2004/342/EC: Commission Decision of 16 December 2003 on the State aid which Italy (Sicily) is planning to implement for the agricultural sector (notified under document number C(2003) 4474)
Date: 2003-12-16
Institutions: European Commission
Subjects: Italy, Sicily, State aid, control of State aid, farming sector

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COMMISSION DECISION

of 16 December 2003

on the State aid which Italy (Sicily) is planning to implement for the agricultural sector

(notified under document number C(2003) 4474)

(Only the Italian text is authentic)

(2004/342/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
pursuant to the Article cited above (1) and having regard to
their comments,

Whereas:

I. PROCEDURE

By letter dated 2 May 1996, registered on 8 May 1996,
Italy notified the Commission of the aids provided for
by Regional Law No 33/1996 of the Region of Sicily of
18 May 1996.

Scrutiny of the notification was divided into four parts:
aid No N 340/A/96,
involving all sectors other than
agriculture and fisheries, aid No N 340/B/96, involving
agricultural products listed in Annex I to the EC Treaty,
aid No N 340/C/96, involving fishery products and aid
No 340/D/96, involving transport. This Decision relates
only to the aid for Annex I agricultural products.

By letter dated 3 June 1996, registered on 12 June
1996,
Italy submitted information sheets on the aid
measures provided for by Articles 10, 17 and 18 of
Regional Law No 33/1996.

letter dated 19 December 1996,
registered on 31
December 1996, Italy submitted additional information
on Articles 9, 13, 14, 15, 16, 17 and 18 of Regional Law
No 33/1996.

By letter dated 21 March 1997 (SG(97) D/2243), the
Commission informed Italy that
it had decided to
initiate the procedure laid down in Article 88(2) of the
Treaty in respect of the aid measures provided for by
Articles 1, 9, 10, 13(2) and (3), 17, 18 and 19 of
Regional Law No 33/96.

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

from Italy by
The Commission received comments
letters dated 2 September 1997,
registered on 4
September 1997, and 7 November 1997, registered on
17 November 1997.

By letter dated 28 January 1998 Italy informed the
the aid measure provided for by
Commission that
Article 18 of Law No 33/1996 could no longer be
implemented due to the lack of
resources
allocated to it and undertook to renotify the aid
measure under Article 88(3) of the Treaty should it be
re-proposed in the future.

financial

(6)

(7)

(8)

(9)

By letter dated 3 July 1996, registered on 11 July 1996,
Italy submitted the text of Regional Law No 33/1996 as
published in the Regional Official Journal of Sicily (No
26 of 21 May 1996).

(10)

In telexes No VI/027617 of 9 July 1996 and No
VI/46886 of 5 December 1996, the Commission sought
information from the Italian authorities. By
further

the file,

in telex AGR
To finalise its examination of
029182 of 20 November 2000 the Commission asked
the Italian autorities for clarifications about the aid in
question. In that same telex the Commission also said
that if the Italian authorities had taken steps to stop the
grant of aid to the agricultural products listed in Annex
I to the Treaty in accordance with the provisions in the
Commmision Decision to initiate the formal scrutiny

(1) OJ C 201, 1.7.1997, p. 10.

(2) See footnote 1.

(1)

(2)

(3)

(4)

(5)

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they had committed themselves to
procedure, and if
repealing those provisions in so far as they applied to
the agricultural sector, then the competent authorities
could consider withdrawing the notice.

(11)

By letter dated 12 June 2001 Italy informed the
Commission of the withdrawal of the notification of the
aid measure provided for by Article 9 of Regional Law
No 33/1996, as the measure concerned had not been
applied and had been replaced by new aid measures
which were notified and/or in the course of notification
to the Commission under Article 88(3) of the Treaty (3).

(12)

By letter dated 28 June 2001, registered on 2 July 2001,
Italy sent further information regarding Article 10.

(16)

(13)

In the light of the above, this decision concerns only the
State aid provided for by Articles 1, 10, 13(2) and (3),
17 and 19 of Regional Law No 33/1996. As the
notification of Articles 9 and 18 of Law No 33/96 was
withdrawn by Italy by the letters of 28 January 1998
and 12 June 2001 there is no reason to assess the aid
measures provided for by those two Articles.

(14) According to Article 63 of Regional Law No 33/96,
implementation of the State aid measures provided for
in the Law itself is conditional upon their approval by
the Commission.

(17)

II. DETAILED DESCRIPTION OF THE AIDS

Article 1 of Regional Law No 33/96

the kilometres travelled and the transported weight in
relation to the transport of the goods within Italy. The
calculation of the extra costs is fixed annually by decree
of the President of the Regional Government, on the
basis of the most economical means of transport and
the most direct connection between the place of
production or processing and the commercial outlets.
The aid for extra costs cannot exceed the real costs
incurred.

in the

case of

the measure was

In its decision to initiate the procedure against this aid,
the
the Commission noted that,
agricultural
in essence an
sector,
amendment of the aid provided for by Article 90 of
Regional Law No 25/93 of 1 September 1993 (4). This
aid had been the subject of a negative decision under
case C 30/95, with a view to cancelling the measure
and recovering any amounts paid out (5). The reasons
which had led the Commission to take that decision
remain, in substance, valid (6).

In particular, the Commission decided that this aid was
operating aid,
incompatible with the common market.
This type of aid, which relieves the recipients of a part
of their operating costs, has no durable and structural
sectors concerned and it gives an
effect on the
advantage only to products which are produced in the
region and marketed outside it, over products which do
not benefit from a comparable measure, in Italy or in
other Member States.

(15) Article 1 provides for aid for the extra costs incurred by
the undertakings operating in Sicily for the transport
outside the Region of
the goods produced and/or
processed there. The reason for the aid is the distance of
the undertakings from the main national and European
in all
markets. The
productive
and
hydroelectric industries which are obliged to operate in
road, maritime and air
the Region)
transport, or combined transport. The aid applies to the
period 1997 and 1998. It is calculated on the basis of

aid applies
(except

to undertakings

that use rail,

the mining

sectors

for

(3) See Article 6 of Regional Law No 22/99 (aid N 795/99) and Article

131 of Regional Law No 32/2000.

(18)

Consequently, none of the exemptions referred to in
paragraphs 2 and 3 of Article 87 of the Treaty were
applicable. The Commission accordingly decided to
initiate the procedure provided for in Article 88(2) of
the Treaty against the aid provided for in Article 1 of
Regional Law No 33/96 in respect of the production,
processing and/or marketing of agricultural products.

(4) Article 1(8) of Regional Law No 33/1996 repeals Article 90 of

Regional Law No 25/1993.

(5) See Commission Decision C(96) 2249 of 17 July 1996, notified to
the Italian government by letter SG(96) D/6819 of 26 July 1996.
(6) The Commission considered that the aid provided for in Article 90
of Regional Law No 25/93, was,
incompatible with
Articles 30 and 52 of the Treaty owing to certain specific forms of
application that were not reproduced in Article 1 of Regional Law
No 33/96.

in addition,

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Article 10 of Regional Law No 33/96

No 3/86 to the consortia referred to in Article 10 of
Regional Law No 33/96 could not benefit from any of
the exemptions referred to in Article 87(2) or (3) of the
EC Treaty.

(19)

(20)

This Article extends the provisions of Articles 51, 52,
53 and 54 of Regional Law No 3/86 to consortia made
up of agricultural, craft and commercial undertakings
which are active in the production, processing and
marketing of plants and flowers. According to the
information provided by the competent authorities by
letter of 3 June 1996, the aid measures concerned have
unlimited duration.

The aid on which the Commission had decided to open
the procedure is the one provided for in Article 10, in
so far as it refers back to Article 53(c) of Regional Law
No 3/86). This aid, which concerns the creation of
common structures, can be granted at a rate of 80 % to
land
subsidise
expenditure:
purchase,
the necessary buildings,
purchase and renovation of existing buildings and the
acquisition of any other essential fixed structure that the
cooperatives need in order to operate.

the
construction of

following

eligible

Article 13(2) and (3) of Regional Law No 33/96

(24) Article 13(2) of Regional Law No 33/96 provides that,
following the damages to agricultural production caused
by the adverse weather events that occurred between
the Regional
December 1995 and March 1996,
Government may decide to suspend payment of
the
contributions due by their members to the Consorzi di
bonifica which were located in areas that had been
included in the territories affected by the natural
disasters in accordance with National Law No 185/92 (a
law providing for national compensation for damages to
agricultural production once the areas affected by the
natural disaster have been demarcated by Ministerial
Decree). Under Article 13(3) the Region may reimburse
the Consorzi di bonifica up to ITL 5 000 million for the
unpaid contributions.

(21)

In its assessment the Commission concluded that the
above investments, which benefited from the regional
subsidy, remained the property of the consortium and
were to be used for the carrying out of its activities in
the processing and marketing of agricultural products.

Article 17 of Regional Law No 33/96

(22)

In this sector, the provisions which were applicable at
the time (7), required national aid to conform with the
limits referred to in the second and third
sectoral
indents of point 1.2 of
the Annex to Commission
Decision 94/173/EEC and the intensity of aid could not
exceed,
in Objective 1 regions such as Sicily, 75 % of
the cost of investment.

(25) Article 17 of Regional Law No 33/96 allows the Region
to advance the amounts due from the State as assistance
from the national solidarity Fund to compensate for the
damage caused by a natural disaster (National Law No
185/92). The aid measure provided for by Article 17 is
limited to 1996, for which expenditure of ITL 20 000
million was planned (see letter of 3 June 1996). The aid
consists of subsidies to enable farmers to restore their
working capital
(capitale di conduzione) and subsidies
for the restoration of farming structures which were
damaged by
concerned. The
beneficiaries are independent farmers who have suffered
their gross saleable
damage to more than 35 % of
and
production due
subsequent flooding in 1996.

the natural

temperature

fluctuations

events

to

(23)

The rate planned for
the regional measure under
examination was 80 % and no information was provided
enabling compliance with the applicable sectoral limits
to be checked. In view of these considerations, the grant
of the aid provided for in Article 53(c) of Regional Law

(7) Guidelines for State aid in connection with investments in the
processing and marketing of agricultural products (OJ C 29,
2.2.1996, p. 4) and the Annex to Commission Decision 94/173/EEC
of 22 March 1994 on the selection criteria to be adopted for
investments for improving the processing and marketing conditions
for agriculture and forestry products and repealing Decision
90/342/EEC (OJ L 79, 23.3.1994, p. 29).

(26)

The aid provided for in Article 13(2) and (3) and that
provided for in Article 17 can be cumulated within the
limits allowed by National Law No 185/92.

(27)

In its decision to open the procedure against Article
13(2) and (3) and Article 17, the Commission noted that
the measures had to be examined in the light of the
criteria that it applied at that time to national aidto

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for

compensate
disasters (8). Under
conditions had to be met:

the

damage
those criteria,

caused

by natural
the two following

(a)

the losses suffered by the recipient of aid had to
reach 30 % of normal production (20 % in the
less-favoured areas within the meaning of Council
Directive 75/268/EEC of 28 April 1975 on
farming and farming in less
mountain and hill
favoured areas (9))
calculated on the basis of
production in the three previous years.

(b) any possibility of over-compensating the losses

incurred had to be excluded.

The Commission noted in its Decision that, in the case
under examination, the information available did not
make it possible to conclude that both conditions in
question were met. Indeed, with regard to Article 17,
which transposes and incorporates national
legislation
on natural disasters and adverse weather conditions, the
regional
texts as submitted restricted themselves to
referring National Law No 185/92 and its implementing
provisions,
from the Ministry of
Agriculture (A1659 of 2 July 1996) which indicated that
the aid could not be more than 100 % of the damage.
When the procedure on the aids under examination was
opened,
law in question was also the
subject of a decision to open the procedure under
Article 88(2) of the Treaty, by virtue of the fact that it
was impossible to check compliance with the conditions
mentioned in 27(a) and (b)

including a letter

the national

(10).

in the absence of

Consequently,
regarding
conditions,
conclusions held in the case under examination.

regional
the Commission noted that

specific assurances
above
the
same

compliance with

the

transmitted

In particular, the Commission had pointed out, firstly,
that neither the regional law under examination nor the
information
how ‘normal'
production was calculated as the reference for fixing the
threshold that triggered compensation. Secondly, doubts
remained
no
over-compensation.

condition

indicated

regards

the

of

as

(28)

(29)

(30)

(31)

(32)

(33)

(34)

the Italian
In their letter dated 19 December 1996,
authorities stated that,
in the case of Article 17 of
Regional Law No 33/96, the Ministry of Agriculture's
letter of 2 July 1996 required aid not to exceed 100 %
of the losses incurred. However, the Commission said
that the aid referred to in Article 17 of Regional Law
No 33/96 seemed to be cumulable with other aids, in
particular those under Article 13(2) of
law. No
assurances that over-compensation did not occur in the
event of cumulation had been provided.

that

the

view of

preceding

In
the
in a position to check for
Commission was not
compliance with the conditions set out in point 27(a)
and (b). Consequently, none of the exemptions referred
to in Article 87(2) and (3) of the Treaty were applicable.

considerations,

Article 19 of Regional Law No 33/96

This Article provides for subsidies up to 80 % for the
construction on farms of facilities for the production of
electric, thermal or mechanical energy from renewable
resources. In particular it provides for an increase in the
aid intensity laid down in Article 12(1) of National Law
No 308/82 of 29 May 1982 and in Article 13(1) of
National Law No 10/91 of 9 January 1991, which set
the maximum intensity at 55 % (65 % for cooperatives).
The subsidy can be cumulated with a subsidised loan
covering the investment costs not covered by the
subsidy. The budget for the measure amounted to ITL
2 500 million.

The Commission noted in its decision to open the
time it had already had the
procedure that at
that
opportunity of examining a similar regional
legislative
text and had communicated to the Italian government
its position concerning the problems of cumulation in
the agricultural sector by its letter No SG(94) D/11946
In that
of 16 August 1994 (aid No E 1/94).
inter
communication the Commission had specified,
alia, that the maximum aid rates provided for in the
national
farming
cooperatives) had to be coordinated with the rates in
force for national
investment aid for the production,
processing and marketing of agricultural products. At
the time that
the rules
applying to these kinds of aid required compliance with
the following conditions:

the procedure was initiated,

65 % for

law (i.e.

55 %,

or

(8) Working

document VI/5934/86, 10.11.1986, Rev 2. Rules
governing the grant of national aids in the event of damage to
agricultural production or the means of agricultural production and
national aids involving the defraying of a proportion of
the
insurance premiums covering such risks

(9) OJ L 128, 19.5.1975, p. 1.
(10) Aid C12/95, (OJ C 295, 10.11.1995, p. 5).

(a)

the applicable maximum rates in the agricultural
sector (any aid, subsidy and/or cumulated interest
rebate) had to be complied with. These were
respectively:

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(i)

in the primary production sector (investments
falling within Article
Council
Regulation (EEC) No 2328/91 on improving the
efficiency of agricultural structures (11)): 35 %, or
45 % in the less-favoured areas within the
meaning of Directive 75/268/EEC;

12(5)

of

(ii) processing industry and marketing: 55 % (75 %

in the Objective 1 regions).

(b)

the sectoral

in both cases,
limits laid down in
Regulation (EEC) No 2328/91 or in the Community
Guidelines on national aid for investments in the
processing and marketing of agricultural products
had to be complied with (12).

(35) No assurances as regards compliance with the above
conditions were provided by the Italian authorities.

(36)

Consequently,
the aid referred to in Article 19 of
Regional Law No 33/96 could not benefit from any of
the exemptions provided for by Article 87(2) and (3) of
the EC Treaty.

III. COMMENTS FROM INTERESTED PARTIES

(37) No comments from interested parties were received.

IV. COMMENTS FROM ITALY

(38)

The Commission received comments from Italy, on
behalf of
the Region of Sicily, by letters dated 2
September 1997, registered on 4 September 1997, and 7
registered on 17 November 1997.
November 1997,
Additional information was subsequently sent by letter
dated 28 June 2001, in reply to Commission telex AGR
029182 of 20 November 2000.

(39)

In its
letter of 2 September 1997 Italy submitted
comments regarding Articles 1, 13 and 17 of Law No
33/96.

(40) With regard to Article 1 Italy submitted a copy of the
comments which it had already submitted in the context
of
the procedure regarding the aid provided for in
Article 90 of Regional Law No 25/93. The aid provided

(11) OJ L 218, 6.8.1991, p. 1.
(12) See footnote 7.

of

road

often

agricultural

products was

coordinated use of

for by this Article had been the object, within the
framework of procedure C 30/95, of a final negative
decision requiring the repeal of the measure and the
recovery of any aid paid out. In their comments the
Italian authorities stated that the aid was intended to
transporting agricultural
promote alternative ways of
vehicles
goods with the
in
compliance with Article 77 of
the Treaty. The
competent authorities indicated that transport in Sicily
was based mainly on road transport
(67 %). The
often
transport
unorganised, involving the irrational and imbalanced use
of different transport systems: road, rail and maritime
transport. The situation was made more difficult by the
transport was often carried out by small,
that
fact
non-specialised,
haulage
family-run,
companies (‘padroncini'). Their organisation mirrored
the fragmentation of the regional agricultural trade, with
the result that the transport system was not very open
to innovation, organisation or the use of combined
forms of transport. This situation had repercussions not
only on the economy (the cost of transport per unit was
higher and there was a risk that
the vehicle would
return from its destination entirely or partially empty),
but also on the environment and on road safety. The
regional
to develop
intermodal transport and to encourage the grouping of
transport operators by favouring the demand for
transport. The aid would be temporary and aimed at the
development of an intermodal organised system of
transport, so favouring a transfer from road transport to
combined road-rail and road-maritime transport and a
reduction in the number of vehicles used for
the
transport of agricultural products. In accordance with
paragraph 4 of that Article, the aid could be a flat-rate
transport, without a
payment based on the type of
direct
the products
transported. The competent authorities ended their
comments by saying that, for the reasons set out above,
they considered the aid to be compatible with Article
77 (now 73) and with Article 92(3)(b) and (c)
(now
87(3)(b) and (c)) of the Treaty.

link to the quantity or value of

aid was

therefore

intended

(41) With regard to the aid provided for by Article 13(2) and
(3) and by Article 17, the Italian authorities indicated
that for the calculation of the ‘normal' production used
to determine the 35 % loss required by National Law No
they had analysed the data sent by the
185/92,
provincial
inspection offices to the National Statistics
Institute (ISTAT) over the previous 10 years. In order to
establish correct reference averages for each Province,
the only production data considered were those for
years when no adverse weather events had occurred. To
ensure there was no overcompensation, the competent
authorities
the Ministry's note
A/1659 of 2 July 1996 the aid could not exceed 100 %
of the damage suffered by the beneficiary. The Italian
authorities confirmed that
the aid provided for by
Article 13(2) of the Law could be cumulated with the
aids provided for by Articles 17 and 18 of that same
Law. However, in compliance with the above mentioned
Ministerial instructions, the aid could never exceed the

stressed that under

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the losses

suffered by the beneficiary.
amount of
Moreover the Italian authorities stressed that the aid
provided for by Article 13(2), i.e. the suspension of the
to the Consorzi di
collection of
bonifica, was granted to all owners of
immovable
property located within the area covered by the
Consorzio di bonifica who had benefited from the land
reclamation works (and so not just to farmers).

the contributions

reduced by Article 51 of Regional Law No 32/2000 to
50 % on a maximum volume of expenditure of
ITL
1 000 million (1 200 million for
the structures of
second-degree consortia). They also said that the aid was
granted for the production, processing and marketing of
plants and flowers, and that admissible expenditure
covered the purchase of land and the cost of building
immovable property,
the cost of buying of existing
buildings, their conversion and adaptation.

(42)

letter of 7 November 1997 Italy submitted
In its
comments regarding Articles 1 and 10 of Law No
33/1996.

V. ASSESSMENT OF THE AID

of

goods

transport

(43) As regards Article 1 the Italian authorities said that the
rules on transport were
consistent with Council
Directive 92/106 of 7 December 1992 on the
establishment of common rules for certain types of
combined
between Member
States (13). They also referred to some comments from
the Regional Assembly of Sicily. Some of the Regional
Assembly's comments had been made direct
to the
Commission during a meeting held on 25 September
1997. According to these comments, Article 1 of Law
No 33/96 was a regional aid within the meaning of
Article 87(3)(a) of the Treaty and should be examined in
Commission
the
2.6
of
light
Communication
20 December
1994 (14).

point
94/C 364/06

the

of

of

(44) As

aids

competent

regards Article 10 the
the

authorities
indicated that
concerned could not be
cumulated with other national or regional aids and
could be granted at the rate of 80 % of the documented
expenditure up to a maximum of ITL 1 000 million
(ITL 1 200 million for the structures of second-degree
consortia). Moreover,
competent
authorities the method for calculating the 80 % rate
differed from that used by the Commission as the
region measure referred to a maximum volume of
documented expenditure, whereas the 75 % rate applied
by the Commission related to the
the
investment. By letter dated 28 June 2001, the competent
authorities indicated that
the aid rate laid down in
Article 33(1)(c) of Regional Law No 3/86 had been

according to the

cost of

(13) OJ L 368, 17.12.1992, p. 38. As corrected in OJ L 72, 25.3.1993,

p. 36.

(14) Changes to the method for the application of Article 92(3)(c) of
the Treaty to regional aid. Communication from the Commission
to the Member States and interested third parties on changes to
the method for the application of Article 92(3)(c) of the EC Treaty
to regional aid (OJ C 364, 20.12.1994, p. 8).

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

A measure that is not State aid

(46)

(47)

information provided by

In the light of the above and the information provided
by the competent authorities, one of
the notified
measures under examination is not to be considered a
State aid within the meaning of Article 87(1) of the
Treaty. This applies to Article 13(2) and (3), since, based
competent
on the
authorities,
the
contributions due by their members to the Consorzi di
bonifica applies equally to all owners of
immovable
property in the area covered by the Consorzi di Bonifica
which were affected by adverse weather conditions
between December 1995 and March 1996 and not just
to the farmers located therein.

the
the payment of

the suspension of

The Consorzi di bonifica are public bodies tasked with
carrying out public infrastructure works (15). They are
regulated by national and regional
law. These works
may include: the planning, execution, maintenance and
management of ‘bonifica works' (land reclamation and
also making land suitable for human occupation, since
most of the land needing to be reclaimed was originally
swampy and malaria-ridden),
the implementation of
protective measures to contain and prevent floods, the
management of water resources with a view to rational
economic
land
and social development,
reclamation works belong to the State and Regions.

etc. The

(15) See aid Nos N 718/97, N 130/2000, N 412/2001 and N 53/2003,

Venice Lagoon.

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(48)

(49)

(50)

The law gives the Consorzi di bonifica the power to
impose contributions on their members which are
compulsory and collected through the direct taxation
system (16).

the members of

is imposed on all

and the municipalities
to them) who benefit

The members of the Consortium are all the owners of
immovable property (land and buildings) which is
located within the area covered by the Consortium. The
contribution under examination is therefore akin to a
tax and it
the
Consortium (usually including the State, the regions, the
assests
provinces
belonging
land
reclamation works, on the basis of their ownership of
immovable property located within the area covered by
the activity
the Consortium, and independently of
carried out by the owner of
the property. The
contribution is normally calculated on the basis of the
‘cadastral rent' of the real estate (‘rendita catastale' for
buildings and ‘reddito dominicale' for land) as resulting
from public land registers, and on the basis of ‘hydraulic
indexes of benefit' (‘indici idraulici di beneficio') relating
to the specific areas where the property is located.

for
from the

the

reference

(which may explain the

In the case under examination the Region pays the
income resulting from the
Consortia for the loss of
suspension of the collection of the contributions from
all their members, not only from those members who
may exercise an economic activity. Although many of
the property owners in the area concerned might be
farmers
to the
demarcation of the affected areas under National Law
No 185/92), the measure under examination cannot be
considered to favour
the
production of certain goods within the meaning of
the Treaty, since, according to the
Article 87(1) of
is not aimed specifically at
information provided,
activity
subjects
is
an economic
applicable, without discrimination,
to all property
owners whose real estate is located within the area
covered by the Consorzio di bonifica and who benefit
from the land reclamation works. The measure does not
therefore constitute a State aid within the meaning of
Article 87(1) of the Treaty.

certain undertakings or

exercising

and

it

State aid measures

(51) Articles 1, 10, 17 and 19 of Regional Law No 33/96
the grant of aid from public funds to
provide for
specific agricultural undertakings which will undeniably
be 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
an
improvement

competitive position of

in the

(16) Article 21 of Royal Decree No 215/1933, Article 864 of the Civil
Code and Article 103 of DPR (Decree of the President of the
Republic) No 603/73.

undertaking as a result of State financial aid leads to
possible distortion of competition compared with other
competing
such
assistance (17).

undertakings

receiving

not

(52)

there is

The measures affect trade between Member States in
intra-Community trade in
that
substantial
indicated by the table (18)
agricultural products as
below, which lists the overall value of agricultural
imports and exports between Italy and the European
Union over the 1997 to 2001 period (19). Within Italy,
Sicily is a significant producer of agricultural products.

Total agricultural sector

ECU-EUR million

ECU-EUR million

Exports

9 459

9 997

10 666

10 939

11 467

Imports

15 370

15 645

15 938

16 804

16 681

1997

1998

1999

2000

2001

(53)

It should however be recalled that the Court of Justice
has held that aid to an undertaking may be such as to
affect
trade between the Member States and 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

(17) Court Judgment in Case C-730/79, Philip Morris Holland BV v

Commission, ECR [1980] 2671, grounds 11 and 12.

in

that
relation

the aid strengthens the position of
companies

(18) Source: Eurostat.
(19) Consistent case law holds that the condition of the effect on trade
is met when the benefiting company carries out an economic
activity which is the subject of trade between the Member States.
this
The simple fact
company
in
other
intra-Community trade makes it possible to consider that 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 Case
C 113/2000, [2002] ECR 7301, grounds 30 to 36 and 54 to 56
and Case C 114/2000, Kingdom of Spain v Commission, [2002] ECR
I-7657, grounds 46 to 52, 68 and 69.

competing

to

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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 (20).

undertakings operating in the production, processing
and marketing of Annex I agricultural products, by
reducing their normal transport costs, as in this case,
the measure must be evaluated on the basis of State aid
rules applicable to agriculture.

(54)

The Commission therefore concludes that the measures
are caught by the prohibition in Article 87(1) of the
Treaty.

(55)

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

is

followed by

(56)

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 Article 87(2)(a),
is
applicable.

(b) or (c)

(61) Moreover

in the

the measure which,

case under
examination, provides for aid to reduce transport costs
of Annex I agricultural products outside Sicily does not
manifestly appear intended to promote the development
of areas where the standard of living is abnormally low
or where there is serious underemployment, nor have
the Sicilian authorities provided any demonstration in
this respect or shown the link between the aids that
they intend to grant and the development of areas
where the standard of
living is abnormally low or
where there is serious underemployment.

(57) 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.

(62)

particular

Furthermore the last indent of point 2.6 of Commission
it does not
Communication 94/C 364/08 states that
instead
apply to Annex I agricultural products but
concerns
This
regions.
Communication is therefore manifestly inapplicable to
the aid for the transport of agricultural products outside
Sicily, as are the guidelines on national regional aids in
which the rules on aids
to compensate for extra
transport costs in specific regions (23) have been later
incorporated.

European

(58)

(59)

(60)

The Commission must however consider that in their
written comments submitted in a meeting the Sicilian
authorities said that Article 1 of Law No 33/96 was a
regional aid within the meaning of Article 87(3)(a) of
the Treaty and should be examined in the light of point
2.6 of the Commission Communication 94/C 364/08.

In this respect reference is made to point 3.7 of the
guidelines applicable to State aid to agriculture (21)
which states that, because the very specific conditions of
agricultural production must be taken into account
during the assessment of aid which is intended to favour
the less-favoured regions, the Commission's guidelines
regional aid (22) do not apply to the
on national
agricultural
to the
sector. Where they are relevant
agricultural sector, regional policy considerations have
been incorporated into the Community guidelines for
State aid to the agriculture sector.

In the light of the above,
Regional

Law No

33/96

in so far as Article 1 of
to

provides

aid

for

(20) Case 102/87 French Republic v Commission ECR [1988] I-4067.
(21) OJ C 28, 1.2.2000, p. 2. As corrected in OJ C 232, 12.8.2000,

p. 17.

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

(63)

It follows that the derogation provided for by Article
87(3)(a) of the Treaty is therefore inapplicable to the
measures under examination.

(64) 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.

(23) See Amendments to the guidelines on national regional aid (OJ
C 258, 9.9.2000, p. 5). Point 4.16.1 states ‘In the outermost
regions qualifying for exemption under Article 87(3)(a) and (c) of
the Treaty, and in the regions of low population density qualifying
for exemption either under Article 87(3)(a) or under 87(3)(c) on
the basis of the population density test referred to at point 3.10.4,
aid which is not both progressively reduced and limited in time
and is intended to offset in part additional transport costs may be
authorised under special conditions. It is the task of the Member
State to prove that such additional costs exist and to determine
their amount'.

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(65)

(66)

The Commission must however consider that the Italian
authorities have also invoked Article 87(3)(b) to claim
that Article 1 of Regional Law No 33/96 is compatible
with the Treaty. In this respect the Commission notes
that the Italian authorities have failed to indicate which
important project of common European interest the aid
would promote or which serious disturbance in Italy's
economy the aid would remedy.

The competent authorities have vaguely indicated that
the aid is aimed at promoting intermodal transport in
compliance with Community Directive 92/106/EEC; this
cannot be considered an important project of common
European interest within the meaning of Article 87(3)(b)
of the Treaty, however. Moreover the aid provided for in
Article 1 is granted to the beneficiaries for any type of
transport they intend to use and the Italian authorities
have not demonstrated the link between the aid that
they intend to grant and the execution of any important
project of common European interest.

(67)

This aid is not
achieving the objectives referred to in Article 87(3)(d).

intended to achieve or suitable for

of Article 1(f) of Council Regulation (EC) No 659/1999
laying down detailed rules for the application of Article
93 of the Treaty (25) will be assessed in accordance with
the rules and guidelines in force at the time the aid is
granted.

(71) On the basis of the information available, Regional Law
No 33/96 was notified to the Commission and its
Article 63 provides for a suspensory clause which
makes the implementation of the State aid measures
contained in the Law conditional upon their approval
by the Commission (26).

(72)

By means of telex AGR 029182 of 20 November 2000,
the Commission asked the competent authorities to
state whether aid had already been granted to Annex I
agricultural products based on provisions in respect of
which the Commission had decided to open a formal
investigation. The Commission also indicated that, if the
Italian authorities could state that they had not granted
the aid to the agricultural sector on the basis of the
abovementioned
committed
themselves to repealing the relevant legal provisions in
so far as they applied to the agricultural sector, they
were invited to consider the option of withdrawing the
notification under examination.

provisions

and

had

(68)

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.

(73)

any

information

The Italian authorities have not replied to this question.
Without
the
Commission is therefore entitled to assume that the aid
concerned has not yet been put
into effect. Their
examination therefore falls within the scope of the new
Guidelines (27).

contrary

the

to

Applicable provisions

(69)

The applicability of the derogation referred to in Article
87(3)(c) of the Treaty must be assessed in the light of
the provisions applicable to the grant of State aid in the
agriculture sector, namely the Community guidelines for
State aid in the agriculture sector (24) (hereinafter ‘the
guidelines').

(74)

Article 1 provides for aid for the extra costs incurred by
undertakings operating in Sicily for
transport
the goods produced and/or
outside the Region of

the

Article 1 of Regional Law No 33/96

(70) Under point 23.3 of the guidelines, the Commission 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

(25) OJ L 83, 27.3.1999, p. 1.
(26) Article 63 (EC control procedure)

in this

reads:
law shall be subject

‘1. The assistance
to the applicable
provided for
Community rules on State aid, and to the conclusion of
the
procedures laid down in Article 93(2) and (3) of the Treaty. 2.
Any suspension of a provision as a result of the procedure laid
down in Article 93 of
the Treaty shall not prejudice the
implementation of the other provisions of this law that are not
subject to comment or that have been favourably assessed by the
Commission of the European Communities.'

(24) See footnote 21.

(27) See footnote 21.

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for

sectors

(except

the mining

the undertakings

processed in Sicily. The reason for the aid is the distance
of
from the main national and
European markets. The aid applies to undertakings in all
productive
and
hydroelectric industries which are obliged to operate in
the Region) which use rail, road, maritime and air
transport, or
combined transport, and so to the
transport of agricultural goods. The aid relates to the
period 1997 and 1998. The aid is calculated on the
basis of the kilometres travelled and transported weight,
based on the transport of the goods within Italy. The
calculation of the extra costs is fixed annually by Decree
of the President of the Regional Government, on the
basis of the most economical means of transport and
the most direct connection between the place of
production or processing and the commercial outlets.
The aid for extra costs cannot exceed the real costs
incurred.

(75)

(76)

In its decision to open the procedure with regard to this
aid,
the Commission noted that with regard to the
agricultural sector, the aid was in essence an amended
form of the aid provided for in Article 90 of Regional
the object, under
Law No 25/1993 which was
procedure C 30/95, of
final negative decision
a
requiring the repeal of the measure and the recovery of
any aid paid out (28). The reasons which had led the
Commission to take that decision remain, in substance,
valid (29).

In particular the Commission noted that it regarded this
type of aid as being operating aid which is not
compatible with the common market. This type of aid,
which relieves the recipients of a part of their operating
costs, has no durable or structural effect on the sectors
concerned and it only gives an advantage to Sicilian
products which are marketed outside the region over
products which do not benefit
from a comparable
measure, in Italy or in other Member States.

(77)

The Commisson's assessment of this measure does not
change under the guidelines. In particular, point 3.5 of
the guidelines establishes that in order to be considered
compatible with the common market, any aid measure
must contain some incentive element or require some
the beneficiary. Unless
counterpart on the part of

(28) See footnotes 4 and 5.
(29) See footnote 6.

exceptions are expressly provided for in Community
legislation or in these guidelines, unilateral State aid
measures which are simply intended to improve the
financial situation of producers but which in no way
contribute to the development of
the sector, and in
particular aids which are granted solely on the basis of
price, quantity, unit of production or unit of the means
of production are deemed to be operating aids which
are
common market.
Furthermore, by their very nature, such aids are also
likely to interfere with the mechanisms of the common
organisations of the market.

incompatible with

the

The aid under examination does not contain any
incentive element and does not require any counterpart
on the part of the beneficiary. Neither the guidelines
applicable to State aid to agriculture nor any other
Community rules provide for State aid of this type and
the aid in question is intended merely to improve the
financial situation of producers without contributing in
any way to the sector's development.

located outside Sicily.

to carry their products
In the

In their comments, the Italian authorities said that the
aid was intended to encourage inter-modal
transport
and to improve the transport sector. However, the aid in
question is quite obviously paid to undertakings that use
to
any haulier whatsoever
markets
case under
examination,
these undertakings are involved in the
production, processing and marketing of agricultural
products listed in Annex I to the EC Treaty. The aid
relieves the undertakings of the transport costs for their
goods, which they should normally bear. No evidence
has been provided that the aid is aimed at encouraging
a particular type of transport or that the aid is passed
on to the transport sector. All the comments made by
the competent authorities in respect of the transport
sector and their references to Article 77 (now 73) of the
Treaty are therefore inapplicable to this case and devoid
of any foundation.

Consequently the aid measure provided for in Article 1
of Regional Law No 33/96 in favour of undertakings
involved in the production, processing and/or marketing
of agricultural products under Annex I, both under
previous Commission practice and under the guidelines
aid for
which are
agriculture, provides operating aid to relieve
the
beneficiaries of their transport costs.

applicable

to State

currently

(78)

(79)

(80)

(81)

Since the aid under examination has no incentive
element and does not require any counterpart on the
the beneficiary, and since Sicily is not an
part of
outermost region where operating aid could be allowed

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under point 16 of the current Community guidelines,
no justification can be given under State aid rules
applicable to agriculture to the aid under examination,
which is simply operating aid intended to relieve the
beneficiaries of their transport costs.

(87)

(82) As such this aid cannot benefit from a derogation under
Article 87(3)(c) of the Treaty. As demonstrated above,
the aid cannot even benefit from a derogation under
Article 87(3)(a) or (b) or from any other derogation
provided for by the Treaty. This aid is therefore to be
considered incompatible with the common market and
cannot be implemented.

comments on this measure
indicated firstly that

Italian
the
In their
authorities
the aids concerned
could not be cumulated with other national or regional
aids and could be granted at the rate of 80 % of the
documented expenditure up to a maximum of
ITL
1 000 million (or ITL 1 200 million for the structures of
second-degree consortia). Moreover, according to the
competent authorities, the way in which the 80 % rate
was
the
calculated
Commission in that
the regional measure related to
documented expenditure on a maximum volume of
expenditure, whereas the 75 % maximum applied by the
Commission related to the cost of the investment.

differed from that used by

(83)

(84)

Article 10 of Regional Law No 33/96

This Article extends the provisions of Articles 51, 52,
53 and 54 of Regional Law No 3/86 to consortia made
up of agricultural, craft and commercial undertakings
which are active in the production, processing and
marketing of plants and flowers. According to the
information provided by the competent authorities by
letter of 3 June 1996, the aid measures concerned are of
unlimited duration.

The aid on which the Commission had decided to open
the procedure is the one provided for by Article 10, in
so far as it refers back to Article 53(c) of Regional Law
No 3/86. This aid, which concerns the creation of
common structures, can be granted at a rate of 80 % to
subsidise the following eligible expenditure: purchase of
land, construction of the necessary buildings, purchase
and conversion of existing buildings and the acquisition
of
the
cooperatives need in order to operate.

any other

structure

essential

fixed

that

(85)

In the sector concerned, according to the provisions
which were applicable at the time (30), national aid had
limits referred to in the
to conform to the sectoral
second and third indents of point 1.2 of the Annex to
Commission Decision 94/173/EEC and the aid intensity
could not exceed 75 % of
the investment costs in
Objective 1 regions such as Sicily.

(86)

the regional measure under
The rate planned for
examination was 80 % and no information was provided
enabling compliance with the applicable sectoral limits
to be checked.

(88)

(89)

(90)

By letter dated 28 June 2001, the competent authorities
indicated that the aid rate laid down in Article 33(1)(c)
of Law No 3/86 had been reduced by Article 51 of Law
No 32/2000 to 50 % on a maximum volume of
expenditure of ITL 1 000 million (1 200 million for the
structures of second-degree consortia). They also said
that the aid was granted for the production, processing
and that
and marketing of plants
admissible expenditure covered the purchase of
land
and the cost of building immovable property and the
cost of buying of existing buildings, their conversion
and adaptation. Since Article 10 of Regional Law 33/96
refers back to Article 53 of Law 3/86 (and not
to
Article 33 of this law),
it is not at all clear that the
measures to which the reduction refers are indeed
Article 53 of Law 3/86 and Article 10 of Law 33/96.

and flowers,

information however

This
the
assessment made by the Commission in its decision to
open the procedure on the aid measure concerned.

does not

change

For the reasons which are set out below, this measure of
unlimited duration cannot be deemed compatible with
the State aid rules on investment aid for the production,
processing and marketing of Annex I agricultural
products which are applicable from 1 January 2000 and
which are set out
the
Community guidelines on State aid in the agriculture
sector (31).

in points 4.1 and 4.2 of

(91) With regard to the aids for processing and marketing,
those guidelines stipulate that, as a general rule, aid
granted to support investments in connection with the
processing and marketing of agricultural products may
be
be
demonstrated to be economically viable, based on an

enterprises which

granted

only

can

to

(30) See footnote 7.

(31) See footnote 21.

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and

regarding

assessment of their prospects (32), and which comply
with minimum standards regarding the environment,
hygiene
animal welfare. However, where
investments are made in order to comply with newly
introduced minimum standards
the
environment, hygiene or animal welfare, aid may be
granted in order to achieve these new standards. The aid
rate may not exceed 50 % of eligible investments in
Objective 1 regions and 40 % in the other regions.
construction,
Eligible
immovable property,
improvement of
acquisition or
new machinery and equipment,
including computer
software, general costs, such as architects, engineers and
consultation fees, feasibility studies and the acquisition
of patents and licences, up to 12 % of the expenditure
referred to above.

expenditure may include

the

the types of

(92) No aid may be granted unless sufficient evidence can be
produced that normal market outlets for the products
concerned can be found. To this end the products
investment and existing and
concerned,
expected capacities must
assessed to an
appropriate degree. To this end, any restrictions on
production or limitations of Community support under
the common market organisations must be taken into
account.
In particular no aid may be granted in
contravention of any prohibitions or restrictions laid
down in the common organisations of the market.

all be

(93) Although, as is the case for 2000, the aid rate may have
been reduced to 50 %, the aid provided for in Article 10
of Regional Law No 33/96 does not comply with any of
the other
in the preceding
paragraphs.
there is no evidence that
normal market outlets for the products concerned have
been found. Moreover the conditions of viability and
minimum standards regarding the environment, hygiene
and animal welfare are not met. As regards the eligible
expenditure, the purchase of land cannot be authorised.

conditions
In particular,

set out

(94) With regard to the aid for primary production governed
by point 4.1 of the Guidelines, subject to the exceptions
provided for in point 4.1.2, which in the case under
examination do not apply, the maximum rate of public
support, expressed as a percentage of the volume of
eligible investment is limited to a maximum of 40 %, or
50 % in the less-favoured areas, as defined in Article 17
of Council Regulation (EC) No 1257/1999 on support
for rural development from the European Agricultural

(32) Aid cannot be granted to undertakings in financial difficulties
except where such aid satisfies the conditions laid down in the
Community guidelines on State aid for rescuing and restructuring
firms in difficulty.

Guidance and Guarantee Fund (EAGGF) and amending
and repealing certain Regulations (33).
In the case of
investments made by young farmers within five years of
setting-up,
the maximum rate of aid is increased to
45 %, or 55 % in the less-favoured areas.

adequate occupational

(95) Aid for investments may only be granted to agricultural
holdings whose economic viability can be demonstrated
by an assessment of their prospects (34), and where the
farmer possesses
and
competence. The holding must comply with minimum
Community
environment,
hygiene
animal welfare. However, where
investments are made in order to comply with newly
introduced minimum standards
the
environment, hygiene or animal welfare, aid may be
granted in order to achieve these new standards.

standards

regarding

regarding

skill

and

the

(96) No aid may be granted for investment having as its
objective increased production for which normal market
outlets cannot be found. The existence of normal
market outlets should be assessed appropriately in terms
of the products concerned, the types of investment and
existing and expected capacities. Any restrictions on
production or limitations of Community support under
the common market organisations must be taken into
account. Where, under a common market organisation,
restrictions on production or limitations of Community
support exist at the level of individual farmers, holdings
or processing plants, no aid may be granted for
investment which would increase production beyond
these restrictions or limitations.

(97)

expenditure may include

Eligible
construction,
immovable property,
acquisition or
new machinery and equipment (35), including computer

improvement of

the

(33) OJ L 160, 26.6.1999, p. 80.
(34) See footnote 32.
(35) The purchase of

second-hand equipment

can be deemed
the following four

admissible in duly justified cases
conditions are also met:
(a) a declaration from the seller stating the precise origin of the
equipment and confirming that it has not previously benefited
from a national or Community contribution;

if all

(b) the purchase of such equipment must be of particular benefit
to the programme or project or be imposed by exceptional
circumstances (new equipment not available or only after a
long waiting period, so threatening the proper implementation
of the project);

(c) it must produce a reduction in the associated costs (and so the
amount of aid) relative to the cost of that equipment if bought
new, so maintaining a good cost/benefit ratio for the operation;
(d) the technical and/or technological features of the equipment

must meet the demands of the project.

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software, general costs, such as architects, engineers and
consultation fees, feasibility studies, the acquisition of
the expenditure
patents and licences, up to 12 % of
referred to above, and land purchase,
including legal
fees, taxes and land registration costs. The maximum
eligible expenses may not exceed the limits for total
investment set by the Member State in accordance with
Article 7 of Regulation (EC) No 1257/1999.

(98)

(99)

(100)

by

analogy

The Commission also applies the rules set out in this
section
primary
agricultural production which are not made by farmers,
for example where equipment is purchased for shared
use by producer associations.

investments

to

in

The aid provided for by Article 10 does not satisfy the
rules currently applicable to investment aid for primary
production. Although, as it would appear, the aid rate
may have been reduced in 2000 to 50 %, this does not
mean that aid is not granted for investment having as
its objective increased production for which normal
market outlets
the
conditions of viability, adequate occupational skills and
competence and compliance with minimum Community
standards
and
animal welfare are not met.

environment, hygiene

found. Moreover,

regarding the

cannot be

In the light of the above assessment, the grant of aid
provided for by Article 10 of Regional Law No 33/96 in
so far as it refers back to Article 53(c) of Regional Law
No 3/86 does not comply with the State aid rules for
investments
and
marketing of Annex I agricultural products. As such this
from the derogation provided by
aid cannot benefit
Article 87(3)(c) of the Treaty. This aid is therefore to be
considered incompatible with the common market and
cannot be implemented.

production,

processing

the

in

covered by the subsidy. The budget for the measure
amounted to ITL 2 500 million. As stated in paragraph
(2) above, this Decision covers only the aid measures in
favour of Annex I agricultural products.

(102) The Commission noted in its decision to open the
procedure that the maximum aid rates provided for in
the national law (55 %, 65 % for farming cooperatives)
had to be coordinated with the aid rates and the rules in
force
the production or
aid for
processing and marketing of agricultural products.

investment

for

(103) At the time of the opening of the procedure, as set out
in the letter to Italy, the rules applicable to this type of
aid required:

(a) compliance with the applicable maximum rates in
the agricultural sector (cumulating any aid, subsidy
and/or interest rebate). These were respectively:

(i)

in the primary production sector (investments
falling within Article 12(5) of Regulation (EEC)
No 2328/91): 35 %, or 45 % in the less-favoured
areas within
of Directive
the meaning
75/268/EEC;

(ii)

in the processing and marketing sector: 55 %
(75 % in the Objective 1 regions).

(b)

limits
in both cases, compliance with the sectoral
laid down in Regulation (EEC) No 2328/91 for
the Community
primary
and
production
guidelines on State aid for
in the
processing and marketing of agricultural products as
referred in to the Annex to Commission Decision
94/173/EEC.

investments

in

Article 19 of Regional Law No 33/96

(101) This Article provides for subsidies up to 80 % for the
construction on farms of facilities for the production of
electric, thermal or mechanical energy from renewable
resources. In particular it provides for an increase in the
aid rate laid down in Article 12(1) of National Law No
308/82 and in Article 13(1) of National Law No 10/91,
for which the maximum limit
is 55 % (65 % for
cooperatives). The capital subsidy can be cumulated
with a subsidised loan covering the investment costs not

(104) The Italian authorities offered no assurances as regards
compliance with the above conditions. The measure
under examination does not therefore satisfy any of the
rules which were applicable to investment aid for the
production, processing and/or marketing of Annex I
agricultural products.

(105) The measure does not even satisfy the rules which
currently apply to investment aid for the production,
processing and/or marketing of Annex I agricultural
the
products, as set out at points 4.1 and 4.2 of
guidelines.

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(106) Although the measure introduces aid to construct
on-farm facilities for the production of electric, thermal
or mechanical energy from renewable resources, and is
therefore an aid within the meaning of point 4.1 of the
guidelines (and to which point 4.3 refers), it will also be
assessed, as was done at the time of the opening of the
procedure, on the basis of the rules which are currently
applicable to the processing and marketing of Annex I
agricultural products.

adequate occupational

(109) Aid for investment may be granted only to agricultural
holdings whose economic viability can be demonstrated
by an assessment of their prospects (36), and where the
farmer possesses
and
competence. The holding must comply with minimum
environment,
Community
hygiene
animal welfare. However, where
investments are made in order to comply with newly
introduced minimum standards
the
environment, hygiene or animal welfare, aid may be
granted in order to achieve these new standards.

standards

regarding

regarding

skill

and

the

In particular,

(107) The rules applicable to investment aid for processing
and marketing were outlined above in the context of the
assessment of the aid provided for by Article 10 of
Regional Law No 33/96. Like the aid provided for by
Article 10, the aid provided for by Article 19 does not
satisfy these rules either.
there is no
evidence of normal market outlets for the products
concerned. The aid rate of up to 80 % well exceeds the
50 % aid rate allowed by the guidelines. Since the aid is
not granted within the framework of a regional aid
scheme which has previously been approved by the
Commission in accordance with the Community
guidelines on national regional aid, the aid cannot even
be granted up to a possibly higher rate which was
approved under that scheme. Moreover the conditions
regarding the
of viability and minimum standards
environment, hygiene and animal welfare are not met.

(110) No aid may be granted for investments having as their
objective increased production for which normal market
outlets cannot be found. The existence of normal
market outlets should be assessed appropriately in terms
of the products concerned, the types of investment and
existing and expected capacities. Any restrictions on
production or limitations of Community support under
the common market organisations must be taken into
account. Where, under a common market organisation,
restrictions on production or limitations of Community
support exist at the level of individual farmers, holdings
or processing plants, no aid may be granted for
investment which would increase production beyond
these restrictions or limitations.

(108) According to the rules set out at point 4.1 of

in point 4.1.2,

the
guidelines which apply to investment aid for primary
production and for diversification at farm level, subject
the
to the exceptions provided for
maximum rate of public support, expressed as a volume
of eligible investment, is limited to a maximum of 40 %,
or 50 % in the less-favoured areas as defined in Article
17 of Regulation (EC) No 1257/1999. However, in the
case of investments made by young farmers within five
years of setting-up, the maximum aid rate is increased
to 45 %, or 55 % in the less-favoured areas. Under point
4.1.2, where investments result in extra costs relating to
the protection and improvement of the environment,
livestock
the improvement of hygiene conditions of
enterprises or
the
maximum aid rates of 40 %, or 50 % under point
4.1.1.2 may be increased by 20 or 25 percentage points
respectively. This increase may be granted only for
investments which
the minimum
Community requirements in force. The increase must be
strictly confined to the extra eligible costs necessary to
meet the objective in question and does not apply to
investments which increase production capacity.

the welfare of

farm animals,

beyond

go

(111) Eligible

the

improvement of

expenditure may include

construction,
acquisition or
immovable property,
new machinery and equipment (37), including computer
software, general costs, such as architects', engineers'
and consultants' fees, feasibility studies, the acquisition
of patents and licences, up to 12 % of the expenditure
referred to above, and land purchase,
including legal
fees, taxes and land registration costs. The maximum
eligible expenses may not exceed the limits for total
investment set by the Member State in accordance with
Article 7 of Regulation (EC) No 1257/1999.

by

(112) The Commission also applies the rules set out in this
section
primary
to
agricultural production which are not made by farmers,
for example where equipment is purchased for shared
use by producer groups.

investments

analogy

in

(36) See footnote 32.
(37) See footnote 35.

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be

aid

The

found.

rate, which

there are no guarantees
investments having as

(113) The aids provided for by Article 19 do not satisfy the
rules currently applicable to investment aid for primary
farm level.
production and for diversification at
In
that aid is not
particular,
granted for
their objective
increased production for which normal market outlets
cannot
can
unconditionally reach 80 %, exceeds the maximum rates
allowed by the Guidelines,
i.e. 40 % (or 50 % in the
less-favoured areas
as defined by Article 17 of
Regulation (EC) No 1257/1999); or 45 % (55 % in the
less favoured areas) if the investments are carried out by
young farmers within five years of setting-up; or 60 %
(75 % in less-favoured areas) if the investments include
extra costs attributed to the protection or improvement
improvement of hygiene
of
livestock enterprises or the welfare of
conditions of
farm animals,
in accordance with the conditions laid
down in point 4.1.2.4 of the guidelines. Moreover, the
conditions of viability, adequate vocational skills and
compliance with the minimum
competence
standards
and
environment, hygiene
animal welfare are not met.

regarding the

environment,

and

the

the

(114)

In the light of the above assessment, the grant of aid
provided for by Article 19 of Regional Law No 33/96
does not comply with the State aid rules for
the
production, processing and marketing of Annex I
agricultural products. As such this aid cannot benefit
from the derogation provided by Article 87(3)(c) of the
Treaty. This
considered
incompatible with the common market and cannot be
implemented.

therefore

to be

aid

is

Article 17 of Regional Law No 33/96

for which an appropriation of

(115) Article 17 of Regional Law No 33/96 allows the Region
to advance the amounts due from the State as assistance
from the national solidarity Fund to compensate for the
damage caused by a natural disaster (National Law No
185/92). The aid measure provided for by Article 17 is
limited to 1996,
ITL
20 000 million is earmarked (see letter of 3 June 1996).
The aid consists of subsidies to enable farmers to restore
their working capital
(capitale di conduzione) and
structures on the
for
subsidies
holdings which were damaged by the natural events
concerned. The beneficiaries are independent
farmers
who suffered damage to more than 35 % of their gross
saleable production due to the temperature fluctuations
and flooding that occurred in 1996.

the restoration of

(116) The aid provided for in Article 17 can be cumulated

within the limits allowed by National Law No 185/92.

(117)

In its decision to open the formal procedure against the
aid provided for by Article 17, the Commission noted
that the above assistance had to be examined in the
light of the criteria applied by the Commission at the
time to national aid to compensate for the damage
caused by natural disasters (38). According to these
criteria, the following two conditions had to be met:

(a)

the losses suffered by the aid recipients had to reach
30 % of their normal production (or 20 % in the
less-favoured areas within the meaning of Directive
75/268/EEC) calculated on the basis of production
in the preceding three years;

(b) any possibility of over-compensating the losses

incurred had to be excluded.

texts

restricted

submitted

themselves

(118) The Commission noted in its Decision that, in the case
under examination, the information abialable made it
impossible to conclude that both these conditions were
met. With regard to Article 17, which transposes and
incorporates national legislation on natural disasters, the
regional
to
referring to the provisions of National Law No 185/92
and its implementing arrangements,
including a letter
from the Ministry of Agriculture (A1659 of 2 July 1996)
which indicated that the aid could not exceed 100 % of
the damage. At the time the procedure on the aid under
examination was opened, National Law No 185/92 was
also the subject of a decision to initiate the procedure
provided for in Article 88(2) of the Treaty, by virtue of
the fact that it was impossible to check compliance with
the conditions referred to in point 117(a) and (b)
above (39). Consequently,
in the absence of specific
assurances regarding compliance at the regional
level
with those conditions, the Commission noted that the
same conclusions were also inevitable in the case under
examination.

(119)

law nor

the regional

In particular, the Commission had pointed out, firstly,
that neither
the information
submitted in respect of
this case file indicated how
‘normal' production used as the reference for fixing the
calculated.
minimum compensation threshold was
Secondly, doubts remained as regards the condition
regarding excess compensation.

(38) See footnote 8.
(39) Aid C 12/95 (OJ C 295, 10.11.1995, p. 5).

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(120)

the

indicated that,

the procedure,

the opening of

In their comments on Article 17, which they submitted
after
Italian
authorities
to calculate the ‘normal'
production which they used to determine the 35 % loss
required by National Law No 185/92, they had analysed
the data sent by the provincial inspection offices to the
National Statistics Institute (ISTAT) over the last 10
years. In order to establish correct reference averages for
each province,
the production data considered were
only those for years when no adverse weather events
the
had occurred. As regards non-overcompensation,
competent authorities stressed that, under the Ministry's
note A/1659 of 2 July 1996, the aid could not exceed
100 % of
the damage suffered by the beneficiary.
Although the aid provided for by Article 17 could be
cumulated with that provided for by Article 13(2) of
in compliance with the above mentioned
Law 33/96,
Ministerial
the total aid could therefore
instructions,
never exceed the amount of the losses suffered by the
beneficiary.

the damage that

or drought cannot of themselves be regarded as natural
disasters within the meaning of Article 87(2)(b) of the
such
Treaty. However, because of
events may cause to agricultural production or
the
means of agricultural production, the Commission has
accepted that such events may be likened to natural
disasters once the level of damage reaches a certain
threshold, which has been fixed at 20 % of normal
production in the less-favoured areas and 30 % in other
areas. Because of the inherent variability of agricultural
production, the maintenance of such a threshold also
appears necessary to ensure that weather conditions
may not be used as a pretext
the payment of
for
operating aid.
In order to enable the Commission to
assess such aid schemes, notifications of aid measures to
compensate for damage caused by adverse weather
conditions
supporting
meteorological information.

appropriate

include

should

(123) Where damage occurs to annual crops the relevant loss
threshold of 20 % or 30 % should be determined on the
basis of the gross production of the relevant crop in the
in question compared with the gross annual
year
production in a normal year.
In principle the gross
production in a normal year should be calculated by
to the average gross production in the
reference
previous
in which
three years, excluding any year
compensation was payable as a result of other adverse
weather conditions. The Commission will however
accept alternative methods of calculation of normal
production,
values,
provided it is satisfied that these are representative and
not based on abnormally high yields. Once the volume
of lost production has been determined, the amount of
In order to avoid
aid payable should be calculated.
over-compensation, the amount of aid payable should
not exceed the average level of production during the
normal period multiplied by the average price in the
same period, minus actual production in the year the
event took place, multiplied by the average price for
that year. The amount of aid should also be reduced by
the amount of any direct aid payments.

including

reference

regional

(124) As a general rule,

the calculation of

loss should be
made for each individual holding. This is particularly
the case where aid is paid to compensate for damage
caused by localised events. However, where the adverse
weather conditions have affected a wide area in the
aid
same way,
payments are based on average losses, provided that
these are representative and will not result in significant
overcompensation of any beneficiary.

the Commission will

accept

that

(121) At the time of the notification of the aid and of the
decision to open the procedure, these types of aid were
assessed on the basis of the Rules governing the grant
of national aids in the event of damage to agricultural
production or the means of agricultural production and
national aids involving the defraying of a proportion of
the insurance premiums covering such risks (40).
In
accordance with these rules and constant Commission
practice, weather events such as ice, hail, frost, rain or
drought could be deemed natural disasters within the
meaning of the Treaty if the damage suffered by an
individual aid beneficiary reached a particular threshold,
set at 30 % of normal production (20 % in the
less-favoured areas) based on the total gross quantity of
in question on an
production affected by the event
to
an allowance
for
individual holding
compensate
the
suffered
corresponding normal gross annual production. That
rate had to be determined by comparing average normal
production recorded objectively
each holding
three years
concerned during a reference period of
preceding that of the event in question, disregarding,
where appropriate, a previous year which also gave rise
to compensation on the same grounds, against
the
reduced or destroyed production under consideration.

applying
losses

and

for

for

on

(122) The rules which are currently applicable to make good
events are
the damages caused by these weather
contained in point 11.3 of the guidelines. According to
these rules the Commission has consistently held that
adverse weather conditions such as frost, hail, ice, rain

(40) See footnote 8.

(125)

In the case of damage to the means of production the
effects of which are felt over several years (for example

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the partial destruction of orchard crops by frost), for the
first harvest following the adverse event the percentage
real loss in comparison with a normal year, determined
in accordance with the principles set out in the previous
paragraphs, must exceed 10 % and the percentage real
in which
loss multiplied by the number of years
production is lost must exceed 20 % in the less-favoured
areas and 30 % in other areas.

(126) The Commission applies the principles set out above by
analogy in the case of aids to compensate for losses to
livestock caused by adverse weather conditions.

(127)

In order to avoid over-compensation, the amount of aid
paid should be reduced by any amount received under
schemes. Furthermore, normal costs not
insurance
incurred by the farmer,
the
non-harvesting of the crop, should also be taken into
account. However, where such costs are increased as a
result of the adverse weather conditions, additional aid
may be granted to cover these costs.

for example because of

(128) Aid to compensate farmers for damage to buildings and
equipment
(for
caused by adverse weather
example damage to glasshouses caused by hail) will be
accepted up to 100 % of actual costs, without any
minimum threshold being applied. As a general rule,
only farmers, or the producers' association of which
they are members, are entitled to the aid described in
this section. The aid must not exceed in this case the
farmer's actual loss.

events

(129)

In their notification and in the comments subsequently
submitted, the competent authorities indicated that the
beneficiaries are independent farmers who have incurred
damage to more than 35 % of
their gross saleable
production due to the temperature fluctuations and
flooding that occurred in 1996. According to the
notification, Article 17 of Regional Law No 33/96
allows the Region to advance the amounts due from the
State as assistance from the national solidarity Fund to
compensate for the damage caused by a natural disaster
(National Law No 185/92). The aid consists of subsidies
to restore their working capital
to enable farmers
(capitale di conduzione) and subsidies for the restoration
of structures in the holdings which were damaged by
the natural events concerned. The aid measure provided
for by Article 17 was limited to 1996, for which an
appropriation of ITL 20 000 million was planned.

detailed

following

assessment,

(130) The Commission has recently concluded its examination
of the compensatory aids granted by Italy on the basis
of National Law No 185/92 until 31 December 1999 to
make good the damage caused by natural disasters and
In this
adverse weather conditions (Aid C 12/A/95).
the
a
decision,
Commission found these aids to be compatible with the
common market.
the Commission
concluded that the method for calculating the losses
proposed by the competent authorities was acceptable,
that the weather events for which the Law provided
compensation following a loss of 35 % of
the gross
saleable production were compatible with Community
rules and that no overcompensation could arise from
the cumulation of the different types of aids to make
good the damage caused by natural disasters and
comparable weather events.

particular

In

that date (41),

(131) Although that Decision regarding National Law No
185/92 covers only the aid granted up to 31 December
1999, and was adopted on the basis of the State aid
rules for aid to make good the damage caused by
natural disasters and comparable weather events which
the Commission
were applicable until
expressed a favourable opinion both on the criteria used
to establish that certain exceptional weather events were
comparable to natural disasters and on the method for
calculating the losses suffered by the beneficiaries which
were applied by the Italian authorities when the adverse
weather events governed by Article 17 took place
(1996). Since Article 17 merely anticipates financially
the aid provided for by National Law No 185/92 and
the competent authorities expressly referred to the
provisions of that law and its implementing rules for
the grant of the aids under examination, there is no
reason to reach a different conclusion in this case.
Moreover, regarding the risk of overcompensation, the
competent authorities in their comments have provided
sufficient assurances that, even when cumulated with
other public aid, the aid could never exceed the amount
of the losses suffered by the beneficiary.

(132) Furthermore, it must be considered that, regarding the
application of National Law No 185/92 from 1 January
2000, i.e. from the entry into force of the new State aid
rules applicable to compensation to farmers for damages
caused by natural disasters and adverse weather events,
the Italian authorities, in the context of another dossier
(aid C 12/B/95), by letters of 20 November 2000 and

(41) See footnote 8.

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21 November 2003, registered on 24 November 2003
(and as supplemented by the fax of 25 November
2003), supplied detailed information that demonstrates
that the aid granted by them under National Law No
185/92 continues to satisfy State aid rules as they are
the Community
now reproduced in point 11 of
guidelines on State aid to the Agriculture sector and as
they were reported above.

(b) the minimum damage threshold for obtaining aid is
35 % (and not 30 % or 20 % as required by the
guidelines) of the affected crop and of the holding's
gross marketable production. The affected holding's
average normal production is
calculated on a
three-year basis, taking ‘normal crop years' as the
reference, i.e. years in which there were no disasters
or excessively good harvests;

(133)

In particular, in their letters of 20 November 2000 and
21 November 2003 the
gave
assurances that:

Italian authorities

(a)

the aid is granted only after a Decree declaring the
exceptionality of
the weather event concerned is
issued by the Ministry of Agriculture following the
verification of the data contained in the technical
reports made by the provincial public inspection
services
agriculture which are
submitted to it by the regions. These reports, which
are drafted on a case-by-case basis after the event
information for
concerned, contain the technical
evaluating the exceptionality of the weather event
(including the relevant meteorological
information)
and for quantifying the resulting damages (42);

competent

for

event

issues

technical

concerned,

since 1 January 2000,

a Decree which declares

(42) Article 2 of Law No 185/92 provides that, once the regions have
established, on the basis of
reports made by the
provincial public inspection services competent for agriculture, the
areas which were hit by the natural disaster or by the comparable
exceptional adverse weather event and have assessed the damages,
the Ministry of Agriculture, following verification of the effects of
the
the
exceptional nature of the event and allows the grant of aid in
favour of the affected undertakings which suffered damages equal
at least to 35 % of their gross marketable production. According
to the information provided by the competent authorities in their
letter of November 2003 regarding the aid paid for natural
disasters and comparable events
the
technical information for evaluating the exceptional nature of each
weather event concerned (including the relevant meteorological
information) and for quantifying the resulting damages are
contained in specific technical reports which are drafted by the
provincial public inspection services competent for agriculture, on
a case-by-case basis, after the event concerned. For each weather
event, or group of weather events, which have resulted in damage
equal at least to 35 % of the gross marketable production of the
affected undertakings, after verification of
the above regional
inspection reports, the Ministry of Agriculture issues a Decree
declaring the exceptional nature of the event concerned. As an
example of the procedure described and of the data on the basis
of which the exceptionality of a weather event is declared, the
national authorities sent a dossier regarding drought
in Sicily
(Agrigento) in the years 2001/2002. Each Decree issued by the
Ministry of Agriculture contains: a description of the exceptional
weather event concerned, the period during which the event took
place, the affected area and the type of aids provided for by Law
No 185/92 which could be granted.

(c)

the aid is paid only in relation to the loss suffered
by the crop which reported a loss not lower than
35 %;
the losses concerning insured crops are
excluded from the calculation of the aid and the
normal costs not
for
example because of the non-harvesting of the crop,
are also taken into account;

incurred by the farmer,

(d) overcompensation from the

cumulation of

the

different types of aids is excluded.

(134)

In the light of the above considerations it may therefore
be concluded that the aid provided for by Article 17 of
Regional Law No 33/96 to make good the damage
caused by adverse weather events, which refers back to
the conditions contained in National Law No 185/92, is
compatible with the common market and may therefore
benefit from the derogation set for these types of aids
by Article 87(3)(c) of the Treaty.

VI. CONCLUSIONS

(135)

In view of the above considerations, the aid measures
provided for by Article 1 of Regional Law No 33/96 to
reduce the transport costs of undertakings involved in
the production, processing or marketing of Annex I
agricultural products cannot benefit from any of the
derogations to Article 87(1) provided for by the Treaty
and are
therefore incompatible with the common
market.

(136) The aid measures provided for by Article 10 (in so far as
it refers back to Article 53(c) of Regional Law No 3/86)
and by Article 19 of Regional Law No 33/96 to support
investments in favour of undertakings involved in the
production, processing or marketing of Annex I
agricultural products cannot benefit from any of the
derogations to Article 87(1) provided for by the Treaty
therefore incompatible with the common
and are
market.

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(137) The aid measure provided for by Article 17 of Regional
Law No 33/96 concerning the grant of aid for damages
caused by adverse weather events similar to natural
disasters
considered compatible with the
common market in accordance with Article 87(3)(c) of
the Treaty as aid designed to make good the damage
caused by events similar to natural disasters.

can be

(138) The aid measure provided for by Article 13(2) and (3)
does not constitute State aid within the meaning of
Article 87(1) of the Treaty.

(139) Under Article 63 of Regional

Law No 33/96,
implementation of the State aid measures provided for
in the Law itself is conditional upon their approval by
the Commission. Without evidence to the contrary, the
Commission is therefore entitled to conclude that the
aids have not yet been granted and that therefore, where
incompatible, they must not be implemented.

HAS ADOPTED THIS DECISION:

Article 1

The State aids which Italy is planning to implement in favour
of undertakings involved in the production, processing or
marketing of Annex I agricultural products under Article 1 of
transport costs are
Regional Law No 33/96 to reduce
incompatible with the common market.

The State aids which Italy is planning to implement in favour
of undertakings involved in the production, processing or
marketing of Annex I agricultural products under Article 10
(in so far as it refers back to Article 53(c) of Regional Law No
3/86) and under Article 19 of Regional Law No 33/96 to
support
investments are incompatible with the common
market.

The above aids may accordingly not be implemented.

Article 2

The State aid which Italy is planning to implement in favour of
agricultural undertakings under Article 17 of Regional Law No
33/96 to make good the damages caused by adverse weather
events similar
to natural disasters is compatible with the
common market.

Article 3

The aid which Italy is planning to implement under Article
13(2) and (3) of Regional Law No 33/96 does not constitute
State aid within the meaning of Article 87(1) of the Treaty.

Article 4

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

Article 5

This Decision is addressed to Italy.

Done at Brussels, 16 December 2003.

For the Commission

Franz FISCHLER

Member of the Commission