2002/822/ECSC: Commission decision of 30 January 2002 on the State aid granted by Spain to a number of steel undertakings in the Basque Country (Text with EEA relevance.) (notified under document number C(2002) 309)
Date: 2002-01-30
Institutions: European Commission
Subjects: Spain, State aid, control of State aid, infringement of EU law, iron and steel industry, research and development

30.10.2002

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Official Journal of the European Communities

L 296/35

COMMISSION DECISION

of 30 January 2002

on the State aid granted by Spain to a number of steel undertakings in the Basque Country

(notified under document number C(2002) 309)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2002/822/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

under Article 6(5) of the Steel Aid Code in respect of the
aid.

Having regard to the Treaty establishing the European Coal
and Steel Community, and in particular Article 4(c) thereof,

Having regard to Commission Decision No 2496/96/ECSC of
18 December 1996 establishing Community rules for State aid
to the steel industry (1), and in particular Article 6(5) thereof,

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

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

Whereas:

I PROCEDURE

(1)

By letter dated 31 July 2000 the Commission requested
the Spanish authorities to provide information on the
aid which the Basque regional government granted in
1999 to ECSC undertakings for research and develop-
ment and which had not been notified in accordance
with the procedure laid down in Article 6(1) of Com-
mission Decision No 2496/96/ECSC (hereinafter the
Steel Aid Code). By letter dated 4 October 2000 the
Spanish authorities provided some information. By letter
dated 20 November 2000 the Commission requested
additional
information. By letter dated 16 January
2001 the Spanish authorities provided the additional
information requested.

(2)

By letter dated 28 March 2001 the Commission in-
formed Spain that it had decided to initiate proceedings

(3)

(4)

(5)

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

The Commission received comments from the United
Kingdom authorities and from the United Kingdom Steel
Association. It forwarded them to Spain, which was
its comments were
given the opportunity to react;
received by letter dated 19 October 2001.

II. DETAILED DESCRIPTION OF THE AID

The aid consists of grants awarded under the scheme
introduced by Decree 185/1997 of 29 July 1997
establishing support measures for research, development
and technological innovation in the Autonomous Com-
munity of the Basque Country (3), which was authorised
by the Commission under the EC Treaty (4).

(6)

The beneficiary ECSC undertakings, the details of the
R&D projects and the amounts of aid are as follows:

A. Acería de Álava SA. Project:
development of a new production line:
finishing of stainless steel bars

(7)

The project consists in the installation of a new pro-
duction line in order to increase the company’s range of
products and improve the steelworks’ production

( 1) OJ L 338, 28.12.1996, p. 42.
( 2) OJ C 185, 30.6.2001, p. 41.

(3) BOPV (Official Gazette of the Basque Country) No 1997147,

4.8.1997, p. 13174.

(4) Letter SG (97) D/6942 of 12 August 1997.

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capacity. Following the results of a market study com-
missioned by the company, which concluded that there
was increasing demand for large stainless steel bars,
Acería de Álava decided to install a new production line
for these products. Neither the application form nor
the documentation provided afterwards describe any
research activity; they mention only the steps followed
for bringing the installations into service.

(8)

external

personnel

(EUR 283 077),

included in the application form refer
The costs
to
services
(EUR 841 017), current expenditure (EUR 12 020),
equipment (EUR 39 065) and depreciation of instal-
lations (EUR 744 043). They total EUR 1 919 063. The
entity charged by the Basque authorities with assessing
the project noted that no description was provided of
the activities of the external agent. The Basque Country
granted EUR 101 407 to cover the costs of the company
and EUR 27 464 to cover the costs of the external agent.

(14) The costs considered eligible by the Spanish authorities
amount
to EUR 527 388 and relate to personnel,
instruments and equipment and external services. The
aid amounts to EUR 210 955.

(15) R&D expenditure by Aceralia Corporación Siderúrgica
rose from an average of EUR 4 362 146 in 1996 to
1998 to 5 409 109 in 1999. The personnel assigned to
R&D activities grew from an average of 37 in 1996
to 1998 to 43 in 1999.

(16) R&D expenditure by Acería Compacta de Bizcaia rose
from an average of EUR 348 376 in 1997 to 1998 to
515 710 in 1999. As a percentage of
it
increased from 0,15 % in 1997 to 1998 to 0,22 % in
1999.

turnover,

(9)

The project was classed as precompetitive development
by the Basque Country.

C. Aceros Inoxidables Olarra SA. Project:
optimisation of the hot-forming of austenitic steels
through thermomechanical simulation

(10) The company’s R&D expenditure declined from an
average of EUR 267 000 in 1996 to 1998 to
EUR 227 000 in 1999. As a percentage of turnover, it
fell from 0,39 % in 1996 to 1998 to 0,33 % in 1999.

(17) The project involves defining the composition of con-
tinuous cast duplex steels and their microstructural
characterisation with continuous cast structure, after
hot-forming and heat treatment.

B. Acería Compacta de Bizcaia SA and Aceralia
Corporación Siderúrgica SA. Project:
development of carbon and micro-alloyed steels
through thin slab casting

(18) The project is being carried out in cooperation with the

CEIT.

(11) The activities involved in the project include studying
the influence of chemical composition (contents of
nitrogen, residual and microalloying elements) in the
hot-rolled product (mechanical properties, cleanliness)
and their influence on the cold-rolled and galvanised
final product. Through simulation in the laboratory, the
project will examine the possibility of defining simplified
conditions for industrial production as well as the
influence of solidification speeds on the properties of
the steel produced.

(19) The costs considered eligible by the Spanish authorities
amount to EUR 77 062 and relate to personnel, instru-
ments and equipment and external services. The aid
amounts to EUR 30 177.

(20) The company’s R&D expenditure over

the period
1996 to 1998 represented on average 0,14 % of
turnover. In 1999 it rose to 0,19 %.

(12) The project is being carried out in cooperation with the
CEIT (Guipúzcoa Research Centre), a member of the
Basque technology network.

D. Grupo Siderúrgico Vasco ‘GSB Acero’ SA.
Project: optimisation of metallurgical parameters
in the direct forging of micro-alloyed steels

(13) The activities were classed by the Spanish authorities as

precompetitive development.

(21) The project is aimed at obtaining vanadium micro-
alloyed steels with the necessary microstructure to be
directly forged (without intermediate treatment).

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(22) The costs considered eligible by the Spanish authorities
amount
to EUR 117 696 and relate to personnel,
instruments and equipment and external services. The
aid amounts to EUR 47 077.

F. Siderúrgica Aristrain Olaberría SL. Project:
development of beam blanks technology
for obtaining carbon and micro-alloyed structural steels

(23)

Expenditure on R&D over the period 1996 to 1998
amounted to an average of EUR 582 000. In 1999, it
rose to EUR 692 000. The personnel assigned to R&D
activities was increased from 11 (average 1996 to 1998)
to 14.

(29)

In order to overcome the problems identified in the use
of traditional continuous casting for the production of
beams, Siderúrgica Aristrain Olaberría SL decided to
adopt beam blanks technology. With this process, the
shape of the semi-finished products obtained is closer to
that of the finished products, which reduces the further
deformation needed to reach the final product and
improves the quality of the steel.

E. Nervacero SA. Project:
recycling of dusts from the steel shop through
briquetting and use in the furnace

(30) The project is being carried out in cooperation with the

CEIT.

(24) Dust from steel shops is normally treated through two
different processes: the so-called Waelz process, which
involves burning the dust mixed with coke and sand at
high temperatures and whose main disadvantage is the
production of very low value slag and the emission of
high quantities of combustion gases; and the chemical
stabilisation/solidification process, which, by mixing the
dusts with other elements, allows the resulting waste to
be dumped in controlled sites since it can be classed as
non-toxic and non-dangerous. The project is aimed at
developing a self-reducing briquette which incorporates
not only the dust and the agglomerating elements but
also the coke necessary for the reduction process. The
project would also reduce the treatment time in the
furnace in comparison with the Waelz process.

(25) The leader in this project is Oñeder SA, a company
dedicated to the recycling of industrial waste. Nervacero’s
contribution relates to personnel costs (one researcher)
as well as costs of materials and some of the costs of
external agents.

(26) The project is being carried out in cooperation with the
Inasmet Foundation (Inasmet), a member of the Basque
technology network.

(31) The costs considered eligible by the Spanish authorities
to EUR 390 708 and relate to personnel,
amount
materials and equipment and external services. The aid
amounts to EUR 23 526.

(32) The company’s R&D expenditure over

the period
1996 to 1998 represented on average 0,38 % of total
turnover. In 1999 it represented 0,42 %.

G. Esteban Orbegozo SA. Project:
optimisation of the melting of steel scrap
in an electric arc furnace through
continuous control of the slag

(33) The project is aimed at incorporating into the control of
the melting process a new variable, control of the slag,
through an on-line analyser of slag and optimisation of
the combustion processes for energy sources other than
electricity.

(27) The costs considered eligible by the Spanish authorities
amount to EUR 50 034 and relate to personnel, instru-
ments and equipment and external services. The aid
amounts to EUR 20 014.

(34) The project is being carried out in cooperation with

Inasmet.

(28) With this project, the company will be involved for the

first time in R&D activities.

(35) The costs considered eligible by the Spanish authorities
to EUR 168 283 and relate to personnel,
amount
instruments and equipment, depreciation and external
services. The aid amounts to EUR 1 030.

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(36) No data have been provided as to R&D expenditure or

personnel assigned to R&D activities.

instruments and equipment, depreciation and external
services. The aid amounts to EUR 13 951.

H. Esteban Orbegozo SA. Project:
process control for the reduction of defects
in the hot rolling of billets

(37) The activities involved include the collection in real time
of details about defects, dimensional control and other
variables that affect
the
analysis of data and the establishment of a correlation
between the defects and the rolling parameters; and
optimisation of the rolling parameters.

the quality of the product;

(44) No data have been provided as to R&D expenditure or

personnel assigned to R&D activities.

J. Tubos Reunidos SA. Project:
Optimisation and improvement of productivity
in the steelworks

(45) The project focuses on improving refining control in the
furnace and the ladle as well as installing new ingot
moulds and agitators in the continuous caster.

(38) The project is being carried out in cooperation with the

CEIT.

(46) The entity charged by the Basque authorities with
assessing the project acknowledges that it
is not a
concrete R&D project and that the bulk of the expendi-
ture corresponds to investment.

(39) The costs considered eligible by the Spanish authorities
to EUR 317 839 and relate to personnel,
amount
instruments and equipment, depreciation and external
services. The aid amounts to EUR 23 145.

(40) No data have been provided as to R&D expenditure or

personnel assigned to R&D activities.

(47) The costs considered eligible by the Spanish authorities
amount
to EUR 531 012 and relate to personnel,
instruments and equipment, depreciation and external
services. The aid amounts to EUR 26 338. The report
on implementation of the project reports the following
costs: personnel, EUR 368 718; current expenditure,
EUR 146 076; depreciation, EUR 125 461; external
services, EUR 214 536.

(48) No data have been provided as to R&D expenditure or

personnel assigned to R&D activities.

I. Marcial Ucín Siderúrgica SL. Project:
improvement of the fatigue behaviour of corrugated
steels with anti-seismic proprieties

III. GROUNDS FOR INITIATING PROCEEDINGS

(41)

Following the new draft standard PNE 36065 EX/98
establishing new values for resistance to low-cycle
fatigue, the company aims with this project to develop
all
the infrastructure necessary for carrying out the
appropriate tests.

(42) The project is being carried out in cooperation with

Inasmet.

(49)

In the decision-initiating proceedings, the Commission
expressed doubts as to the incentive effect of the aid
since it took the view that the indicators which the
Basque regional government had when it notified the
scheme undertaken to consider for the purpose of
examining the incentive effect of the aid for large
undertakings (evolution of R&D spending, evolution of
the number of people assigned to R&D activities,
evolution of R&D spending as a proportion of total
turnover) had not been taken into account and would
be relevant for the purpose of assessing the incentive
effect in the present case.

(43) The costs considered eligible by the Spanish authorities
to EUR 220 789 and relate to personnel,

amount

(50) The Commission also expressed its doubts as to the
fulfilment of the other requirements established in the
R&D framework since it lacked detailed information
about the projects.

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(51)

In these circumstances, the Commission requested Spain
to provide all the information necessary for assessing
the aid. If such information was not forthcoming, the
Commission would have to adopt a decision on the
basis of the information in its possession.

IV. COMMENTS FROM INTERESTED PARTIES

(52) The United Kingdom authorities agreed with the Com-
mission’s reasoning for initiating proceedings. They also
stressed the need for the Member States to establish the
incentive effect of the aid.

(c)

(d)

(e)

the participation of external agents contributed to
the improvement of research methods;

the mere fact of applying for aid required the
companies to examine more closely the different
options and the most effective solutions;

the implementation of an R&D project contributed
to an improvement in internal coordination within
the company.

VI. ASSESSMENT OF THE AID

(53) The United Kingdom Steel Association considered that
none of the undertakings could be regarded as SMEs;
they also submitted that, on the basis of the limited
information published, some of the projects could be
seen as applying existing technologies.

(57) The abovementioned companies manufacture products
included in Annex I to the ECSC Treaty. They are
therefore undertakings within the meaning of Article 80
of the ECSC Treaty and are therefore subject to that
Treaty and to the Steel Aid Code.

(54) The information transmitted by the Spanish authorities
included the comments that some of the companies had
made further to the initiation of proceedings. These
comments stressed the incentive effect of the aid along
the same lines as the comments made by Spain (see
recital 56 below).

(58)

Pursuant to Article 2 of the Steel Aid Code, aid granted
to defray expenditure by steel undertakings on research
and development projects may be deemed compatible
with the common market if it is in compliance with the
rules laid down in the Community framework for State
aid for research and development (6) (hereinafter ‘the
R&D framework’).

V. COMMENTS FROM SPAIN

(59)

(55) By letter dated 8 June 2001, the Spanish authorities
transmitted a copy of their entire documentation con-
cerning these aid measures.

In accordance with the R&D framework, in order to
assess whether aid is compatible with the common
market the Commission must verify the nature of the
activities, the stage of the research, the aid intensity and
the eligible costs and make sure that the aid has an
incentive effect.

(56) As to the incentive effect of the aid, although the
Commission had already indicated that quantifiable
factors would be relevant (see recital 49 above) the
Spanish authorities did not mention (5) them and main-
tained in that letter that:

(60) As to the nature of the activities, the Commission
considers that all the projects except two (the projects
referred to in recitals 7 to 10 and 45 to 48 above)
consist of R&D.

(a)

(b)

the aid was a decisive factor in carrying out the
research because the risk involved in R&D activities
was high;

the technical assistance provided in the process of
assessing the aid was important for the undertak-
ings;

(61) The Acería de Álava project in fact involves the instal-
lation of a new production line. Even the entity charged
by the Basque authorities with assessing the project
acknowledges this fact. This is also confirmed by the
type of personnel involved (maintenance, assembly) and
the third parties’ contribution (engineering companies
supplying equipment). The aid for this project therefore
does not comply with the R&D framework.

( 5) It can be seen from the documentation transmitted that the
application form requires the companies to provide, among other
things, the following information for the period 1996 to 1999:
turnover; personnel assigned to R&D; total R&D expenditure. This
is therefore in line with the commitment of the Basque regional
government to take these factors into account in determining the
incentive effect.

(62) The Tubos Reunidos project relates to the improvement
of processes with a view to increasing productivity. This
constitutes a routine activity that every company is

(6) As published in OJ C 45, 17.2.1996, p. 5.

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bound to undertake on a regular basis in order to
maintain its competitiveness and does not constitute
R&D. Even the entity charged by the Basque authorities
with assessing the project acknowledges that it is not a
concrete R&D project and that the bulk of the expendi-
ture corresponds to investment. The aid for this project
therefore does not comply with the R&D framework.

issue of the incentive effect of the aid on a specific
company, i.e. whether the planned aid would induce
that firm to pursue research that it would not otherwise
have pursued. In these circumstances, since quantifiable
data of the type mentioned above had been included in
some of the applications for aid filed by the companies
with the Spanish authorities, the Commission is entitled
to take them into account for the purpose of assessing
the incentive effect of the aid.

(63) As to the stage of research, except for the abovemen-
tioned two projects, all the others constitute at least
precompetitive development.

(64) As to the eligible costs, except for the abovementioned
two projects, all the others comply with the definitions
given in the R&D framework (personnel, instruments
and equipment, materials, external services).

(65) As regards the intensity of the aid, according to point 5.5
of the R&D framework the permissible gross aid intensity
is 25 % of the eligible costs for precompetitive activities.
This intensity can be increased by 15 percentage points
where the research project is in accordance with the
objectives of a specific project or programme undertaken
as part of the Community framework programme for
R&D (7) and by 5 percentage points where the research
project is carried out
in an Article 87(3)(c) region
(point 5.10.2 of the framework).

(66) The Commission notes that for the projects where the
25 % intensity is exceeded, the abovementioned bonuses
apply.

(67) As for the incentive effect of the aid, the Commission
took the view in the decision initiating proceedings (see
recital 49 above) that the quantifiable factors which the
Basque regional government had undertaken to consider
when the Commission approved the scheme were also
relevant in this case (in addition to being the quantifiable
factors included in the R&D framework). The Basque
government did not, however, take them into account.
It did take into account other factors (see recital 56
above) that relate to some beneficial effects of R&D
activities in general but do not in any way address the

(68) On the basis of the evolution of R&D spending, of the
number of people assigned to R&D activities and of
R&D spending as a proportion of total turnover, the
incentive effect can be considered to be demonstrated
for the companies involved in the projects referred to in
recitals 11 to 32 above.

(69) As for the other companies, the Commission considers
that the incentive effect has not been demonstrated on
the basis of those indicators and that no other relevant
factor for this purpose has been indicated by the Member
State or by the companies. Consequently the aid for
these projects is not in compliance with the R&D
framework.

VII. CONCLUSION

(70) The Commission finds that Spain has unlawfully granted
the aid in question in breach of Article 6(4) of the Steel
Aid Code.

(71) The Commission concludes, however,

the aid
granted in respect of the projects referred to in recitals 11
to 32 above is compatible with the common market.

that

(72) The Commission concludes that aid for the projects
referred to in recitals 7 to 10 and 33 to 48 above is
incompatible with the common market.

( 7) In the present case the ‘Medium-term guidelines of the ECSC steel
R&D programme for research and pilot/demonstration projects,
improved materials and production technology in the steel
field’ undertaken as part of the Community’s fifth framework
programme.

(73) Where the Commission finds that State aid incompatible
with the common market has been illegally granted, it
must require the Member State to take all the necessary
measures to recover the aid from the beneficiary. The

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aid to be recovered shall include interest at the reference
rate used in the assessment of regional aid schemes.
Interest shall be payable from the date on which the
unlawful aid was at the disposal of the beneficiary until
the date of its recovery,

HAS ADOPTED THIS DECISION:

Article 1

Article 3

Spain shall take all necessary measures to recover from
1.
the beneficiaries the aid referred to in Article 2 and unlawfully
made available to the beneficiaries.

Recovery shall be effected without delay and in accord-
2.
ance with the procedures of national law provided that they
allow the immediate and effective execution of the decision.
The aid to be recovered shall include interest from the date on
which it was at the disposal of the beneficiaries until the date
of its recovery. Interest shall be calculated on the basis of the
reference rate used for calculating the grant-equivalent of
regional aid.

The State aid which Spain has granted to Acería Compacta
de Bizcaia SA and Aceralia Corporación Siderúrgica SA
(EUR 210 955), Aceros Inoxidables Olarra SA (EUR 30 177),
Grupo Siderúrgico Vasco ‘GSB Acero’ SA (EUR 47 077),
Nervacero SA (EUR 20 014) and Siderúrgica Aristrain Olaber-
ría SL (EUR 23 526) is compatible with the common market.

Article 4

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

Article 2

Article 5

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 30 January 2002.

The State aid which Spain has granted to Acería de Álava SA
(EUR 128 871), Esteban Orbegozo SA (EUR 34 175), Marcial
Ucín Siderúrgica SL (EUR 13 951) and Tubos Reunidos SA
(EUR 26 338) is incompatible with the common market.

For the Commission

Mario MONTI

Member of the Commission