2005/906/EC: Commission Decision of  16 March 2004  concerning the aid scheme that Italy plans to implement to compensate processing and marketing cooperatives for losses caused by an outbreak of blue tongue — Article 5 of Region of Sardinia Law No 22 of  17 November 2000 (notified under document number C(2004) 471)
Date: 2004-03-16
Institutions: European Commission
Subjects: Sardinia, State aid, agro-industry, animal disease, control of State aid, sheep

16.12.2005

EN

Official Journal of the European Union

L 329/31

COMMISSION

COMMISSION DECISION

of 16 March 2004

concerning the aid scheme that Italy plans to implement to compensate processing and marketing
cooperatives for losses caused by an outbreak of blue tongue — Article 5 of Region of Sardinia Law
No 22 of 17 November 2000

(notified under document number C(2004) 471)

(Only the Italian text is authentic)

(2005/906/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

By letter dated 2 February 2001,
the Commission
informed Italy of its decision to initiate the procedure
provided for in Article 88(2) of the Treaty in respect
of this aid.

Having regard to the Treaty
Community,
and in particular
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

Having called on interested parties to submit their comments
pursuant to the above Article,

Whereas:

I. PROCEDURE

(1)

By letter dated 24 November 2000,
registered on
28 November 2000, the Permanent Representation of
Italy to the European Union notified the Commission,
under Article 88(3) of the Treaty, of Region of Sardinia
Law No 22 concerning measures to enable livestock
farmers
epizootic disease blue
tongue (1), hereafter referred to as ‘Law No 22/2000’.
Article 10 of the Law makes the grant of some aid
conditional
the
procedure provided for in Articles 87 and 88 of the
Treaty.

to cope with the

on Commission

approval

under

(4)

(5)

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (2). The Commission called on the interested parties
to make their comments on the measure in question.

In that same Decision, the Commission approved the aid
measures provided for in Articles 2, 3 and 4 of Law No
22/2000, taking the view that they complied with the
conditions for being considered aid to facilitate the devel-
opment of
activities within the
meaning of Article 87(3)(c) of the Treaty.

certain economic

(6)

The Italian authorities submitted no comments on the
in question. The Commission received no
measures
comments from other interested parties.

(2)

By letter dated 15 December 2000,
registered on
19 December 2000, the Permanent Representation of
Italy to the European Union sent the Commission the
additional
letter dated
13 December 2000.

information requested in a

(1) The Law was approved by the Regional Council of Sardinia on
25 October 2000 and published in the Bollettino ufficiale della
Regione Sardegna (Official Bulletin of
the Region of Sardinia)
No 36 on 25 November 2000.

II. DESCRIPTION

(7)

The aid is based on Article 5 of Region of Sardinia Law
No 22/2000 concerning measures
to compensate
processing and marketing cooperatives for losses caused
by blue tongue.

(2) OJ C 327, 22.11.2001, p. 5.

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(8)

In August 2000, blue tongue broke out in Sardinia and,
despite the measures taken by the authorities, spread
throughout the island. The spread of the disease was
facilitated by climatic conditions (hot, dry weather). In
order to combat the disease, on 28 August 2000 the
Italian health authorities prohibited the movement of
domestic and wild ruminants originating in or coming
from the Region of Sardinia (including sperm, ova and
embryos) to the rest of national territory and to the other
Member States of the EU. A ban was also placed on the
movement of those animals from the Province of Cagliari
to the rest of Sardinia and the veterinary services of other
regions were ordered to carry out clinical checks on all
holdings onto which sheep from Sardinia had been
introduced within the past two months. The regional
authorities then adopted Decree No 34 of 5 September
2000 on emergency measures for the control of blue
tongue (1), which prohibited
from
holdings anywhere in Sardinia of sheep, goats, cattle,
buffaloes and reared animals of wild species. The
insects carrying the
Decree also made the control of
disease
the
Sardinian health authorities adopted the plan to control
and eradicate blue tongue in Sardinia and on 25 October
2000 the Regional Council of Sardinia adopted Law No
22/2000 concerning measures
livestock
farmers to cope with the epizootic disease blue tongue,
which was notified to the Commission for examination
of compliance with Articles 87, 88 and 89 of the Treaty.
The measures provided for in Articles 2, 3 and 4 of Law
No 22/2000 were considered to be compatible with the
common market (2). The Commission decided to initiate
the procedure provided for in Article 88(2) of the Treaty
with regard to the aid provided for in Article 5 of the
Law.

compulsory. On 16 October 2000,

the movement

to enable

(11)

for

granting

common market. These doubts
that point 11.4 of

the procedure
The Commission decided to initiate
provided for in Article 88(2) of the Treaty because of
doubts regarding the compatibility of the scheme with
concerned,
the
in
the Guidelines
the fact
particular,
does not provide
compensation to
processing undertakings for losses caused by epizootic
diseases. The Commission considered that, even though
the Italian authorities had decided to restrict aid to coop-
eratives, no causal link had been established between the
disease (blue tongue) and the reduction in supplies. In
particular, the region had been hit by drought (see Aid
N 745/2000), which could have contributed to the
reduction in supplies.
In addition, certain cooperatives
reduction in raw materials
could have
received for reasons other than blue tongue (or the
drought).

suffered a

(12) Under point 11.3.8 of the Guidelines, which lays down
that aid may be paid only to farmers or to a producer
organisation of which farmers are members for damage
caused by adverse weather events, it is not possible to
apply these rules by analogy to processing undertakings
that have suffered losses from blue tongue. As a general
rule,
agricultural
processing undertakings have a degree of flexibility in
the management of their sources of supply. This can,
involve additional costs for raw materials
of course,
this does not
and a reduction in profitability, but
the rules
appear
applicable to agricultural production.

to justify a direct application of

the Commission

considers

that

(9)

Article 5 of Law No 22/2000 authorises the regional
authorities to grant aid to undertakings and cooperatives
having their registered office in Sardinia involved in the
harvesting, processing, packaging and marketing of crop
and animal products and which have suffered a reduction
in supplies due under statutory or contractual obligations
of more than 20 % (less-favoured agricultural areas) or
30 % (other areas) compared with the average of the last
three years. This aid is intended to compensate for losses
due to the lack of raw materials for processing and is
limited to losses related to the reduction of the supplies
from the cooperatives' members.

(13)

(14)

In the absence of any other legal basis for examining and
possibly approving the aid measure provided for
in
Article 5 of Law No 22/2000,
it seemed that the aid
should be regarded as operating aid, i.e. aid intended to
cover expenditure which processing undertakings would
normally bear themselves in the day-to-day adminis-
tration of their activities. Such aid must in principle be
considered as incompatible with the common market.

Following the decision to open the procedure provided
the
for
Commission no comments.

in Article 88(2) of

the Treaty,

Italy sent

III. LEGAL ASSESSMENT

(10) A total of LIT 5 billion (around EUR 2 582 280) was

provided for aid for 2000.

(1) Published in the Bollettino ufficiale della Regione Sardegna No 29 of

19.9.2000, p. 1958.

(2) Decision SG(01) D/285817 of 2 February 2001.

(15) Under 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 compe-
tition
the
certain
favouring
insofar as it affects
production of certain goods is,
trade between Member States,
incompatible with the
common market.

undertakings

by

or

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L 329/33

in beef and veal (1)

(16) Article 40 of Council Regulation (EC) No 1254/1999 of
17 May 1999 on the common organisation of
the
lays down that, save as
market
otherwise provided in the Regulation, Articles 87, 88
and 89 of the Treaty apply to the production of and
trade in the products covered by that Regulation.
Similarly, Article 23 of Council Regulation (EC) No
2529/2001 of 19 December 2001 on the common orga-
nisation of the market in sheepmeat and goatmeat (2) lays
down that, save as otherwise provided for in the Regu-
lation, Articles 87, 88 and 89 of the Treaty apply to the
production of and trade in the products referred to in
Article 1 of that Regulation.

(17) Article 5 of Law No 22/2000 provides for aid to
compensate agricultural undertakings and cooperatives
for losses due to a lack of raw material for processing
from members
caused by a reduction in deliveries
following the outbreak of blue tongue. The undertakings
and cooperatives
in question thus enjoy economic
benefits they would not otherwise have received in
their normal course of business and which improve
their competitive position when compared to other
farmers in the Community who do not receive the
same type of aid.

(18)

The aid concerned affects competition and trade between
Member States. The beneficiaries carry out an economic
activity in sectors (the beef and veal and sheepmeat
sectors) that are the subject of trade between Member
States. In 2001, the cattle population in Italy totalled
6 932 700 head,
including 273 900 head in Sardinia.
In that same year, the sheep population was 8 311 400
including 3 602 200 in Sardinia, and the goat
head,
population was 1 024 800 head,
including 240 200
head in Sardinia.

(19)

The measure under examination is therefore state aid as
defined in Article 87(1).

(20)

The prohibition on state aid is not absolute. However, in
this case, the derogations provided for in Article 87(2)
are clearly not applicable and, moreover, were not
requested by the Italian authorities.

(21) Neither does Article 87(3)(a) apply, because the aid is not
intended to promote the economic development of areas
where the standard of living is abnormally low or where
there is serious underemployment.

(22)

By the same token, the aid is not intended to promote
the execution of an important project of common
European interest or to remedy a serious disturbance in
the economy of a Member State within the meaning of
Article 87(3)(b).

(23) Neither is the aid intended to fulfil the objectives laid

down in Article 87(3)(d).

(24) Given the nature of the aid scheme notified, the only
derogation that could be applied is that laid down in
Article 87(3)(c). It must therefore be checked whether
implementation of the planned measures is eligible for
this derogation.

(25)

Since Law No 22/2000 was correctly notified by the
Italian authorities in accordance with Article 88(3) of
it must be assessed in accordance with the
the Treaty,
Community Guidelines for state aid in the agriculture
sector (3) (hereafter referred to as the Guidelines). Under
point 23.3 of the Guidelines, these apply from 1 January
2000 to new state aid, including aid already notified by
the Member States on which the Commission has not yet
adopted a Decision.

include

a group of measures
to

(26) Under point 11.1.1 of the Guidelines, state aids for agri-
intended to
culture
agricultural
safeguard
production or
including
buildings and plantations, caused by unforeseen occur-
adverse weather
rences
conditions or outbreaks of animal or plant disease.

such as natural disasters,

the means of production,

damage

farmers

against

(27)

(28)

(29)

It is therefore clear that, in the case of losses caused by
an epizootic disease, compensation may be provided only
for losses borne by the productive sector and not those
borne by undertakings processing or marketing agri-
cultural products. Aid to compensate for such losses
the
must also be compatible with point 11.4 of
Guidelines, which concerns,
aid for
combating animal and plant diseases.

in particular,

The Italian authorities submitted no comments. The
Commission did therefore not receive additional
infor-
mation that could dispel
the doubts stated when it
initiated the procedure provided for in Article 88(2) of
the Treaty with regard to the aid in question.

income incurred during the same period.

Furthermore, the Italian authorities have not established
in a clear and indisputable manner a direct link between
the reduction in deliveries from members of the under-
takings or cooperatives due to blue tongue and the losses
of
In the
absence of a direct link, the losses in question could
have been caused by other factors, such as the drought,
the crisis on the markets, the financial management of
the undertakings concerned, etc. Any aid intended to
compensate for
loss would constitute
type of
operating aid,
incompatible with the common market
under point 3.5 of the Guidelines (4).

this

(1) OJ L 160, 26.6.1999, p. 21. Regulation as last amended by Regu-

lation No 1782/2003 (OJ L 270, 21.10.2003, p. 1).

(2) OJ L 341, 22.12.2001, p. 3.

(3) OJ C 28, 1.2.2000, p. 2.
(4) Judgment of the Court of First Instance of 8 June 1995 in Case
the European Communities

T-459/93 Siemens SA v Commission of
[1995] ECR II-1675.

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(30)

(31)

IV. CONCLUSIONS

In the light of the above, the Commission concludes that
the aid provided for in Article 5 of Regional Law No
22/2000 constitutes state aid within the meaning of
Article 87(1) of the Treaty and that it is ineligible for
any of the derogations provided for in Article 87(3).

Since Article 10 of Law No 22/2000, notified in
accordance with Article 88(3) of the Treaty, lays down
that the aid provided for in Articles 3, 4 and 5 is to be
implemented by the regional authorities only after
is not
approval by the European Commission,
the aid
necessary to provide
referred to in Article 5 of the Law,

it
recovery of

the

for

HAS ADOPTED THIS DECISION:

Article 1

The aid planned by Italy under Article 5 of Region of Sardinia
Law No 22 of 17 November 2000 to compensate agricultural

undertakings and cooperatives for losses caused by a lack of raw
material for processing caused by a reduction in deliveries from
members is incompatible with the common market. The above
aid may accordingly not be implemented.

Article 2

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

Article 3

This Decision is addressed to the Italian Republic.

Done at Brussels, 16 March 2004.

For the Commission

Franz FISCHLER
Member of the Commission