2004/341/EC: Commission Decision of 10 December 2003 on the State aid which the Campania region of Italy has granted to the agricultural sector (notified under document number C(2003) 4469)
Date: 2003-12-10
Institutions: European Commission
Subjects: Campania, Italy, State aid, control of State aid, farming sector

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Official Journal of the European Union

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COMMISSION DECISION

of 10 December 2003

on the State aid which the Campania region of Italy has granted to the agricultural sector

(notified under document number C(2003) 4469)

(Only the Italian text is authentic)

(2004/341/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having called on interested parties to submit their comments
to that Article (1), and having regard to their
pursuant
comments,

Whereas:

(5)

(6)

(7)

I. PROCEDURE

By letter dated 31 October 1994, registered as received
on 4 November 1994, Italy notified the Commission in
accordance with Article 88(3) of the EC Treaty of the
aid provided for in Regional Law (Campania) No 24 of
12 August 1993 governing, promoting and developing
organic agriculture in Campania.

The law,
initially registered under number N 645/94,
was later entered in the register of non-notified aids
under number NN 140/94,
the Commission having
noted that the law had already been adopted and had
entered into force without a suspension clause.

The Commission received comments from Italy in a
registered on 3
letter dated 29 September 1995,
October 1995.

received

from the

Comments were
Permanent
Representative of Denmark to the European Union by
letter of 6 December 1995, registered on the same day.
These comments were forwarded to Italy by letter No
VI/001809 of 8 January 1996 and Italy was given the
opportunity to react. No reaction to these comments
was received from Italy.

By telex No VI/29692 of 22 July 1996, the Commission
invited the Italian authorities to clarify the comments
they had submitted at the start of the procedure in their
letter of 29 September 1995, registered as received on 3
October 1995. The Commission received no reply to
that telex.

(8) With a view to concluding examination of the file, by
telex AGR 021605 of 7 August 2003 the Commission
sent the Italian authorities a reminder, asking them to
provide a reply to the previous telex No VI/29692 of 22
July 1996. The Commission has received no reply.

the
By letter dated 27 July 1995 (SG(95) D/10012),
Commission informed Italy that
it had decided to
initiate the procedure laid down in Article 88(2) of the
EC Treaty in respect of the aid measure concerned.

(9)

The Commission decision to initiate the procedure was
published in the Official
the European
Communities (2). The Commission called on interested
parties to submit their comments.

Journal

of

(1) OJ C 292, 7.11.1995, p. 14.
(2) Cf. footnote 1.

II. DETAILED DESCRIPTION OF THE AID

law under examination lays down rules
The regional
governing the promotion and introduction of organic
level. The only aid
regional
farming techniques at
measure provided for
for
therein involves a grant
switching to organic production (Article 19 of Regional
Law No 24/93) which is intended to offset losses of
income suffered by farmers when switching from
traditional
farming to organic farming methods as
referred to in Regulation (EEC) No 2092/91, over a
maximum of four years. The assistance covers up to
75 % of such losses.

(1)

(2)

(3)

(4)

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L 119/47

(10)

(11)

The Commission decided to initiate the procedure
provided for in Article 88(2) of the Treaty in respect of
the abovementioned aid measure on the following
grounds.

The Commission was generally favourable towards aid
for converting to organic farming in accordance with
Council Regulation (EEC) No 2092/91 of 24 June 1991
on organic production of agricultural products and
indications referring thereto on agricultural products
and foodstuffs (3), provided that such aid did not exceed
the actual income loss suffered by the farmer as a result
of the conversion.

(12)

Regulation (EEC) No 2092/91 lays down the binding
conditions that must be met in order for agricultural
products to be defined as organic and any national or
regional provisions in this area must also comply with
those conditions.

(13)

The regional
conditions, particularly as regards:

law in question does not satisfy these

(a)

the length of the conversion period (the regional
law provides for a conversion period of two years
for annual and perennial crops, whereas Annex I to
Regulation
for
perennials a minimum period of three years);

(EEC) No

stipulates

2092/91

(b) the possibility of

incorporating ingredients not
obtained by organic production methods (without
laying down the maximum percentages
to be
referring to organic
the indications
observed if
production methods in the sales description of the
product or in the list of ingredients are to be used,
as specified in Article 5 of Regulation (EEC) No
2092/91);

(c)

the inspection authorities (which do not appear on
the list of inspection authorities authorised in Italy);

(d) the products listed in the Annexes on production
standards (not corresponding to the products listed
in the Annexes to Regulation (EEC) No 2092/91).

(15) Organic farming products may move freely in the
Community subject to compliance with the rules on
production and the provisions on packaging and
marketing laid down in Annex III to Regulation (EEC)
No 2092/91. The regional law in question was therefore
also in breach of Article 12 of Regulation (EEC) No
2092/91, which prohibits
any restriction on the
marketing of organic farming products.

(16)

In view of the fact that regional
law (Campania) No
24/93 was at variance on several points with the
binding provisions of Regulation (EEC) No 2092/91, the
aid provided for in Article 19 of the regional law could
not, in the opinion of the Commission, qualify under
any of the exceptions laid down in Article 87(2) and (3)
of the Treaty.

III. COMMENTS FROM INTERESTED PARTIES

(17)

(18)

(19)

Comments were
Permanent
Representative of Denmark to the European Union by
letter of 6 December 1995, registered on the same day.

from the

received

In its comments the Danish Ministry of Agriculture and
Fishery said that it shared the objections expressed by
the Commission in its decision to open the procedure
on the aid concerned. It also said that aids in favour of
organic farming should only be granted to agricultural
undertakings which complied with Regulation (EEC) No
2092/91.

letter also expressed
The Ministry of Agriculture's
the Italian provisions provided for a
concern that
restriction on the import of organic products to the
region concerned. As regards the method for calculating
the aid in the Italian law, the Ministry noted that the
commitments made by the beneficiaries ought to have
five years (and not a
least
been maintained for at
maximum of four), as required by Council Regulation
(EEC) No 2078/92 of 30 June 1992 on agricultural
production methods compatible with the requirements
of
and the
the
maintenance of the countryside (4).

the protection of

environment

IV. COMMENTS FROM ITALY

(14)

In addition, Article 12 of the regional law provides that
products from outside the region must be accompanied
by a certificate issued by the authorities competent for
the territory from which they come.

(20)

The Commission received comments from Italy on
behalf of
the Campania Region, by letter dated
29 September 1995, registered on 3 October 1995.

(3) OJ L 198, 22.7.1991, p. 1.

(4) OJ L 215, 30.7.1992, p. 85. Regulation repealed by Regulation (EC)

No 1257/1999 (OJ L 160, 26.6.1999, p. 80).

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(21)

In their comments the Italian authorities indicated that
the law had not been implemented since its application
was suspended by Decision of the Regional Government
No 1073 of 28 March 1995, partly due to the lack of
timely notification to the Commission pursuant
to
Article 88(3) of the Treaty and partly due to the need to
adapt the law to bring it into line with the Community
rules on organic production.

(22)

In order to meet the second need a draft law had been
prepared. However due to the end of the mandate of
the regional parliament this draft law was not pursued.

(23)

In their comments the Italian authorities indicated that
they shared the objections of the Commission, which
was for them a further incentive to proceed with the
revision of Regional Law No 24/93. The
Italian
authorities also confirmed that
its application would
remain suspended.

(24)

(25)

(26)

V. ASSESSMENT OF THE AID

Pursuant to Article 87(1) of the Treaty, 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
in so far as it affects
production of certain goods is,
trade between Member States,
incompatible with the
common market.

(27)

The measure under examination provides for the grant
of aid, through public resources, to specific agricultural
undertakings which are undeniably granted an undue
economic and financial advantage to the detriment of
other undertakings not receiving the same contribution.
The Court of Justice has held that an improvement in
the competitive position of an undertaking as a result of
aid can lead to a distortion of
State
competition
competing
undertakings not receiving such assistance (5).

compared

financial

other

with

The measure affects trade between Member States in
intra-Community trade in
that

substantial

there is

(5) See the judgment of

Justice in Case
C-730/79, Philip Morris v Commission [1980] ECR 2671, grounds 11
and 12.

the European Court of

agricultural products as indicated by the table below (6),
which lists the overall value of agricultural imports and
exports between Italy and the EU in the period 1993 to
2001 (7). Within Italy, Campania
significant
producer of agricultural products.

is

a

(ECU/EUR million)

Total agricultural sector

Exports

6 714

7 360

8 364

9 191

9 459

9 997

10 666

10 939

11 467

Imports

12 741

13 390

13 629

14 525

15 370

15 645

15 938

16 804

16 681

1993

1994

1995

1996

1997

1998

1999

2000

2001

and

States

between

the Member

It should also be recalled that the Court of Justice has
held that aid to an undertaking may be such as to affect
trade
distort
competition where that undertaking competes with
products coming from other Member States even if it
does not itself export its products. Where a Member
State grants aid to an undertaking, domestic production
may for that reason be maintained or increased with the
result that undertakings established in other Member
States have less chance of exporting their products to
the market in that Member State. Such aid is therefore
likely to affect trade between Member States and distort
competition (8).

(6) Source: Eurostat.
(7) Consistent case-law holds that the condition of the effect on the
trade is met since the benefiting company carries out an economic
activity which is the subject of trade between the Member States.
The simple fact that aid strengthens the position of this company
in relation to other competing companies in intra-Community trade
makes it possible to consider that
this trade was affected. As
regards State aid to the agricultural sector, settled case-law holds
that, regardless of the relatively small amount of total aid involved
and its distribution among many farmers, there is an impact on
intra-Community trade and competition (see the judgments of the
Court of
in Case C-113/2000, Kingdom of Spain v
Commission, [2002] ECR 7601, grounds 30 to 36 and 54 to 56, and
in Case C 114/2000, [2002] ECR 7657, grounds 46 to 52, 68 and
69.

Justice

(8) Judgment of the Court of Justice in Case 102/87, French Republic v

Commission ECR [1988] 4067.

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(28)

The Commission therefore concludes that the measure is
caught by the prohibition in Article 87(1) of the EC
Treaty.

(29)

The prohibition in Article 87(1)
exemptions in Article 87(2) and (3).

is

followed by

(30)

The exemptions listed in Article 87(2)(a), (b) and (c) are
manifestly inapplicable given the nature of
the aid
measures in question and their objectives. Indeed, Italy
has not submitted that either Article 87(2)(a), (b) or (c)
is applicable.

(31) Article 87(3)(a) is also inapplicable since the aids are not
intended to promote the development of areas where
the standard of living is abnormally low or where there
is serious underemployment.

(32) Article 87(3)(b)

is equally inapplicable as the aids in
question are not intended to promote the execution of
an important project of common European interest or
to remedy a serious disturbance in Italy's economy.

(33)

The aid under examination is not intended to achieve or
referred to in
suitable for achieving the objectives
Article 87(3)(d).

(34)

Considering the nature of the aid under examination
and its objectives the only exemption which may be
applicable is the one provided for by Article 87(3)(c) of
the Treaty.

Applicable provisions

(35)

The applicability of the abovementioned exception needs
to be assessed in the light of the provisions applicable
to the grant of State aids in the agriculture sector,
namely the Community guidelines for State aid in the
agriculture sector (9) (hereinafter ‘the Guidelines'), which
entered into force on 1 January 2000.

(36) According

to point 23.3 of

the
Community will apply them with effect from 1 January
2000 to new notifications of State
aid and to
notifications which are pending on that date. Unlawful
aid within the meaning of Article 1(f) of Council

guidelines,

the

(9) OJ C 232, 12.8.2000, p. 19.

Regulation (EC) No 659/1999 laying down detailed rules
for the application of Article 93 (new Article 88) of the
EC Treaty (10) will be assessed in accordance with the
rules and the guidelines in force at the time the aid is
granted.

(37)

It should be noted that ‘to implement' means not only
the actual grant of the aid but the conferral of powers
that allow the aid to be provided without any further
formalities (11).

(38)

(39)

(40)

In the light of the above considerations the examination
of the aid measure concerned falls within the scope of
the State aid rules which were applicable to this type of
measure before the entry into force of the Community
guidelines for State aid to the agriculture sector (12).

losses of

The measure under examination, which is provided for
in Article 19 of Regional Law No 24/93, is an aid for
conversion to organic production and is intended to
income suffered by farmers when
offset
switching from traditional farming to organic farming
methods as referred to in Regulation (EEC) No 2092/91,
over a maximum period of four years. The aid covers
up to 75 % of such losses.

the adoption of

the guidelines which are
Before
currently applicable,
the Commission assessed the
compatibility of this type of aid measure by analogy
with
(EEC) No
of
2078/92 (13).

Regulation

provisions

the

(41) Article 2 of Regulation (EEC) No 2078/92 laid down
that, subject to positive effects on the environment and
the countryside, aid could be granted for farmers who
undertook to reduce substantially their use of fertilisers
and/or plant protection products, or to keep to the
reductions already made, or to introduce or continue
with organic farming methods.

(42) Article 10 of that regulation laid down that Member
States were not precluded from implementing, except in
the field of application of Article 5(2), additional aid
measures for which the conditions of granting of aid
differed from those laid down therein or the amounts of

(10) OJ L 83, 27.3.1999, p. 1.
(11) See Commission letter SG(89) D/5521 of 27 April 1989.
(12) See footnote 9.
(13) See footnote 4.

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the

therein (14),
which exceeded
provided that
complied with the
objectives of that regulation and with Articles 92, 93
and 94 (now Articles 87, 88 and 89) of the Treaty.

those measures

stipulated

limits

(43) As indicated in the decision initiating the procedure in
this case,
the Commission was generally favourable
towards aid for converting to organic farming methods
in accordance with Regulation (EEC) No 2092/91,
provided that it did not exceed the actual income loss
suffered by the farmer as a result of the conversion.

(44)

In the light of the applicable rules it appears that the
measure under examination, which is designed to
encourage a switch to the organic farming methods laid
down in Regulation (EEC) No 2092/91, may be
considered to pursue the objectives of Article 2(a) of
the
Regulation
introduction or
farming
methods).

2078/92
continuation of organic

(EEC) No

(favouring

(45) However,

the measure under

examination simply
provides for an aid to offset up to 75 % of the losses of
income suffered by farmers when switching from
traditional farming to organic farming techniques, over
a maximum period of four years. No indication was
provided on how such losses, which constitute the basis
for
the aid, are assessed and
calculated, so as to allow the Commission to verify that
the aid does not exceed the actual income loss suffered
by the farmer as a result of the conversion.

the quantification of

(46) Moreover, taking into account the comments submitted
by the Danish authorities, it must be considered that the
Italian authorities failed to provide a clear indication of
the length of the commitment to convert to organic

least

(14) Article 4 of Regulation (EEC) No 2078/92 provided for the grant
of an annual aid per hectare or livestock unit removed from a
herd to farmers who gave one or more of the undertakings listed
in Article 2 for at
in accordance with the
five years,
programme applicable in the zone concerned. The aid had to be
granted in accordance with conditions laid down in the regulation.
in order to achieve the
In particular Article 5 laid down that,
regulation's objectives, the Member States had to determine (a) the
conditions for the grant of aid; (b) the amount of aid, on the basis
of the undertaking given by the beneficiary and of the loss of
income and of the need to provide an incentive; (c) the terms on
which the aid for the upkeep of abandoned land as referred to in
Article 2(1)(e) may be granted to persons other than farmers,
where no farmers are available; (d) the conditions to be met by the
beneficiary to ensure that compliance with the undertakings may
be verified and monitored; (e) the terms for the grant of aid in
cases where the farmer is personally unable to give an undertaking
for the minimum period required. No aid could be granted under
the regulation for areas subject to the set-aside scheme which were
being used for
the production of non-food products. While
ensuring that the incentive content of the scheme was retained,
the Member States could limit the aid to a maximum amount per
holding and differentiate according to holding size.

farming (which would appear to be a maximum of four
years) or on the terms on which the aid could be
granted where the farmer was personally unable to give
an undertaking for
the minimum period required
(which, pursuant to Regulation (EEC) No 2078/92, was
five years) (15).

(47)

Furthermore, as it was indicated by the Commission in
its decision to open the procedure on the aid measure
concerned, Regulation (EEC) No 2092/91 lays down
mandatory conditions to be met if agricultural products
are to be deemed organic and any national (or regional)
comply with those
area must
provisions
conditions.

in this

(48) As the Italian authorities acknowledged in their letter of
29 September 1995, the regional law in question does
not meet these conditions, particularly as regards:

(a)

the length of the conversion period (the regional
law provides for a conversion period of two years
for both annual and perennial crops, while Annex I
to Regulation (EEC) No 2092/91 indicates
for
perennials a minimum period of three years);

(b) the possibility of

incorporating ingredients not
obtained by organic production methods (without
laying down the maximum percentages
to be
observed if
referring to organic
the indications
production methods in the sales description of the
product or in the list of ingredients are to be used,
as specified in Article 5 of Regulation (EEC) No
2092/91);

(c)

the inspection authorities (which do not appear on
the list of inspection authorities approved by Italy);

(d) the products listed in the Annexes on production
standards (not corresponding to the products listed
in the Annexes to Regulation (EEC) No 2092/91).

(49) Although repeatedly requested,

the Italian authorities
have not provided any information on the actual
amendments made
law under
examination with a view to making it compliant with
Regulation (EEC) No 2092/91.

regional

the

to

(50)

In the light of the above assessment the Commission
must therefore conclude that the doubts expressed in its
decision to open the procedure on the measure
concerned are confirmed, as the aid measure under

(15) Article 5 of Regulation (EEC) No 2078/92, see footnote 4.

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examination does not satisfy the State aid rules appying
before 1 January 2000 to aid for switching to organic
farming methods as referred to in Regulation (EEC) No
2092/91.

(56)

(51)

The Commission's assessment of the aid measure does
not change even under the new guidelines applicable to
State aids.

In the light of the above assessment the aid provided for
in Article 19 of Regional Law No 24/93 does not satisfy
the State aid rules applicable to aid for conversion to
organic farming methods as referred to in Regulation
(EEC) No 2092/91 and cannot therefore benefit from a
derogation pursant to Article 87(3)(c) of the Treaty. As
demonstrated in recitals 30 to 33, the aid cannot benefit
from any other derogation provided for by the Treaty
and must therefore be considered incompatible with the
common market.

(52)

(53)

(54)

(55)

Firstly,
although recently reminded by telex AGR
021605 of 7 August 2003, the Italian authorities have
still not provided any information on the actual
amendments made
law under
examination with a view to making it compliant with
Regulation (EEC) No 2092/91.

regional

the

to

of

5.3

aid)

point

(agri-environmental

Secondly, consideration should also be given to the fact
that
the
Community guidelines for State aid in the agricultural
sector (16), applicable to this kind of aid, cross-refer to
Articles 22, 23 and 24 of Regulation (EC) No
1257/1999 (17), which repeals and replaces Regulation
(EEC) No 2078/92, as well as the relevant implementing
rules now laid down in Commission Regulation (EC) No
445/2002 of 26 February 2002 laying down detailed
rules for the application of Council Regulation (EC) No
1257/1999 on support for rural development from the
European Agricultural Guidance and Guarantee Fund
(EAGGF) (18).

The new provisions currently applicable to this type of
in addition to new requirements which do not
aid,
under
appear
examination (19),
basic
requirements as those in Regulation (EEC) No 2078/92.

the measure
same

be met

provide

the

for

by

to

These basic requirements, as demonstrated above, are
not satisfied by the aid measure provided for in Article
19 of Regional Law No 24/93, particularly as regards
the need to demonstrate to the Commission the losses
of income suffered by the farmer, the way such losses
are calculated and the length of the commitments made
by the farmers.

(16) OJ C 232, 12.8.2000.
(17) OJ L 160, 26.6.1999. Regulation as last amended by Regulation
(EC) No 1783/2003 (OJ L 270, 21.10.2003, p. 70). This latter
Regulation completely replaces Chapter VI of Regulation (EC) No
1257/1999 as regards agri-environmental measures.

(18) OJ L 74, 15.3.2002, p. 1. Regulation as

last amended by
Regulation (EC) No 963/2003 (OJ L 138, 5.6.2003, p. 32). See in
particular Articles 13 to 21 of Regulation (EC) No 445/2002.
(19) See footnote 18 and in particular Articles 13 to 21 of Regulation
to Article 20 of
(EC) No 445/2002. For example, pursuant
farmer who gives
an
Regulation (EC) No 445/2002,
agri-environmental commitment
for part of his holding must
adhere to at least the standard of usual good farming practice
throughout the farm.

a

(57) However,

the

since

application of

law was
suspended by the Italian authorities (see recital 21 of
this decision) there is no need for the Commission to
order recovery of the aid.

the

(58)

the

freely

regional

in the Community subject

Regarding Article 12 of
law (which
provides that products from outside the region must be
accompanied by a certificate issued by the authorities
competent for the territory from which they come), the
following should be noted. Organic farming products
may move
to
compliance with the rules on production and the
provisions on packaging and marketing in Annex III to
Regulation (EEC) No 2092/91. It follows therefore that
law in question was also in breach of
the regional
Article 12 of Regulation (EEC) No 2092/91, which
prohibits any restriction on the marketing of organic
farming products. However, this is not an issue which
appears to affect the compatibility of the aid with the
common market, but rather a separate violation of
Community law, which could be subject to infringement
proceedings
the EC Treaty). The
Commission reserves its right to intervene on this point,
but since the application of the law was suspended by
the Italian authorities, there appears to be no need to
institute such proceedings.

(Article 226 of

VI. CONCLUSIONS

(59)

In the light of the above, the aid measure provided for
by Article 19 of Law No 24/93 of the Campania Region
income suffered by farmers when
to offset losses of
switching from traditional farming to organic farming as
referred to in Regulation (EEC) No 2092/91 cannot
benefit from any of the derogations to Article 87(1)
provided for by the Treaty and is therefore incompatible
with the common market.

(60) According to the information provided by the Italian
not

24/93 was

law No

regional

authorities,
implemented.

(61) Ordering recovery is therefore unnecessary,

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HAS ADOPTED THIS DECISION:

Article 2

Article 1

The State aid provided for by Article 19 of Regional Law
No 24/93 of the Campania Region which Italy intended to
implement to offset losses of income suffered by farmers when
switching from traditional
farming to organic farming as
referred to in Regulation (EEC) No 2092/91 is incompatible
with the common market.

This aid cannot be implemented.

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

Article 3

This Decision is addressed to the Italian Republic.

Done at Brussels, 10 December 2003.

For the Commission

Franz FISCHLER

Member of the Commission