2002/825/EC: Commission decision of 24 April 2002 on the State aid implemented by Belgium for the Beaulieu Group (Ter Lembeek International) (Text with EEA relevance.) (notified under document number C(2002) 1341)
Date: 2002-04-24
Institutions: European Commission
Subjects: Belgium, State aid, aid to industry, control of State aid, glass industry, infringement of EU law, packaging

L 296/60

EN

Official Journal of the European Communities

30.10.2002

COMMISSION DECISION

of 24 April 2002

on the State aid implemented by Belgium for the Beaulieu Group (Ter Lembeek International)

(notified under document number C(2002) 1341)

(Only the French and Dutch versions are authentic)

(Text with EEA relevance)

(2002/825/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

Having regard to the Treaty establishing the European Com-
munity, 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 called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

I. PROCEDURE

(1)

(2)

By Decision of 4 October 2000, notified to Belgium on
16 October 2000 (SG(D)2000/107549),
the Com-
mission terminated the Article 88(2) procedure in
respect of some of the aid granted by Belgium to the
Verlipack Group (2). By that same Decision, it revoked
its Decision of 16 September 1998 (ref. SG(D)98/
8769) (3) not to raise any objections to part of the aid.
This was prompted by the fact that the Decision of
16 September 1998 was based on incorrect information
provided in the course of the procedure which was of
decisive importance in the decision.

During its examination of the aid, the Commission was
informed of other measures that might contain elements
of state aid for the Verlipack Group and/or the Beaulieu
Group. Since the case concerned new support from the
Walloon Region, the Commission called on the Belgian
State on 5 July 2000 to provide it with information that
would enable it to assess the measures in the light of the
rules applicable.

After several reminders, the Commission decided to
issue, by letter of 19 January 2001, a formal injunction
to Belgium to supply the information that would enable
it to assess the compatibility of the measures in favour
of Verlipack and/or the Beaulieu Group with Article 87
of the Treaty. Only a few days before this injunction was
notified, Belgium submitted its reply to the letter of
5 July 2000 by letter registered as received on 15 January
2001.

(4)

(5)

On 6 June 2001 the Commission decided to initiate the
Article 88(2) procedure with regard to the aid. Belgium
was informed by letter of 8 June 2001. After having
requested additional time to reply, Belgium responded
by letter received by the Commission on 26 July 2001.

The publication of this letter in the Official Journal of the
European Communities (4) prompted a reaction from the
Collectif de Défense des Travailleurs Licenciés de Verli-
pack à Jumet et à Ghlin, an association of workers laid
off at Verlipack’s Jumet and Ghlin plants, by letter of
3 December 2001 and from the United Kingdom
Permanent Representation by letter of 7 December
2001. Belgium replied to the letter of 3 December 2001
by letter received by the Commission on 16 January
2002.

II. BACKGROUND

II.1. Developments within the Verlipack Group

(6)

Until it was declared bankrupt on 18 January 1999, the
Verlipack Group had been Belgium’s largest producer of
hollow container glass (white or brown glass bottles or
jars for the agri-foodstuffs industry), with a market share
of 20 % in Belgium and 2 % in the Community. It
employed 735 people at its plants at Ghlin, Jumet and
Mol in 1996.

( 1) OJ C 313, 8.11.2001, p. 2.
( 2) OJ L 320, 5.12.2001, p. 28.
( 3) OJ C 29, 4.2.1999, p. 13.

(4) See footnote 1.

(7)

(8)

(9)

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L 296/61

In 1985 the Belgian public authorities acquired a 49 %
holding in the Verlipack Group, with the remaining
shares being held by a private operator, the Beaulieu
Group. This holding, which had been acquired by Société
Nationale pour la Restructuration des Secteurs nationaux
(SNRSN), was approved by the Commission (aid N123/
85). In accordance with the Special Law of 15 January
the Walloon Region acquired the non-voting
1989,
shares for the Ghlin and Jumet plants, while the shares
for the Mol plant were transferred to the Flemish Region.

(11) The two companies located in Wallonia were making
losses at that time (SA Verlipack Ghlin suffered an
operational loss of 8 % in 1995 and 16 % in 1996; SA
Verlipack Jumet recorded a loss of 55 % in 1995 and
60 % in 1996).

(12) The Verlipack Group would not have been able to
honour the end-of-1996 repayment deadlines for bank
loans of more than BEF 362,8 million and would have
been subjected to the banks’ recovery procedures.

In 1992 the Verlipack Group received two investment
grants totalling BEF 502 122 500 under a regional aid
scheme (Law of 30 December 1970) approved by
the Commission (5). The decision by Société Régionale
d’Investissement (set up by the Law of 2 April 1962) to
grant a BEF 500 million convertible equity loan (prêt
participatif) was also the subject of a Commission
Decision of 8 December 1992 not to raise any objec-
tion (6). The Walloon authorities subsequently revealed
that, for various internal reasons, this loan had not been
released. They also indicated that a decree had been
adopted on 15 July 1993 repealing their initial decision
to grant this aid to Verlipack.

In the course of the procedure resulting in the adoption
of the decision of 4 October 2000, Belgium revealed
that the Verlipack Group was experiencing problems,
mainly due to the quality of its management and,
above all, its production (inadequate equipment and
technology); while investment was needed to improve
equipment, the Beaulieu Group could not fully assume
the burden and management of its BEF 5 500 million
investment programme. This would explain, among
other things, why the Walloon Region did not pay the
aid that had been authorised.

(10)

Following a number of capital increases by the private
shareholders (SA Imcopack Wallonie, owner of
the
Ghlin and Jumet sites, and NV Imcopack Vlaanderen,
owner of the Mol site, both belonging to the Beaulieu
Group), the public holding was gradually reduced. By
1996 the Walloon Region had shareholdings of 6,2 %
in SA Verlipack Jumet and 11,1 % in SA Verlipack Ghlin,
the operating companies situated on Walloon territory.
At the end of this gradual disengagement, the public
authorities held no more than 20,7 % of the capital of
the Verlipack Group.

( 5) OJ L 312, 9.11.1982, p. 18.
( 6) OJ C 83, 24.3.1993, p. 3.

(13) On 1 September 1996 the Verlipack Group and the
German Heye-Glas Group signed a technical cooperation
agreement.

(14) This scope of this agreement was extended on 11 April
1997 to cover managerial and financial assistance, with
the German group becoming directly involved in the
management and running of the Verlipack Group. At
the end of this operation, the shares held by the Walloon
Region in SA Verlipack Ghlin and SA Verlipack Jumet
were bought by the Beaulieu Group (7). The latter and
the Heye-Glas Group set up an umbrella holding,
Verlipack Holding I, controlled by the latter subject to a
majority vote.

(15) Verlipack Holding I has equity capital of BEF 1 030 mil-
lion, of which BEF 515 million was contributed by the
Heye-Glas Group, with the rest comprising all of the
equipment of the three operating sites contributed by
the Beaulieu Group and valued at BEF 515 million. Out
of this umbrella holding a second holding company,
Verlipack Holding II, was formed with a capital of
BEF 1 230 million to oversee the three production sites.
The management bodies for the whole of the new
industrial group are concentrated at the level of Verlipack
Holding II, in which Heye holds a majority, and there is
single management of the group’s various departments
(commercial, technical, accounting, financial and admin-
istrative).

(7) By agreement of 18 December 1996, SA Ter Lembeek Inter-
the following holdings from Sowagep (the
national bought
management company for the holdings of the Walloon Region
in commercial
firms): Verlipack Ghlin SA: 5 087 non-voting
preferential shares and 3 937 Category I profit shares; Verlipack
Jumet SA: 2 923 non-voting preferential shares and 2 267 Cate-
gory I profit shares. The agreement stipulated that the price of
BEF 113 712 000 was payable ‘on 31 December 2001, net-net,
without interest’.

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(16) However, the results announced by the Heye-Glas Group
and Verlipack worsened significantly in 1997. On
30 November of that year, the provisional and unaudited
consolidated position revealed a net loss for the year of
BEF 828 592 044. On 2 April 1998 the Walloon
authorities estimated the loss as at 31 December 1997
to be some BEF 825 million, whereas the Heye-Glas/
Verlipack business plan had forecast a loss of only
BEF 368 million,
i.e. BEF 457 million less than the
estimate.

(22) The Group is controlled by the holding company Ter
Lembeek International, known until 1994 as Beaulieu
Wielsbeke (8).

(23) Beaulieu Wielsbeke NV, which took over the activities
of Ter Lembeek International before the latter changed
its name, recorded a turnover of BEF 5 182 220 000 in
1998 and BEF 4 821 857 000 in 1999, with losses of
BEF 39 035 000 and BEF 309 520 000 respectively.

(17) On 8 January 1999 Verlipack sought a court-approved
arrangement with creditors for the Jumet and Ghlin
plants and announced the closure of the Mol plant.
According to media reports, the company justified these
measures ‘in part at least, by the difficult situation on
the container glass market’ and by ‘mounting losses and
unfavourable forecasts given the overcapacity in glass
production on the market in central Europe’.

(24)

In 1999 Beaulieu Wielsbeke employed 553 persons, and
98 % of its sales were exported.

III.

INJUNCTION ADDRESSED TO BELGIUM

(18) On 11 January 1999 the Turnhout Commercial Court
declared Verlipack Mol bankrupt and on 18 January
1999 the Mons Commercial Court declared bankrupt
the six companies in the glassmaking Verlipack Group
(the Ghlin and Jumet plants, Verlipack Belgium, Verli-
pack Engineering, Verlimo and Imcourlease).

(25)

In the context of the procedure resulting in the decision
of 4 October 2000, Belgium described the situation at
Verlipack in the months preceding and following the
Commission’s decision of 16 September 1998.

(19) Recognising that it no longer had enough liquidity or
assets to meet its debts, Verlipack Holding II filed for
bankruptcy before the Mons Commercial Court on
11 February 1999. Sowagep announced to the Court
that it did not intend to pursue recovery of its claim (and
thus granted a credit to its debtor). As a consequence,
the Court found on 31 May 1999 that the conditions
for bankruptcy on the part of Verlipack Holding II were
not met even though, now that its object no longer
existed, the company was destined merely to be put into
liquidation.

II.2. Beaulieu Group

(20) The Beaulieu Group is the name of a Belgian holding
company active in the carpeting and synthetic fibres
sector.

(26) The Commission notes that, in view of the deterioration
in Verlipack’s position at the end of May 1998, fresh
efforts had to be made by the partners (banks, Beaulieu
Group and Heye) under a relaunch agreement concluded
on 5 June 1998. In this context, and in addition to
converting its BEF 150 million loan into capital, Sowa-
gep undertook to find a new private investor willing to
make a cash injection of BEF 100 million. However,
according to the information supplied by Belgium, it
became clear fairly quickly that
this new relaunch
plan was not producing the anticipated results in that
Sowagep was no longer able to find a new private
investor.

(27)

It was decided on 26 June 1998 to increase Verlipack’s
capital further with a contribution from Heye (9) of
BEF 200 million for 19 408 new shares and a
BEF 100 million injection by the Luxembourg company
Worldwide Investors, the investor found by Beaulieu, in
exchange for 9 704 new shares.

(21)

It is the world’s second-largest carpet manufacturer and
by far the largest carpet manufacturer in Europe. It also
produces nylon fibres for its own use and, as a result, is
one of the carpet manufacturers which have become
involved upstream in the production of nylon fibres.

(8) This holding company owns the following subsidiaries Beaulieu
Wielsbeke NV, Goed Ter Lembeek NV, Cefima NV, Verlico NV,
Der Grüne Teppich GmbH, Beja Textil Lda, Beaulieu Service
Centre Moskau, Datex NV, Beaulieu Kunstoffen NV, Chemical
Finance Company, De Steenhout NV and Verlipack Holding NV.
(9) In ‘full knowledge of the statutes and financial situation of

Verlipack Holding II’.

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(28)

In the autumn of 1998 the undertaking given by
Worldwide Investors was terminated by the transfer of
its shares to the Beaulieu Group, which in turn trans-
ferred them to the Walloon Region. This transfer was in
lieu of payment (10) of the amount owed by Beaulieu to
the Walloon Region for the Verlipack shares valued at
BEF 113 712 000, held by the latter and acquired by the
Group in December 1996, repayment of which, without
interest, was not to begin until 31 December 2001.

(32)

In its letter to Belgium of 14 December 1998 in the
procedure resulting in the decision of 4 October 2000,
the Commission reserved ‘its position concerning any
further
intervention by the Walloon authorities in
Verlipack’s favour’. This was repeated in its letter of
13 January 1999 in the same case. Moreover, Belgium
stated on 4 February 1999, also in the same case, that it
had ‘never considered financing the composition period
in view,
the recent
Commission decision [of 16 September 1998]’.

in particular, of

the terms of

(29) The Commission notes that the transfer in lieu of
payment of a debt, which was not to start being repaid
took place several weeks
until 31 December 2001,
before Verlipack filed for bankruptcy.

(33) Nevertheless, it was only indirectly that the Commission
learned of
further intervention by Walloon Region
linked to the repayment of its amount owed to it by the
Beaulieu Group for the transfer of its shares in the Ghlin
and Jumet plants in 1996.

(30)

In its letter of 28 September 1999 (11), Belgium had
indicated that the transfer in lieu of payment that took
place in December 1998 to clear the Beaulieu Group’s
debts to the Walloon Region could be regarded as a
‘further increase in Verlipack’s capital financed by Beau-
lieu, which has been repaid by having its debt to the
Walloon Region cleared’.

(34) The Commission informed Belgium by letter of 5 July
2000 that it had entered the new measure in the register
of non-notified aid under number NN 73/2000 with a
view to determining its compatibility with the common
market.

(31)

In its letter of 10 April 1998 (12), Belgium announced its
intention to grant BEF 100 million to Verlipack in the
form of either a capital contribution or a long-term
loan (13). It also specified that it would not ‘implement
the project without prior notification to the Commission
and without authorisation’.

( 10) Supplementary agreement of 20 November 1998 to the transfer
agreement of 18 December 1996 between the Walloon Region
and the Beaulieu Group on the acquisition of 14 214 shares.
( 11) Response to the initiation of the formal investigation procedure

( 12)

( 13)

resulted in the decision of 4 October 2000 (page 24).
In the context of the procedure resulting in the decision of
16 September 1998, subsequently revoked.
‘Given the firm’s difficulties and the desire on the part of its
private shareholders and bankers to provide Verlipack with new
finance, the Walloon Region had agreed in principle to participate
on certain conditions in a BEF 100 million capital increase. [...]
The Walloon Region would point out that it will not implement
the project without prior notification to the Commission and
without authorisation. At present, the project is tending towards
the granting of a BEF 100 million long-term loan on the same
terms as applied to Verlipack by the banks. The Walloon Region
will ensure that it contacts the Commission again once the
conditions in finalising such a project have been met. [...] Finally,
Verlipack’s management has announced that the initial results
for 1998 point to the start of an improvement.’

(35)

(36)

letter,

the Commission observed that

In this
the
BEF 100 million contribution from either Sowagep or
the Walloon Region had come from state resources but
that, since this was a new public measure, it did not at
the time have all the information it required to assess
the measure’s compatibility with Article 87 of the Treaty.

In the same letter, the Commission expressed doubts
concerning possible aid granted to the Beaulieu Group
by the Walloon Region on the ground that the Group
had secured payment terms when buying the shares in
the Ghlin and Jumet plants which would not have been
acceptable to a private financial institution. Moreover, it
wondered whether the transfer in lieu of payment which
had taken place in December 1998, a few weeks before
Verlipack had filed for bankruptcy, did not constitute
aid to the Beaulieu Group within the meaning of
Article 87(1) of the Treaty.

(37)

In its letter of 5 July 2000, the Commission requested
information on the following aspects: the activities of
Worldwide Investors; the steps taken by Sowagep to find
a private investor; the use made of the BEF 100 million
subscribed by Worldwide Investors in June 1998; an
the
explanation of
14 214 shares acquired by the Beaulieu Group in 1996;
an explanation of the Heye Group’s ignorance of these

the difference in the value of

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transactions involving intervention by the Walloon
authorities; an explanation of the four-year grace period
granted by the Walloon Region to the Beaulieu Group
for payment for the 14 214 shares and of the circum-
stances which, several weeks before Verlipack filed for
bankruptcy and therefore at a time when it was fully
aware of the fact that Verlipack was making losses,
prompted the Walloon Region to accept early repayment
of this debt.

Partner

Undertaking

Heye

Injection
BEF 200 million

into Verlipack

of

Beaulieu Group

(38)

In the same letter, the Commission wondered who was
the real beneficiary of the increase in Verlipack’s capital
subscribed in June 1998 by Worldwide Investors.

Walloon Region

a

of

debt

of
Waiver
BEF 600 million owed to it by
the Verlipack (unless the latter’s
fortunes improved after 1 Janu-
ary 2002)

— Search for an investor to
put up BEF 100 million in
order
to increase Verli-
pack’s capital

— Conversion into capital of
the BEF 150 million subor-
dinated loan granted to
Verlipack by the Walloon
Region in 1997

(39) By letter of 4 September 2000, Belgium asked for more
the Commission

time to reply to these questions;
acceded to the request by letter of 6 September 2000.

(40) By letter of 29 September 2000, the Commission issued

a second reminder.

(41) Belgium failed to submit the information requested by

the deadline set.

(42)

Since Belgium had therefore not provided it with all the
information it required to examine the measures in
question, and in accordance with Article 10(3) of
Council Regulation (EC) No 659/1999 of 22 March
1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (14), the Commission issued
an injunction requiring Belgium to supply the docu-
ments, information and data necessary for it to examine
the compatibility with the common market of the
relevant measures in favour of Verlipack and/or the
Beaulieu Group. This decision, which reproduced the
wording of the letter of 5 July 2000 regarding the
information which was being requested, was notified to
Belgium by
(ref.
SGD(2001)285235).

19 January 2001

letter of

IV. REPLY FROM BELGIUM AND INITIATION
OF THE PROCEDURE

(43) By letter registered as received on 15 January 2001,
Belgium replied to the Commission’s letter of 5 July
2000 in the following terms:

(44) Despite the Verlipack Group’s poor results during 1997,
a reduction in the scale of losses was observed after
March 1998 as a result of a marked increase in
productivity. A new relaunch plan was thus adopted by
the private and public partners which entered into an
agreement (Heads of Agreement) on 5 June 1998. This
plan can be summarised as follows:

( 14) OJ L 83, 27.3.1999, p. 1.

Private banks (Kredietbank, Release
Crédit Lyonnais)

of

remaining
the
BEF 73 million of an overdraft
facility granted in 1997, plus
rescheduling of debts and con-
ditional
reduction in interest
rates

(45) As regards the Walloon Region’s involvement,

the

following should be stressed:

(46) The conversion into capital of the BEF 150 million
subordinated loan was covered by the negative final
decision of 4 October 2000.

(47) As for the capital

increase of BEF 100 million, the
Walloon Region was supposed to find a private investor.
However, according to the Walloon authorities, in order
to ensure that the relaunch plan could be implemented
immediately, the Beaulieu Group offered to put up the
necessary funds ‘provided that this was only a temporary
measure and that the funds would be repaid to it by the
new investor which (the Walloon Region) was to find’.
According to Belgium, the Beaulieu Group, which had
waived a debt of BEF 600 million, had every interest in
ensuring that the relaunch plan would produce the
anticipated results.

(48) As it happened,

it was Worldwide Investors SA, a
Luxembourg investment company, which on 26 June
1998 put up the BEF 100 million to increase Verlipack’s
capital. According to Belgium, this was done on the
Beaulieu Group’s behalf.

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(49) However, again according to the Belgian authorities,
since the new relaunch plan did not succeed in curbing
Verlipack’s mounting losses, the Walloon Region was
unable to find a new private investor.

(50) Consequently, the Walloon region and the Beaulieu
Group jointly decided to amend the terms of the
agreement under which the Beaulieu Group had pur-
chased the shares held by the Walloon Region in
Verlipack Ghlin and Verlipack Jumet in 1996. Under the
terms of the supplementary agreement of 20 November
1998 amending the agreement of 1996 between Beaul-
ieu and the Walloon Region,
the payment of
BEF 113 712 000 for the shares acquired by Beaulieu in
1996 could be made ‘either by bank transfer to the
account (of the Walloon Region) or by the transfer in
lieu of payment of 9 704 shares in the capital of SA
Verlipack Holding II’.

In return,

(51) On 21 December 1999 Worldwide Investors transferred
9 704 shares in Verlipack Holding II to the Beaulieu
the Beaulieu Group transferred
Group.
9 704 shares in Verlipack Holding
I to Worldwide
Investors. Belgium has also confirmed that, on an
unspecified date between 21 and 31 December 1998,
the Beaulieu Group transferred 9 704 shares in Verlipack
Holding II to the Walloon Region ‘in exchange for the
waiver
to the Region
(Annex 5)’ (15).

the Beaulieu’s

debt

of

(52)

(53)

In their letter registered as received on 15 January 2001,
the Belgian authorities themselves indicated that their
reply was incomplete since the Beaulieu Group had not
cooperated. Since then, they have not submitted any
other communication to the Commission, not even to
confirm that their letter covered the questions contained
in the information injunction.

In the light of the information available, the Commission
concluded on 6 June 2001 that this debt waiver involved
a transfer of public resources on the part of the Belgian
State that constituted prima facie State aid within the
meaning of Article 87 of the EC Treaty. It also took the
view that doubts existed as to the compatibility with
Article 87 of the Treaty and Article 61 of the EEA
Agreement of the aid received by the Verlipack and/
or Beaulieu Group and, consequently,
initiated the
Article 88(2) procedure in that regard. This decision was
communicated to Belgium by letter of 8 June 2001.

( 15)

It should be noted that the Annex 5 in question does not relate
to the transfer of shares held by the Beaulieu Group to the
Walloon Region but rather to an exchange of shares between
Worldwide Investors and the Beaulieu group.

V. COMMENTS FROM BELGIUM

(54) By letter received by the Commission on 27 July 2001,
Belgium repeated the comments which it had made in
the context of the injunction and which can be summar-
ised as follows.

(55) Despite the Verlipack Group’s poor results during 1997,
a reduction in the scale of losses was observed after
March 1998 as a result of a marked increase in
productivity. A new relaunch plan was thus adopted by
the private and public partners, which entered into an
agreement (Heads of Agreement) on 5 June 1998. Under
this plan, the Walloon Region undertook (i) to convert
the BEF 150 million subordinated loan into capital and
(ii) to find a private investor willing to contribute
BEF 100 million to Verlipack’s capital.

(56) The conversion into capital of the BEF 150 million
subordinated loan was covered by the negative final
decision of 4 October 2000. It is therefore not covered
by the new procedure.

(57) As regards the search for a private investor, the Walloon
authorities indicate that this undertaking ‘could not be
met by Sowagep in the short term’. They go on to state
that ‘Beaulieu thus proposed to Sowagep that it would
put up the funds itself, provided that this was only a
temporary measure and that the funds would be repaid
to it by the new investor which Sowagep was to find.
This intervention by Beaulieu is the result of verbal
negotiations and has not been formalised by an agree-
ment’.

(58) As it happened, it was Worldwide Investors SA which
on 26 June 1998 put up the BEF 100 million to increase
Verlipack’s capital. According to Belgium, this was done
on the Beaulieu Group’s behalf.

(59) However, again according to the Belgian authorities,
since the new relaunch plan did not succeed in curbing
Verlipack’s mounting losses, the Walloon Region was
unable to find a new private investor. Consequently, the
Walloon region and the Beaulieu Group jointly decided,
by means of a supplementary agreement of 20 Novem-
ber 1998, to amend the terms of the agreement which
enabled the Beaulieu Group in 1996 to acquire the
shares held by the Walloon Region in Verlipack Ghlin
and Verlipack Jumet. Under the terms of the supplemen-
tary agreement, the payment of BEF 113 712 000 for
the shares acquired by Beaulieu in 1996 could be made
‘either by bank transfer to the account (of the Walloon
Region) or by the transfer in lieu of payment of
9 704 shares in the capital of SA Verlipack Holding II’.

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(60) According to the Walloon authorities, this supplemen-
tary agreement ‘is a clear indication of the temporary
nature of Beaulieu’s intervention in favour of the Verli-
pack Group and of the existence of a nominee trans-
action on the Walloon Region’s behalf’ (page 7 of the
letter of 26 July 2001).

(61)

Finally, on 21 December 1999 Worldwide Investors
transferred 9 704 shares in Verlipack Holding II to
In return, the Beaulieu Group
the Beaulieu Group.
to
transferred 9 704 shares in Verlipack Holding I
Worldwide Investors.

(62) Belgium has also confirmed that, on an unspecified date
between 21 and 31 December 1998, the Beaulieu Group
transferred 9 704 shares in Verlipack Holding II to the
Walloon Region ‘in exchange for the waiver of the
Beaulieu’s debt to the Region’.

(63) With regard to the value of these 9 704 shares, they
were worthless in real terms given that the assets of the
company had, according to the Mons Commercial Court,
been ‘reduced to one franc, it is unable to obtain a bank
loan to meet its liabilities and [...], consequently, the
conditions for bankruptcy are met’ (16).

VI. COMMENTS FROM INTERESTED PARTIES

(64) The Collectif de Défense des Travailleurs Licenciés de
Verlipack à Jumet et à Ghlin presented comments on the
facts established by the Commission, referring to the
social consequences of the crisis within the Verlipack
Group. It also supplied copies of the minutes of meetings
of the Verlipack board and a copy of a letter signed by a
union representative at Verlipack (Ghlin plant).

(65) The United Kingdom Permanent Representation present-
ed the following comments on behalf of the association
of the leading United Kingdom carpet manufacturers,
the Carpet Foundation (formerly the British Carpet
Manufacturers Association):

(a)

The United Kingdom was Europe’s largest market
for fitted carpets (97 % of homes use this type of
floor covering). For obvious reasons, the United

( 16) As it happened, bankruptcy was not declared even though, since
its purpose had lapsed, the company was destined merely to be
put into liquidation. The Walloon Region indicated that it did
not intend to pursue recovery of the amounts owed to it (and, in
so doing, granted a credit to its debtor). When questioned on
this point at the time the procedure was initiated, the Walloon
Region confirmed that, as a result of the adoption of the negative
decision of 4 October 2000, it had instructed Verlipack Holding II
to repay the state aid. Following this, the Mons Commercial
Court, by judgment of 19 February 2001, declared Verlipack
Holding II bankrupt after the latter had, on the same date, filed
for a suspension of payments.

Kingdom market was a target for outside compe-
tition, and imports had increased to such an extent
that imported fitted carpets now accounted for
64 % of the total volume fitted in the United
Kingdom (47 % in value terms).

(b) This dramatic growth had threatened the continued
the United Kingdom fitted-carpet
existence of
In 1970, when imports were almost
industry.
employed
industry
insignificant,
45 000 people. Now, with imports accounting for
64 % of the market, only 8 000 people were
directly employed in the industry.

the

(c)

The Carpet Foundation considered the main ben-
eficiaries of this major market penetration to be
manufacturers in Belgium, who now accounted for
55 % of the fitted carpets imported into the United
Kingdom. In the last twenty years, imports from
Belgium had increased tenfold (from 8 million m2
in 1980 to 85 millions m2 in 2000).

(d) The average price of fitted carpets imported into
the United Kingdom was GBP 3,83/m2 while that
of exported fitted carpets was GBP 6,43/m2. The
most
supplied by the United
Kingdom Department of Trade and Industry (DTI)
for 1997 revealed a deficit vis-à-vis the rest of the
Community of GBP 273 million.

figures

recent

(e)

The Commission had been informed that Beaulieu
had, in recent years, been implicated in dubious
financial transactions. In the present case, in which
Beaulieu had cleared a debt of BEF 113,7 million
by transferring 9 704 shares in Verlipack Holding II
to the Walloon Region, the Carpet Foundation took
the view that the Walloon Region had effectively
waived a debt equivalent to GBP 1,5 million in
state aid. It thus considered that this debt waiver
constituted operating aid to Beaulieu/Verlipack,
which was incompatible with the common market.

(66)

In its reply to the comments from third parties, Belgium
asked that the Commission disregard those from the
Collectif des Travailleurs Licenciés since this was an
insufficiently representative body.

(67) Belgium failed to submit by the deadline set comments

on the points raised by the United Kingdom.

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VII. ASSESSMENT OF THE AID

VII.1. Existence of State aid within the meaning
of Article 87(1) of the Treaty

(68) Article 87(1) of the Treaty stipulates that any aid granted
by a Member State or through state resources in any
form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the
production of certain goods is, in so far as it affects trade
between Member States, incompatible with the common
market.

(69) The concept of aid is wider that that of a grant and
extends to measures which, in various forms, reduce the
charges usually borne by a firm’s budget and have
identical effects to grants. It follows that, while not
involving any direct transfer of state resources, a measure
by which the public authorities renounce a claim places
the beneficiaries in a more favourable position than
other taxpayers and thus constitutes state aid within the
meaning of Article 87(1) of the Treaty.

(70) The following tables provide statistics for carpets and
other textile floor coverings and reveal the existence of
trade between Belgium and the other Member States:

1998

Imports into
Belgium

Exports from
Belgium

(EUR 1 000)

World

France

211 659,19

2 009 560,84

44 502,03

204 232,6

Netherlands

47 711,61

201 575,12

Germany

Italy

32 177,89

482 395,03

3 363,12

25 131,73

United Kingdom

21 083,57

438 580,14

L 296/67

(EUR 1 000)

2000

Imports into
Belgium

Exports from
Belgium

World

France

234 803,67

2 185 284,43

39 851,55

186 007,02

Netherlands

72 424,95

192 991,38

Germany

31 533,12

459 466,56

Italy

2 695,96

27 042,16

United Kingdom

23 711,69

557 366,43

Ireland

Denmark

Greece

Portugal

Spain

191,31

25 054,58

569,55

15 657,08

730,35

28 670,43

1 212,05

18 410,99

1 297,43

24 813,28

Luxembourg

286,95

2 417,64

Sweden

Finland

Austria

(Source: Eurostat)

606,83

21 062,8

415,04

10 837,97

527,53

21 444,46

Ireland

Denmark

Greece

Portugal

Spain

Sweden

Finland

Austria

(Source: Eurostat)

317,46

19 756,55

1 147,49

17 893,69

573,09

31 398,44

3 844,57

14 468,5

2 875,73

23 844,69

(71) Moreover, in view of the aid recipient’s market posi-
tion (17), any aid granted to this group is liable to affect
such trade and distort competition (18). The sales of
Beaulieu Wielsbeke NV (a subsidiary of Ter Lembeek
International active on the carpeting market) in 1997,
1998 and 1999 amounted to BEF 4 379 764 000,
BEF 5 182 220 000 and BEF 4 821 857 000 respect-
ively.

1 396,42

26 411,19

manufacturer and exports 98 % of its production.

(17) The Beaulieu in 2000 group is the leading European carpet

220,4

9 460,45

385,45

22 268,92

(18) For example,

in 2000 Associated Weavers, a manufacturer
established in Belgium, sold 48,7 million m2 of carpeting for a
total turnover of EUR 212,89 million, which makes it one of the
largest European manufacturers in the sector. According to the
data published on its website (http://www.awe.be/ (14 march
2002), it exports its products throughout the world, but predomi-
nantly to Europe.

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(72) These data, along with those supplied by the United
Kingdom Permanent Representation, demonstrate the
trade within the
existence of a significant level of
Community.

VII.2. Contribution of BEF 100 million to Verlipack
Holding II

(73)

Leaving aside the complexity of the legal and financial
arrangements behind the intervention in June 1998 of
Worldwide Investors, which injected BEF 100 million
into Verlipack Holding II, one indisputable fact stands
out: in December 1998 the Beaulieu Group settled a
debt of BEF 113 712 000 towards the Walloon Region
by transferring, in lieu of payment, 9 704 shares in
Verlipack Holding II, the nominal value of which was
BEF 100 million but the real value of which was to
prove significantly lower given the assets position of the
company.

(74) With regard to the value of these 9 704 shares, the

following should be borne in mind:

Belgium, it was a ‘price imposed by the Royal Decree of
7 May 1985’ (19). Under Article 3 of this Royal Decree,
the purchase price of non-voting preferential shares
‘may not be lower than 80 % of the issue price’.
According to Belgium, the price of BEF 113 712 000 for
the non-voting and profit shares purchased by the
Beaulieu Group in December 1996 was equivalent to
80 % of their issue price.

(78) The requirement to set a price equivalent to 80 % of the
issue price is a statutory one imposed without distinction
on anyone wishing to purchase such preferential shares.

(79) Regardless of the fact that the purchase price was set on
the basis of national rules applicable without distinction,
as Belgium acknowledged in its letter of 26 July 2001,
to anyone wishing to purchase such preferential shares,
it has to be concluded that the price thus set had to
be paid by the Beaulieu Group. This was confirmed by
the Belgian authorities when they stated in their
letter of 15 January 2001 (20)
‘the debt of
BEF 113 712 000 of the Beaulieu group to the Walloon
Region was a definite debt the repayment of which was
in no way linked to the financial situation of the
Verlipack group’.

that

(75) On 11 February 1999 Verlipack Holding II filed for a
suspension of payments before the Mons Commercial
Court, which granted a suspension with effect from June
1998. The ruling states, inter alia, that:

(80)

‘Whereas the company Verlipack Holding II, with
assets reduced to ONE FRANC, is unable to obtain
a bank loan to meet its liabilities and, consequently,
the conditions for its bankruptcy are met.’

Since, according to the above ruling by the Mons
Commercial Court of 31 May 1999,
the assets of
Verlipack Holding II, which had filed for a suspension of
payments on 11 February 1999, had been reduced to a
value of one franc, with the Court stipulating that
‘the suspension of payments was effective from June
1998’ (21), the shares received in payment were of no
value. In accepting them in clearance of a definite debt
of BEF 113 712 000, the Walloon Region effectively
waived a debt of that amount vis-à-vis the Beaulieu
Group.

(76)

In the event, bankruptcy was not declared. This was
because the Walloon Region indicated that it did not
intend to pursue recovery of the amounts owed to it
(and, in so doing, granted a credit to its debtor) and
proposed that it would meet the cost of voluntary
found on
liquidation. As a consequence, the Court
31 May 1999 that the conditions of bankruptcy on the
part of Verlipack Holding II were not met even though,
now that its object no longer existed, it was destined
merely to be put into liquidation.

(77) Belgium claims that the price of BEF 113 712 000 deter-
mined in December 1996 for the non-voting shares and
the profit shares transferred by Sowagep to the Beaulieu
Group did not correspond to their value. According to

(19) Royal Decree concerning the issuing of non-voting preferential
shares by limited companies in national sectors (Moniteur Belge
of 11 May 1985). The shares in question were non-voting
shares which could be subscribed to in companies undergoing
restructuring by: (1) Société nationale d’investissement; (2) Socié-
té nationale pour la Restructuration des Secteurs nationaux; (3)
Fonds voor de herstructurering van de nationalen sectoren in het
Vlaamse Gewest; (4) Fonds pour la restructuration des secteurs
nationaux en Région wallonne; (5) limited liability companies
(‘sociétés anonymes’) in which Société nationale d’investissement
holds at least 50 % of the capital, provided that they are
authorised to do so by decree of the Minister for Economic
Affairs.

(20) This letter was in reply to the Commission’s letter of 5 July 2000

(p. 5).

(21) See the first recital of the ruling by the Mons Commercial Court

of 31 May 1999.

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L 296/69

(81) Consequently, the Commission considers that this oper-
ation constitutes a ‘debt waiver’, as Belgium confirmed
in its letter of 15 January 2001 (22). Belgium argues,
however, that the Beaulieu Group did not draw any
economic benefit from that operation since, by waiving
the debt, Belgium was compensating the Beaulieu Group
for the ‘capital contribution made in June 1998’. The
difference between the BEF 113 712 000 (amount of
the debt) and the BEF 100 million (nominal amount of
the capital contribution) was said to be justified ‘by the
early repayment of the debt (23) [...] and remuneration of
the nominee transaction’.

(82) With regard to the latter aspect, reference should be
made to the terms of the Heads of Agreement of 5 June
1998. Point 2 states: ‘Capital increase (cash) of BEF 100
promoted by Sowagep in Verlipack Holding II (to be
used for corresponding capital increases in the Verlipack
group companies). A new shareholder must be accepted
by all shareholders of Verlipack Holding II.’ In its letter
of 15 January 2001, Belgium indicated that it was in this
context that ‘Sowagep undertook to find a new private
investor willing to make a BEF 100 million cash
injection’. (Page 2). In its letter of 26 July 2001, Belgium
stated that the measures provided for in the Heads
of Agreement
increase of
BEF 100 million by a private investor introduced by
Sowagep (since renamed Sogepa)’ (page 6).

included

‘capital

a

(83) Accordingly, the Walloon authorities undertook under
the Heads of Agreement to introduce an investor and
not to contribute BEF 100 million to the capital of
Verlipack Holding II.

(84) Despite the formal

injunction, and even after the
initiation of the procedure, Belgium failed to provide
proof of the existence of an agreement between the
Beaulieu Group and the Walloon Region under which
Beaulieu would take over the Walloon Region’s under-
taking (under the Heads of Agreement of 5 June 1998)
to find an investor who would put up BEF 100 million.

(85)

In the event, Belgium has not even provided proof of
the existence of a nominee agreement between the
Beaulieu Group and Worldwide Investors.

(86) Belgium also confirmed in its response to the initiation
of the procedure that there had not been any formal
agreement but rather ‘verbal negotiations which were
not formalised by an agreement’ (24).

(87)

in the light of

it were accepted,

the comments
If
presented by Belgium, that the Beaulieu Group decided
to take over the Walloon Region’s undertaking under
the Heads of Agreement of 5 June 1998, it would have
to be concluded that the Beaulieu Group undertook to
introduce
contribute
BEF 100 million to Verlipack II’s capital. A private
investor, World Investors, was found that was willing to
run the risk of
investing in a firm like Verlipack
Holding II.

investor

and

not

an

to

(88) The response to the initiation of procedure suggests,
although there is nothing substantial to bear this out,
that the supposed verbal agreement between the Beau-
lieu Group and the Walloon Region according to which
the former would take over the latter’s undertaking
(under the Heads of Agreement of 5 June 1998) to find
an investor that would put up BEF 100 million went
well beyond the Walloon Region’s undertaking under
the Heads of Agreement (to find an investor that would
put up BEF 100 million).

(89) The suggestion is that the Beaulieu Group did not merely
take over the Walloon Region’s undertaking under the
Heads of Agreement (to find an investor that would put
up BEF 100 million) but, going beyond that undertaking,
intended to ensure in any event that BEF 100 million
would be contributed to Verlipack Holding II’s capital
without its having to put up that amount itself, some-
thing which Sowagep supposedly guaranteed to it.

(90) On the basis of the information supplied by Belgium,
the Commission considers that the Member State has
not demonstrated: (i) that an agreement under which the
Beaulieu Group is said to have taken over the undertak-
ing to find an investor that would put up BEF 100 million
actually existed;
there was also a second,
separate and more extensive, agreement under which
the Walloon Region allegedly guaranteed to the Beaulieu
Group repayment of the BEF 100 million that a private
investor should have contributed.

that

(ii)

( 22) See footnote 21 (p. 5).
( 23) The agreement of December 1996 stipulated that the price of
BEF 113 712 000 was payable ‘on 31 December 2001, net-net,
without interest’.

(24) Moreover, in the context of the injunction issued to Belgium, the
Walloon authorities’ legal counsel approached the legal counsel
of the Beaulieu Group in order to obtain information for a reply
to the injunction. Belgium did not pass on any reply from the
Beaulieu Group or its legal counsel. In addition, neither the
Beaulieu Group nor its legal counsel has come forward in the
context of this procedure.

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(91) The only incontrovertible aspect is still the fact that on
20 November 1998 the Walloon Region waived a
definite debt of BEF 113 712 000 owed to it by the
Beaulieu Group in exchange for 9 704 shares in a
company (Verlipack Holding II) whose situation had
worsened to the extent that in June 1998 it had required
a new refinancing plan in the context of which it had
not been possible to find a private investor willing to
contribute BEF 100 million to its capital. The company’s
assets were valued on 11 February 1999 at one franc.

(95) Questioned on this point when the procedure was
initiated, the Walloon Region confirmed that, following
the adoption of the negative decision of 4 October
2000, it had given notice to Verlipack Holding II to
repay the aid. Subsequently, on 19 February 2001, the
Mons Commercial Court declared Verlipack Holding II
bankrupt.

(92)

In the light of these various circumstances, the Com-
mission concludes that this debt waiver involves a
transfer of public resources on the part of the Belgian
State that constitutes state aid within the meaning of
Article 87 of the Treaty.

VII.3. Debt waiver in favour of Verlipack Holding II

(93) On 8 January 1999 Verlipack sought a court-approved
arrangement with creditors concerning the plants at
Jumet and Ghlin and announced the closure of the plant
at Mol. On 11 January 1999 the Commercial Court of
Turnhout declared Verlipack Mol bankrupt, while on
18 January 1999 the Commercial Court of Mons
declared the six companies of the glassmaking group
Verlipack bankrupt (the plants at Ghlin and Jumet,
Verlipack Belgium, Verlipack Engineering, Verlimo and
Imcourlease).

(94) Recognising that it no longer had enough liquidity or
assets to meet its debts, Verlipack Holding II filed for
bankruptcy before the Mons Commercial Court on
11 February 1999. Before the Court, Sowagep, ‘acting
on behalf of the Walloon Region, a minority shareholder
in the company’ (25), indicated that it did not intend to
pursue recovery of
(and,
accordingly, granted a credit to its debtor) and that it
was meeting the cost of a voluntary liquidation. As a
consequence, the Court found on 31 May 1999 that the
conditions for bankruptcy on the part of Verlipack
Holding II were not met, stressing however that, now
that its purpose had lapsed, it was destined merely to be
put into liquidation.

the amount owing to it

( 25) Second recital to the ruling by the Mons Commercial Court of

31 May 1999.

(96) The Commission notes that the purpose of Verlipack
Holding II was to hold and manage the shares of a series
of companies which had been declared bankrupt and
that, as a result, its object no longer existed. Accordingly,
the only step it could take was to go into liquidation.
Given that its assets had been rendered worthless, none
of its creditors could reasonably hope to recover even
part of what was owing to them. In these circumstance,
and in view of the closure of all production installations
and the fact that the holding was itself in liquidation, the
Commission finds that the debt waiver granted to
Verlipack Holding II did not
involve a transfer of
public resources conferring an economic advantage on
Verlipack Holding II or other creditors which is liable
to distort competition or affect trade.

VII.4. Compatibility of the aid

(97) The Commission notes that Belgium has not invoked
any of the derogations provided for by the Treaty, its
position being that this case does not
involve the
granting of State aid.

(98)

It thus considers that none of the derogations provided
for in Article 87(2) of the Treaty apply to the measure
under review since it does not constitute aid having a
social character granted to individual consumers, aid to
make good the damage caused by natural disasters or
aid to compensate for the economic disadvantages
caused by the division of Germany.

(99) The derogations provided for in Article 87(3)(a), (b) and
(d) do not apply either since the aid is not designed to
compensate for the economic disadvantages of certain
areas, to promote the execution of an important project
of common European interest or to promote cultural
and heritage conservation.

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L 296/71

(100) It remains to be examined, therefore, whether or not the
aid in question qualifies for the derogation provided for
in Article 87(3)(c) as 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.

(101) The production units of some of the companies belong-
ing to the Beaulieu group are indeed located in an
assisted region under Article 87(3)(c). Such regions
qualify for regional aid schemes authorised by the
Commission and with a maximum ceiling of 25 % net.
However, Belgium, in its response to the initiation of the
procedure, has not supplied any information enabling
the aid in question to be classified as investment aid, the
eligibility of the investment to be verified or the intensity
of such aid to be calculated.

(102) Consequently, the Commission takes the view that, as
far as the aid in question is concerned, the conditions
for
in
derogation
Article 87(3)(c) in connection with the development of
certain economic areas are not met.

provided

applying

the

for

(103) The information at the Commission’s disposal concern-
ing the intervention of the Walloon authorities leads it
to believe that the measures in question should be
regarded as operating aid to the Beaulieu Group, which
is incompatible with the common market.

(104) This is because they are designed to relieve the Beaulieu
Group of the costs it would have had to bear on its own
under the normal conditions of its day-to-day operation
or activities.

(105) As the Commission stated in points 4.15 to 4.17 of its
guidelines on national regional aid (26), regional aid
aimed at reducing a firm’s current expenses (operating
aid) is normally incompatible with the common market.

(106) Exceptionally, however, such aid may be granted in
regions eligible under the derogation in Article 87(3)(a)
provided that it is justified in terms of its contribution
to regional development and its nature and that its level
is proportional to the handicaps it seeks to alleviate.
the Beaulieu
However,
Group’s production plants are not situated in one of the
regions referred to in Article 87(3)(a) of the Treaty.

the Commission notes that

( 26) OJ C 74, 10.3.1998, p. 9.

(107) In view of the above, the Commission finds that the aid

is not compatible with the common market.

VIII. CONCLUSIONS

(108) The State aid implemented by Belgium for the Beaulieu
Group (Ter Lembeek International) in the form of the
waiver of a debt of BEF 113 712 000 is incompatible
with the common market.

(109) The Commission finds

illegally
implemented the aid in question in violation of
Article 88(3).

that Belgium has

(110) Article 14 of Council Regulation (EC) No 659/1999
stipulates that any unlawful aid which the Commission
has deemed to be incompatible with the common
market must be the subject of a decision requiring that
it be recovered from the beneficiary.

(111) In order to restore the economic conditions with which
the company would have had to contend if it had not
been granted incompatible aid, the Belgian authorities
must take all the necessary steps to withdraw the benefits
from the
deriving from the aid and to recover it
beneficiary.

(112) The aid must be recovered in accordance with the
procedures laid down in national law and must include
interest from the date on which the aid was at the
beneficiary’s disposal until
its effective
recovery, calculated on the basis of the reference rate
used to calculate the net grant equivalent of regional aid
in Belgium (27),

the date of

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Belgium has implemented for the Beaulieu
Group (Ter Lembeek International) in the form of the waiver
of a debt of BEF 113 712 000 is incompatible with the
common market.

Article 2

1.
Belgium shall take all necessary steps to recover from the
beneficiary the aid referred to in Article 1 and unlawfully made
available to the beneficiary.

(27) Letter from the Commission to the Member States (SG (91) D/
4577 of 4 March 1991). See also the judgment of the Court of
Justice of 21 March 1990 in Case C-142/87 Belgium v Com-
mission ECR [1990] I-959.

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2.
Recovery shall be effected without delay and in accord-
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 beneficiary 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.

Article 4

This Decision is addressed to the Kingdom of Belgium.

Done at Brussels, 24 April 2002.

Article 3

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

For the Commission

Mario MONTI

Member of the Commission