Proposal for a Council Decision on the position to be taken by the Community within the Association Council established by the Europe Agreement signed on 8 March 1993 between the European Communities and their Member States, of the one part, and the Republic of Bulgaria, of the other part, with regard to amendments to Article 2 and Article 3 of the Additional Protocol to the Europe Agreement
Date: 2003-12-04
Institutions: European Commission
Subjects: Bulgaria, State aid, agreement (EU), aid for restructuring, iron and steel industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 4.12.2003
COM(2003) 753 final

Proposal for a

COUNCIL DECISION

on the position to be taken by the Community within the Association Council established
by the Europe Agreement signed on 8 March 1993 between the European Communities
and their Member States, of the one part, and the Republic of Bulgaria, of the other
part, with regard to amendments to Article 2 and Article 3 of the Additional Protocol to
the Europe Agreement

(presented by the Commission)

EXPLANATORY MEMORANDUM

The  Europe  Agreement  (EA),  establishing  an  Association  between 
the  European
Communities and their Member States, of the one part, and the Republic of Bulgaria, of the
other part, came into force on 1 February 1995.

Protocol 2 of the Agreement governs ECSC products (i.e. steel and coal), including the issue
of public aid for these sectors. According to Protocol 2, public aid in any form whatsoever –
apart from the derogations allowed pursuant to  the  ECSC Treaty –  is incompatible with the
Europe  Agreement.  Consequently,  Bulgaria  can  grant  public  aid  only  for  the  following
purposes:  (i)  environmental  improvements;  (ii)  research  and  development;  (iii)  permanent
closure of capacity.

Protocol 2 of this Agreement, however, exceptionally also permitted Bulgaria to grant public
aid in order to allow the Bulgarian steel industry to restructure during the five years following
the entry into force  of  the  Agreement  (the so-called grace  period),  which expired  on  31st of
December 1997. In any event, aid granted  for  such  a restructuring would be authorised  if it
respected certain criteria1.

The Bulgarian authorities have requested and signed up on 21 November 2002 an Additional
Protocol with the European Union to provisionally extend the period during which public aid
could exceptionally be granted to steel companies to allow restructuring. The final decision on
the prolongation of the so-called “grace period” remains however conditional to the approval
of  the  restructuring  plans  for  the  Bulgarian  steel  sector  by  the  Council  on  the  basis  of  the
assessment done by the Commission.

Taking  into  account  recent  changes  in  the  Bulgarian  legislation  on  distribution  of  functions
between implementing institutions, Bulgaria would like to propose an amendment to Article 2
and  Article  3  of  the  Additional  Protocol  by  replacing  the  reference  to  the  “Competition
Council” in both Articles with reference to “the Commission on Protection of Competition” in
Article 2 and “the Ministry of Finance” in Article 3 respectively.

The Bulgarian authorities need these changes to be adopted so as to ensure the conformity of
the Europe Agreement, and its subsequent Protocol 2 to Bulgarian institutional organisation.
This  conformity  will  allow  the  Additional  Protocol  to  enter  into  force  and  provide  for  the
legal basis allowing the adoption of a national restructuring plan for the steel sector.

1

The restructuring programme was linked to a global reduction and rationalisation involving an overall
permanent reduction in the overall production capacity for finished products in Bulgaria;
It  led  to  the  viability  of  the  benefiting  firm  under  normal  market  conditions  at  the  end  of  the
restructuring period and,
The amount and intensity of such aid was strictly limited to what was absolutely necessary in order to
reach the objective of viability and that such aid was progressively reduced.

2

                                                
In order to ensure conformity between the Europe Agreement and  the  Bulgarian legislation,
the Council is invited to adopt the annexed proposal for decision concerning an amendment to
the Additional Protocol signed on 21 November 2002.

3

Proposal for a

COUNCIL DECISION

on the position to be taken by the Community within the Association Council established
by the Europe Agreement signed on 8 March 1993 between the European Communities
and their Member States, of the one part, and the Republic of Bulgaria, of the other
part, with regard to amendments to Article 2 and Article 3 of the Additional Protocol 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)(e),  in  conjunction  with  the  first  sentence  of  the  first  subparagraph  of  Article
300(2) and the first subparagraph of Article 300(3) thereof,

Having regard to the Council Decision of 14 October 2002 on the Additional Protocol to the
Europe Agreement… with regard to an extension of the period laid down in art 9(4)…

Having regard to the proposal from the Commission,

Whereas:

(1)

(2)

(3)

(4)

(5)

A Europe Agreement establishing an association between the European Communities
and their Member  States, of the one  part,  and  the  Republic  of  Bulgaria,  of  the  other
part2,was signed on 8 March 1993.

Article 9(4) of Protocol 2 to the above Europe Agreement lays down that during  the
first five years after the entry into force of the Agreement, and by way of derogation
from paragraph 1(iii) of the said Article, Bulgaria 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 Bulgaria.

The initial period of five years expired on 31 December 1997.

The  Republic  of  Bulgaria  requested  the  extension  of  the  above-mentioned  period  in
October 1997.

This  period  was  provisionally  extended  for  an  additional  eight  years  starting  on  1
January  1998  or  until  the  date  of  Bulgaria's  accession  to  the  European  Union,
whichever comes first.

2

OJ L 358, 31.12.1994, p.3

4

                                                
(6)

(7)

(8)

(9)

The  final  decision  on  the  extension  of  the  period  provided  under  art  9(4)  of  the
Protocol 2 of the Europe Agreement is conditional to the approval of the restructuring
plans for the Bulgarian steel sector by the Council on the basis of the assessment done
by the Commission

To this effect, an Additional Protocol  to  the  Europe  Agreement has  been  agreed  and
signed between the Parties.

Recent  changes  in  the  Bulgarian  legislation  modified  the  distribution  of  functions
between implementing institutions.

In  order  to  ensure  conformity  between  the  Europe  Agreement  and  the  Bulgarian
institutional  organisation,  it  is  appropriate  to  amend  Article  2  and  Article  3  of  the
Additional Protocol by replacing the  reference to  the  “Competition  Council”  in  both
Articles with reference to “the Commission on Protection of Competition” in Article 2
and “the Ministry of Finance” in Article 3 respectively.

(10)

This  conformity  is  necessary  to  allow  the  entry  into  force  in  Bulgarian  law  of  the
Additional Protocol to the Europe Agreement mentioned above.

HAS DECIDED AS FOLLOWS:

Sole Article

The position to be taken by the Community within the Association Council established by the
Europe Agreement between the European Communities and their Member States, of the one
part, and the Republic of Bulgaria, of the other part, with regard to amendments to Article 2
and Article 3 of the Additional Protocol to the Europe Agreement, shall be based on the draft
decision of the Association Council annexed to this decision.

Done at Brussels,

For the Council
The President

5

ANNEX

ASSOCIATION BETWEEN THE EUROPEAN UNION AND THE REPUBLIC OF
BULGARIA The Association Council

DECISION No …/2003 OF THE ASSOCIATION COUNCIL
BETWEEN THE EUROPEAN COMMUNITIES
AND THEIR MEMBER STATES, OF THE ONE PART,
AND THE REPUBLIC OF BULGARIA, OF THE OTHER PART

Amending Article 2 and Article 3 of the Additional Protocol of the Europe Agreement

THE ASSOCIATION COUNCIL,

Having  regard  to  the  Europe  Agreement  establishing  an  association  between  the  European
Communities and their Member States, of, the one part, and the Republic of Bulgaria, of the
other part,

Having  regard  to  Protocol  2  of  the  Europe  Agreement  and  in  particular  to  Article  2  and
Article 3 of the Additional Protocol thereof;

Whereas

(1)

(2)

(3)

(4)

An  Additional  Protocol,  with  regard  to  an  extension  of  the  period  laid  down  in
Article  9(4)  of  Protocol  2  to  the  Europe  Agreement  has  been  agreed  and  signed
between the Parties.

The  Additional  Protocol  to  the  Europe  Agreement,  on  behalf  of  the  European
Community, was subject to a decision 12685 of the Council on 14 October 2002.

Recent  changes  in  the  Bulgarian  legislation  modified  the  distribution  of  functions
between implementing institutions.

In  order  to  ensure  conformity  between  the  Additional  Protocol  to  the  Europe
Agreement and the Bulgarian institutional changes, it is appropriate to amend Article
2  and  Article  3  of  the  Additional  Protocol  by  replacing  the  reference  to  the
“Competition  Council”  in  both  Articles  with  reference  to  “the  Commission  on
Protection  of  Competition”  in  Article  2  and  “the  Ministry  of  Finance”  in  Article  3
respectively.

(5)

This  conformity  is  necessary  to  allow  the  entry  into  force  in  Bulgarian  law  of  the
Additional Protocol to the Europe Agreement mentioned above.

6

HAS DECIDED AS FOLLOWS:

Article 1

In Article 2 of the  Additional Protocol to the  Europe  Agreement  establishing an  association
between  the  European Communities  and  their  Member  States,  of  the  one  part,  and  the
Republic of Bulgaria, of the other part, with regard to an extension of the period laid down in
Article  9(4)  of  Protocol  2  to  the  Europe  Agreement,  the  term  “Competition  Council”  is
replaced by “the Commission on Protection of Competition”.

In Article 3 of the  Additional  Protocol, the term “Competition  Council” is replaced by  “the
Ministry of Finance”.

The text of the amended Additional Protocols attached to this Decision.

This Decision shall enter into force on the day of its adoption by the Association Council.

Article 2

Done at Brussels,

For the Association Council

The President

7

Version with the modifications proposed

ADDITIONAL PROTOCOL TO THE EUROPE AGREEMENT ESTABLISHING AN
ASSOCIATIONBETWEEN  THE  EUROPEAN  COMMUNITIES  AND  THEIR
MEMBER  STATES,  OF  THE  ONE  PART,  AND  THE  REPUBLIC  OF  BULGARIA,
OF  THE  OTHER  PART,  WITH  REGARD  TO  AN  EXTENSION  OF  THE  PERIOD
LAID DOWN IN ARTICLE 9(4) OF PROTOCOL 2 TO THE EUROPE AGREEMENT

THE  EUROPEAN  COMMUNITY,  hereinafter  referred  to  as  "the  Community",of  the  one
part, and

THE REPUBLIC OF BULGARIA, of the other part,

HAVING  REGARD  to  the  Europe  Agreement  establishing  an  association  between  the
European  Communities  and  their  Member  States,  of  the  one  part,  and  the  Republic  of
Bulgaria, of the other part, and in particular Article 9(4) of Protocol 2 thereto,

WHEREAS

(1)

(2)

(3)

(4)

Article  9(4)  of  Protocol  2  to  the  Europe  Agreement  lays  down  that  during  the
first five years after the entry into force of the Agreement, and by way of derogation
from  paragraph  1(iii)  of  the  same  Article,  Bulgaria  may  exceptionally,  as  regards
ECSC  steel  products,  grant  public  aid  for  restructuring  purposes,  provided  that  it
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 are strictly
limited  to  what  is  absolutely  necessary  in  order  to  restore  such  viability  and  are
progressively  reduced;  and  that  the  restructuring  programme  is  linked  to  a  global
rationalisation and reduction of overall production capacity in Bulgaria.

The initial period of five years expired on 31 December 1997.

The Republic of Bulgaria requested the extension of the above mentioned period in
October 1997.

This extension should be granted for an additional period of eight  years starting  on
1 January 1998  or  until  the  date  of  Bulgaria’s  accession  to  the  European  Union,
whichever comes first,

HAVE AGREED AS FOLLOWS:

ARTICLE 1

The  period  within  which  the  Republic  of  Bulgaria  may  exceptionally,  as  regards  steel
products, grant public aid for restructuring purposes under the conditions listed in Article 9(4)
of Protocol 2 shall be extended for a further period of eight years starting on 1 January 1998
or until the date of Bulgaria's accession to  the European  Union, whichever comes  first. The
extension shall be subject to fulfilment of the conditions laid down in Articles 2 and 3.

8

ARTICLE 2

The  Republic  of  Bulgaria  shall  submit  to  the  European  Commission  a  restructuring
programme and business plans that meet the requirements listed in Article 9(4) of Protocol 2,
and that have been assessed and agreed by its National State Aid Monitoring Authority (the
Competition Council [to be replaced by:] the Commission on Protection of Competition).

ARTICLE 3

The Commission shall provide a final assessment of whether the restructuring programme and
business plans meet the requirements listed in Article 9(4) of Protocol 2. The Council of the
European Union shall decide whether the programme and the plans are in compliance with the
requirements of the above mentioned Article.

The  Commission  shall  regularly  monitor  the  implementation  of  the  plans  on  behalf  of  the
Community,  and  the  National State Aid Monitoring  Authority (the Competition Council  [to
be replaced by:] the Ministry of Finance) shall do so for the Republic of Bulgaria.

ARTICLE 4

This Protocol may be amended by decision of the Association Council set up by the Europe
Agreement establishing an association between the European Communities and their Member
States, of the one part, and the Republic of Bulgaria, of the other part.

ARTICLE 5

This Protocol shall enter into force on the first day of the month following the date on which
the Parties notify  each  other  of  the  completion  of  the  internal  procedures  necessary  for  that
purpose. It shall apply provisionally from the date of signature.

Done at Brussels,

For the European Community

For the Republic of Bulgaria

9