submitted an amended notification. The geographical
units in the amended notification are at NUTS (8) level V (municipalities). Four municipalities (Reykja-
nesbær, Sandgerdisbær, Gerdahreppur and Vatnsleysustrandarhreppur) were taken out from the assisted
area proposed on 2 August 2000. This reduced the total population coverage of the assisted area to 33,2 %.

The indicator used in determining the assisted area is low population density. The Icelandic authorities
point out that the population density of the assisted area is extremely low, only 0,92 inhabitants per sq.
km. The Icelandic authorities also mention that the population trends in these areas are quite different from
those of the capital area, and that the assisted areas are more dependent on fisheries and agriculture.

The total population of the proposed assisted area is 93 812 inhabitants.

(7) Dec. No. 103/96/COL.
(8) NUTS = Nomenclature of Territorial Statistical Units in the European Communities

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The capital area not eligible for regional aid is defined as the capital Reykjavík and the adjoining
municipalities of Kópavogsbær, Seltjarnarneskaupstadur, Gardabær, Hafnarfjardarkaupstadur, Bessastadah-
reppur, Mosfellsbær, Reykjanesbær, Sandgerdisbær, Gerdahreppur and Vatnsleysustrandahreppur. The
capital area has a population of 189 033 inhabitants, which corresponds to 66,8 % of Iceland's total
population.

3.2. Aid ceilings

The Icelandic authorities have proposed a general aid ceiling of 17 % NGE for the whole regional aid area.
For small and medium-sized enterprises (SMEs), it is proposed that they should be eligible for a supplement
of 10 % gross.

The proposed aid intensities are the same as the ones approved on 28 August 1996.

II. APPRECIATION

1. General remarks

The Authority has noted that the Icelandic authorities have not claimed that Iceland has any area that is
eligible for regional aid under the derogation of Article 61(3)(a) of the EEA Agreement (or any of the other
exemption clauses under Article 61). The Authority has thus examined the proposed regional aid map in
the light of Article 61(3)(c) of the EEA Agreement and Chapter 25, Rules on regional aid, of its State Aid
Guidelines.

Chapter 25.5(1) of the State Aid Guidelines states that ‘the regions of an EFTA Member State eligible under
the derogations and the ceilings on the intensity of aid for initial investment or the aid for job creation
approved for each region together form an EFTA State's regional aid map’.

The establishment of the map itself does not involve aid in the meaning of Article 61(1) of the EEA
Agreement. However, the authorisation of the map implies an endorsement of the granting of aid under the
regional aid schemes. Furthermore, the approved maximum aid ceilings under the map will apply to these
schemes.

The letters dated 2 August 2000 (Doc. No 00-5486-A), 23 May 2001 (Doc. No 01-3881-A) and 12 July
2001 (Doc. No 01-5213-A) together constitute a complete notification and forms the basis of the
Authority's assessment. Consequently, the EFTA Surveillance Authority is obliged to assess whether the
exemption clause under 61(3)(c) of the EEA Agreement is applicable.

2. Methodology and population coverage

The notified regions must, according to Chapter 25.3(16) of the State Aid Guidelines, ‘conform to NUTS
level III, or, in justified circumstances, to a different homogeneous geographical unit. Only one type of
geographical unit may be submitted by each EFTA State’. The regions proposed must also form compact
zones.

Given that the electoral districts proposed by the Icelandic authorities in their letter dated 2 August 2000
are too big to be suitable for delimiting the capital region from the region qualified for regional aid, the
Authority considers it justified using municipalities (NUTS level V) to delimit the regional aid area. The
Authority notes that the Icelandic authorities have notified only one type of geographical unit and that the
proposed regional aid area forms a compact zone.

Chapter 25.3(17) of the State Aid Guidelines states: ‘Subject to the ceiling for each Member State mentioned
in paragraph (12), regions with a population density of less than 12,5 inhabitants per square kilometre may
also qualify for the derogation in question.’

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The Authority notes that the proposed assisted area has a total population of 93 812 persons and a
population density of 0,92 inhabitants per square kilometre. The proposed map of the assisted area is
covering 33,2 % of the total population in Iceland.

The Authority finds that this part of the proposal meets the relevant criteria of Chapter 25 of the State Aid
Guidelines.

An overview of the municipalities covered by the regional map is given in Annex I to this Decision.

3. Aid ceilings

Chapter 25.4(16) of the State Aid Guidelines states i.a. that ‘in the Article 61(3)(c) regions, the ceiling on
regional aid must not exceed 20 % NGE in general, except in the low population density regions where it
may be as high as 30 % NGE.’

Chapter 25.4(20) furthermore states that ‘The ceilings indicated in paragraphs 15 to 19 may be raised by
the supplements for SMEs,
i.e. by 15 percentage points gross in the case of regions qualifying for
exemption under point (a) and by 10 percentage points gross in the case of these regions qualifying for
exemption under point (c). The final ceilings apply to the base for SMEs. These supplements for SMEs do
not apply to transport firms.’

The Icelandic authorities have proposed a general maximum aid ceiling of 17 % NGE, with a top-up of
10 % gross for SMEs.

The Authority therefore concludes that the maximum aid intensities for regional
investment aid, as
proposed by Icelandic authorities, are in accordance with the Guidelines and can be accepted under the
exemption clause in Article 61(3)(c) of the EEA Agreement.

The proposed top-up on the aid ceiling for SMEs of 10 % gross is admissible, according to the State Aid
Guidelines, but it must be ensured that reference to a definition of SMEs consistent with the one stipulated
in Chapter 10.2 of the State Aid Guidelines is laid down in the relevant national

legal provisions.

The maximum aid intensities of the regional aid map are cumulative aid ceilings. This means that when a
given investment project is to be awarded aid under more than one aid scheme, the cumulated intensity of
aid granted to the project under different aid schemes must not exceed the relevant aid ceiling of the map
of assisted areas.

4. Scope of the Decision and cumulation of aid

Regarding the scope of application of the map of assisted areas in Iceland, it should be pointed out that
new plans to grant or alter aid with regional objectives, which respect the geographical delimitation and
maximum aid intensities of the map, will need no further justification regarding their regional aspects. This,
however, does not relieve the Icelandic authorities from their obligation to notify such plans in accordance
with Article 1(3) of Protocol 3 to the Surveillance and Court Agreement.

All specific notification obligations with regard to certain sensitive sectors (currently shipbuilding, steel,
synthetic fibres and motor vehicles) remain applicable.

The map of assisted areas shall not be redrawn, save by way of exception, until the end of the approved
validity of 31 December 2006. However, during that period, and subject to prior notification to and
approval by the EFTA Surveillance Authority, the possibility of adjusting the map to reflect a change in
circumstances is not ruled out.

Nevertheless, this Decision does not restrict the powers of the EFTA Surveillance Authority to review the
map, in accordance with Article 1(1) of Protocol 3 to the Surveillance and Court Agreement, if necessary
before the end of the period approved referred to above.

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5. Conclusion

In light of the above, the Authority considers that the notified regional aid map for the period until the end
of 2006 reflects the requirements set out in the State Aid Guidelines (Chapter 25) for aid under Article
61(3)(c) of the EEA Agreement, and is thereby eligible for the exemption under Article 61(3)(c) of the EEA
Agreement. The Authority therefore closes the formal investigation procedure with a positive decision
based on Article 61(3)(c) EEA,

HAS ADOPTED THIS DECISION:

1. The regional aid map for Iceland is considered compatible with the functioning of the EEA Agreement
under Article 61(3)(c) of the EEA Agreement. Implementation of the measure is therefore authorised.

2. Without prejudice to Article 1(1) of Protocol 3 to the Surveillance and Court Agreement, the map of

assisted areas shall be applicable from the date of this Decision until 31 December 2006.

3. This Decision is addressed to Iceland.

Done at Brussels, 8 August 2001.

For the EFTA Surveillance Authority

The President

Knut ALMESTAD

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ANNEX I

MUNICIPALITIES IN THE ASSISTED AREA

Number

Municipality

1606

2300

3000

3501

3502

3503

3504

3506

3510

3601

3609

3701

3709

3710

3711

3713

3714

3809

3811

4100

4200

4502

4604

4607

4803

4901

4902

4904

4905

4908

4909

Kjósarhreppur

Grindavíkurkaupstaður

Akraneskaupstaður

Hvalfjarðarstrandarhreppur

Skilmannahreppur

Innri-Akraneshreppur

Leirár- og Melahreppur

Skorradalshreppur

Borgarfjarðarsveit

Hvítársíðuhreppur

Borgarbyggð

Kolbeinsstaðahreppur

Eyrarsveit

Helgafellsveit

Stykkishólmsbær

Eyja- og Miklaholtshreppur

Snæfellsbær

Saurbæjarhreppur

Dalabyggð

Bolungarvíkurkaupstaður

Ísafjarðarbær

Reykhólahreppur

Tálknafjarðarhreppur

Vesturbyggð

Súðavíkurhreppur

Árneshreppur

Kaldrananeshreppur

Hólmavíkurhreppur

Kirkjubólshreppur

Bæjarhreppur

Broddaneshreppur

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Official Journal of the European Communities

L 15/55

Number

Municipality

5000

5200

5508

5601

5602

5603

5604

5605

5606

5607

5608

5609

5610

5706

6000

6100

6200

6400

6501

6504

6506

6513

6514

6601

6602

6604

6605

6606

6607

6608

6609

6610

6611

Siglufjarðarkaupstaður

Sveitarfélagið Skagafjörður

Húnaþing vestra

Áshreppur

Sveinsstaðarhreppur

Torfalækjarhreppur

Blönduósbær

Svínavatnshreppur

Bólstaðarhlíðarhreppur

Engihlíðarhreppur

Vindhælishreppur

Höfðahreppur

Skagahreppur

Akrahreppur

Akureyrarkaupstaður

Húsavíkurkaupstaður

Ólafsfjarðarkaupstaður

Dalvíkurbyggð

Grímseyjarhreppur

Hríseyjarhreppur

Arnarneshreppur

Eyjafjarðarsveit

Hörgárbyggð

Svalbarðsstrandarhreppur

Grýtubakkahreppur

Hálshreppur

Ljósavatnshreppur

Bárðdælahreppur

Skútustaðahreppur

Reykdælahreppur

Aðaldælahreppur

Reykjahreppur

Tjörneshreppur

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Number

Municipality

6701

6702

6705

6706

6707

7000

7300

7501

7502

7505

7506

7509

7512

7605

7610

7611

7612

7613

7617

7618

7708

8000

8200

8508

8509

8601

8602

8603

8604

8605

8606

8607

8610

8611

Kelduneshreppur

Öxarfjarðarhreppur

Raufarhafnarhreppur

Svalbarðshreppur

Þórshafnarhreppur

Seyðisfjarðarkaupstaður

Fjarðabyggð

Skeggjastaðahreppur

Vopnafjarðarhreppur

Fljótsdalshreppur

Fellahreppur

Borgarfjarðarhreppur

Norður-Hérað

Mjóafjarðarhreppur

Fáskrúðsfjarðarhreppur

Búðahreppur

Stöðvarhreppur

Breiðdalshreppur

Djúpavogshreppur

Austur-Hérað

Sveitarfélagið Hornafjörður

Vestmannaeyjabær

Sveitarfélagið Árborg

Mýrdalshreppur

Skaftárhreppur

Austur-Eyjafjallahreppur

Vestur-Eyjafjallahreppur

Austur-Landeyjahreppur

Vestur-Landeyjahreppur

Fljótshlíðarhreppur

Hvolhreppur

Rangárvallahreppur

Ásahreppur

Djúpárhreppur

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Number

Municipality

8612

8701

8706

8707

8708

8709

8710

8711

8712

8714

8716

8717

8719

9999

Holta- og Landsveit

Gaulverjabæjarhreppur

Hraungerðishreppur

Villingaholtshreppur

Skeiðahreppur

Gnúpverjahreppur

Hrunamannahreppur

Biskupstungnahreppur

Laugardalshreppur

Þingvallahreppur

Hveragerðisbær

Sveitarfélagið Ölfus

Grímsnes- og Grafningshreppur

Almenningur