Proposal for a Council Decision on the fulfilment of the conditions laid down in Article 3 of Decision 3/2002 of the EU-Poland Association Council of 23 October 2002 extending the period set out in Article 8 (4) of Protocol 2 on European Coal and Steel Community (ECSC) products to the Europe Agreement {SEC(2003) 621}
Date: 2003-05-26
Institutions: European Commission
Subjects: Poland, State aid, aid for restructuring, association agreement (EU), iron and steel industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 26.5.2003
COM(2003) 299 final

Proposal for a

COUNCIL DECISION

on the fulfilment of the conditions laid down in Article 3 of Decision 3/2002 of the EU-
Poland Association Council of 23 October 2002 extending the period set out in Article 8
(4) of Protocol 2 on European Coal and Steel Community (ECSC) products to the
Europe Agreement.

(presented by the Commission)

{SEC(2003) 621}

EXPLANATORY MEMORANDUM

(1) 

According to Article 8(4) of Protocol 2 of the Europe Agreement with Poland, during
the first five years after the entry into force of the Agreement, and by derogation from
paragraph  1  (iii)  of  the  same  Article,  Poland  could  exceptionally,  as  regards  steel
products,  grant  public  aid  for  restructuring  purposes,  provided  that  this  leads  to  the
viability  of  the  benefiting  firms  under  normal  market  conditions  at  the  end  of  the
restructuring  period;  that  the  amount  and  intensity  of  such  aid  be  strictly  limited  to
what  is  absolutely  necessary  in  order  to  restore  viability  and  that  the  aid  be
progressively  reduced;  and  that  the  restructuring  programme  be  linked  to  a  global
rationalisation and reduction of overall production capacity.

(2) 

This initial period expired on 31 December 1996 for Poland.

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

Poland requested an extension of the above-mentioned period in April 1997.

A  realistic  restructuring  programme,  including  individual  company  viability  plans,
respecting the criteria set out in Article 8 (4) of Protocol 2 of the Europe Agreement,
are the necessary basis for agreeing the requested extension of the period during which
Poland may grant state aid for restructuring purposes.

In  May  2002,  the  Commission  proposed  an  extension  of  the  period  during  which
Bulgaria, the Czech Republic, Poland and Romania may grant aids to restructure their
steel sector, in view of the urgent need to find an acceptable solution to move forward
the steel restructuring process in the candidate countries concerned, and pave the way
for bringing the accession negotiations on the Competition Chapter to a conclusion.

This  extension  would  provide  the  legal  basis  for  granting  restructuring  aid  in  the
period before accession in the framework of the  required  restructuring plans  (i.e.  the
aid provided should be limited and proportional to capacity reduction); it would also
have  the  effect  of  retroactively  legalising  aid  that  may  have  been  granted  illegally
since the entry into force or the Europe Agreement.

The  extension  will  come  into  effect  only  after  the  adoption  and  assessment  of  a
restructuring  plan  and  business  plans,  which  fulfil  the  criteria  of  Protocol  2  of  the
Europe Agreements.

According  to  Article  8(4)  of  Protocol  2  of  the  Europe  Agreement,  the  Association
Council shall decide whether the period of five years could be extended.

On  23  October  2002,  the  EU–Poland  Association  Council  adopted,  the  Decision
3/2002 providing for extension of the period foreseen by Protocol 2 by a further eight
years  starting  on  1  January  1997,  or  until  the  date  of  the  Poland’s  Accession  to  the
European Union, whichever comes first, subject to the fulfilment of certain conditions.

(10)  Protocol 8 of the Treaty of Accession defines the conditions and principles that need to

be fulfilled by the steel restructuring process in Poland.

(11)  Poland has fulfilled the first condition by submitting to the Commission a restructuring
programme and business plans, which have been  assessed  and agreed by its national
State  Aid  Monitoring  Authority  (the  Office  for  Competition  and  Consumer
Protection).

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(12)  The  second  condition  is  the  final  assessment  of  the  restructuring  programme  and
business  plans  by  the  Commission,  with  a  view  to  determining  whether  the
requirements  of  Article  8(4)  of  Protocol  2  of  the  Europe  Agreement  and  the
commitments included in the Protocol 8 of the Treaty of Accession are met.

(13)  The Commission has made a final assessment which concludes that the restructuring
programme and plans submitted by Poland meets the  requirements of Article 8(4) of
Protocol  2  of  the  Europe  Agreement  and  the  conditions  set  up  in  protocol  8  of  the
Treaty of Accession.

(14)  The  Commission  is  proposing  a  Council  Decision  approving  the  Commission's  final
assessment, as foreseen in Article 3 of the Decision 3/2002 providing for extension of
the period foreseen by Protocol 2 of the Europe Agreement and the fulfilment of the
commitment  agreed  in  Protocol  8  of  the  Treaty  of  Accession.  Once  the  Council  has
granted  its  approval,  the  conditions  laid  down  in  Articles  2  and  3  of  the  Decision
3/2002  and  in  Protocol  8  of  the  Treaty  of  Accession  will  have  been  met  and  the
extension  of  the  period  foreseen  by  Protocol  2  of  the  Europe  Agreement  and  the
conditions set up in the Protocol 8 of the Treaty of Accession will take effect.

(15)  The  Council  is  therefore  requested  to  approve  the  attached  draft  proposal  for  a
Decision on the fulfilment of the conditions laid down in Article 3 of the Additional
Protocol  to  the  Europe  Agreement  establishing  an  association  between  the  European
Communities and their Member States, of the one part, and Poland, of the other part,
with regard to an extension of the period foreseen in Article 8(4) of Protocol 2 of the
Europe Agreement and on the fulfilment of the conditions set up in Protocol 8 of the
Treaty of Accession.

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Proposal for a

COUNCIL DECISION

on the fulfilment of the conditions laid down in Article 3 of Decision 3/2002 of the EU-
Poland Association Council of 23 October 2002 extending the period set out in Article 8
(4) of Protocol 2 on European Coal and Steel Community (ECSC) products to the
Europe Agreement.

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty Establishing the European Community, and in particular Article
87 (3) thereof,

Having  regard to  EU–Poland Association  Council Decision 3/2002 extending the period  set
out in Article 8(4) of Protocol 2 on European Coal and Steel Community (ECSC) products to
the Europe Agreement, and in particular Article 3 thereof;

Having regard to the proposal of the Commission;

Whereas:

(1) 

(2) 

A Europe Agreement establishing an association between the European Communities
and  their  Member  States,  of  the  one  part,  and  the  Republic  of  Poland,  of  the  other
part1, was signed on 16 December 1991;

Article 8(4) of Protocol 2 to the above Europe Agreement lays  down  that  during the
first  five  years  after  entry  into  force  of  the  Agreement,  and  by  derogation  from
paragraph  1  (iii)  of  the  same  Article,  Poland  may  exceptionally,  as  regards  steel
products,  grant  public  aid  for  restructuring  purposes,  provided  that  this  leads  to  the
viability  of  the  benefiting  firms  under  normal  market  conditions  at  the  end  of  the
restructuring  period;  that  the  amount  and  intensity  of  such  aid  is  strictly  limited  to
what is absolutely necessary in order to restore viability and that aid is progressively
reduced; and that the restructuring programme is linked to a global rationalisation and
reduction of overall production capacity in Poland;

(3) 

The initial period of five years expired on 31 December 1996;

(4) 

(5) 

Poland requested an extension of the above-mentioned period in April 1997;

It is appropriate to grant an extension of this period for an additional period of eight
years  starting  on  1  January  1997  or  until  the  date  of  Poland's  accession  to  the
European Union, whichever comes first;

1 

OJ L 348, 31.12.1993, p.2

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(6) 

(7) 

(8) 

(9) 

To  this  effect,  on  23  October  2002,  the  EU–Poland  Association  Council  adopted
Decision 3/2002 and is provisionally applied from that date;

Article 1 of the EU–Poland Association Council Decision 3/2002 grants an extension
of the above-named period, subject to the fulfilment of conditions laid out in Articles 2
and 3.

Under  Article  2,  of  the  EU–Poland  Association  Council  Decision  3/2002,  the
extension  of  the  above-mentioned  period  is  made  conditional  on  the  submission  by
Poland  to  the  Commission  of  a  restructuring  programme  and  business  plans  for  all
companies  included  in  the  restructuring  process  which  meet  the  requirements  of
Article 8(4) of Protocol 2 of the Europe Agreement and have been assessed and agreed
by  its  national  State  Aid  Monitoring  Authority  (the  Office  for  Competition  and
Consumer protection);

Protocol No 8 on the restructuring of the Polish steel industry, annexed to the Treaty
of Accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus,
the  Republic  of  Latvia,  the  Republic  of  Lithuania,  the  Republic  of  Hungary,  the
Republic of Malta, the Republic of Poland, the  Republic  of Slovenia  and the Slovak
Republic  provides  that  State  aid  granted  by  Poland  for  restructuring  purposes  to
specified parts of the Polish steel industry shall, under certain conditions, be deemed
to  be  compatible  with  the  common  market;  the  first  of  those  conditions  is  that  the
period  provided  for  in  Article  8  (4)  of  Protocol  2  on  ECSC  products  to  the  Europe
Agreement  has  been  extended  until  the  date  of  accession;  Article  6  of  that  Protocol
provides  that  the  restructuring  aid  granted  to  the  benefiting  companies  shall  be
determined  by  the  justifications  set  out  in  the  approved  steel  restructuring  plan  and
individual plans as approved by the Council;

(10) 

In  April  2003,  Poland  submitted  to  the  Commission  a  restructuring  programme  and
business  plans  which  have  been  assessed  and  agreed  by  the  Office  for  Competition
and  Consumer  Protection;  Under  Article  3  of  the  EU–Poland  Association  Council
Decision 3/2002 , the extension of the above-mentioned period is made conditional on
a final assessment of the restructuring programme and plans by the Commission;

(11)  The  Commission  has  made  a  final  assessment  of  the  restructuring  programme  and

plans submitted by Poland;

(12)  The  assessment  indicates  that  restructuring  aid  is  necessary  to  return  certain

companies in the Polish steel industry to viability;

(13)  The  assessment  confirms  that  implementation  of  the  restructuring  programme  and
plans will lead to the viability of the companies under normal market conditions by the
end of the restructuring period; that the amount and intensity of aid is strictly limited
to what is absolutely necessary in order to  reach  this objective  and  that restructuring
aid to the Polish steel industry will cease by the end of 2003; and that the restructuring
programme  is  linked  to  a  global  rationalisation  and  reduction  of  overall  production
capacity in Poland and that the programme respect all the commitments agreed in the
Accession negotiations;

(14)  The  assessment  therefore  concludes  that  the  restructuring  programme  and  plans
submitted by Poland meet the requirements of Article 8(4) of Protocol 2 of the Europe
Agreement and in Protocol 8 of the Treaty of Accession;

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(15)  The conditions laid down in Articles 2 and 3 of  the EU–Poland Association Council

Decision 3/2002 are accordingly met;

HAS DECIDED AS FOLLOWS:

Article 1

The restructuring programme and business plans submitted to the Commission by Poland on 4
April 2003 pursuant to Article 2 of EU–Poland Association Council 3/2002, with regard to an
extension of the period laid down in Article 8(4) of Protocol 2 to the Europe Agreement are in
compliance with the requirements of Article 8(4) of Protocol 2.

Done at Brussels,

For the Council
The President

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