2005/319/EC: Commission Decision of 7 May 2004 on the aid scheme which Italy is planning to implement to assist farmers in the province of Campobasso (notified under document number C(2004) 1634)
Date: 2004-05-07
Institutions: European Commission
Subjects: Abruzzi, Italy, State aid, control of State aid, dairy farm, farm modernisation, food industry, infringement of EU law, interest rate subsidy, working conditions

L 103/32

EN

Official Journal of the European Union

22.4.2005

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 7 May 2004

on the aid scheme which Italy is planning to implement to assist farmers in the province of
Campobasso

(notified under document number C(2004) 1634)

(Only the Italian text is authentic)

(2005/319/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 provision cited above,

(4)

(5)

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (1). The Commission called on interested parties to
submit their comments on the measure in question.

The Italian authorities did not submit any comments on
the measure. The Commission has received no comment
from other interested parties.

Whereas:

(1)

(2)

(3)

I. PROCEDURE

By letter dated 29 November 2000, recorded as received
on 30 November 2000, the Italian Permanent Represen-
tation to the European Union notified the Commission,
the Treaty, of
in accordance with Article 88(3) of
Decision No 629 of 29 December 1999 of
the
Campobasso Provincial Executive.

2001,

recorded

September

By letters dated 8 February, 21 February, 12 June and
11
on
12 February, 28 February, 14 June and 13 September
2001 respectively, the Italian Permanent Representation
to the European Union provided the Commission with
additional
information it had requested in its letters
of 12 January, 26 April and 7 August 2001.

received

as

By letter dated 13 November 2001 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.

II. DESCRIPTION OF THE AID

1. The aid scheme

(6)

The Decision of the Provincial Executive provides for the
granting of aid in the form of subsidised loans of up to
ITL 20 million (EUR 10 329) at a rate of 2 % for:

— adapting farms to health and hygiene standards in
accordance with Decree No 54 of 14 January 1997
adopting
the Regulation transposing Directives
92/46/EEC and 92/47/EEC on the production and
placing on the market of milk and milk products,

— improving health and safety in the workplace in
accordance with Legislative Decree No 626 of
19 September 1994, and subsequent amendments
thereto,
89/391/EEC,
89/654/EEC, 89/655/EEC, 89/656/EEC, 90/269/EEC,
90/270/EEC, 90/394/EEC, 90/679/EEC, 93/88/EEC,
97/42/EC and 1999/38/EC on improving health
and safety at work,

transposing

Directives

(1) OJ C 354, 13.12.2001, p. 18.

22.4.2005

EN

Official Journal of the European Union

L 103/33

— adapting food production control

in
accordance with Decree No 155 of 26 May 1997
transposing Directives 93/43/EEC and 96/3/EC on
the hygiene of foodstuffs.

standards

(7)

By way of
following in particular:

indication,

the aid scheme covers

the

— work on building and/or adapting facilities for the

treatment of liquid waste,

— work on building and/or adapting milk-collection and

storage facilities,

— work on building and/or adapting small-scale elec-

trical installations,

— work on building and/or adapting sanitation facilities,

— work on building and/or adapting livestock housing,

— work on building and/or adapting food-collection and

storage facilities,

— the use of building materials that lend themselves to

better hygiene.

(12)

The aid provided for in the Decision of the Provincial
Executive may not be combined with other aid having
the same purpose.
In this connection, recipients must
sign a declaration to the effect that they will not apply
for other aid for the same purpose. Regular checks are to
be carried out in this respect.

2. Grounds on which proceedings were initiated by
the Commission

(13)

The Commission initiated proceedings under Article
88(2) of
to
whether the scheme was compatible with the common
market. Those doubts were as follows.

the Treaty because it had doubts as

A. Doubts regarding the types of investment eligible for aid

(14) As part of

the

information they provided before
proceedings were initiated, the Italian authorities stated
that the maximum authorised aid intensity levels were
those applicable under Article 7 of Regulation (EC)
for
No 1257/1999,
investment
the
Community guidelines for State aid in the agriculture
sector (2) (hereinafter the Guidelines). The Italian autho-
rities also referred to Measure 4.9 under the Regional
Operational Programme, which covers only investment
in agricultural holdings.

in other words those specified,
in agricultural holdings, at 4.1 of

(15)

In the light of that information and the above-mentioned
reference, the aid rates applicable would be 50 % in less-
favoured areas and 40 % elsewhere, plus, in both cases,
an additional five percentage points if the investment is
made by young farmers.

(8)

Aid under the above headings includes planning and
construction, the purchase of materials and ‘other costs’
(covered by ‘etc.’ in the notification).

(16)

The aid could conceivably be covered by three points of
the Guidelines:

(9)

The maximum aid intensities are as specified in Article 7
of Council Regulation (EC) No 1257/1999 (1).

(10)

The recipients of
practising farming as
thereof,
groups
Chamber of Commerce.

the aid are owner farmers,

their main occupation,

farmers
and
the Campobasso

registered with

(11)

ITL 150 million (EUR 77 468) has been earmarked for
funding the scheme. The latter is set to last until the
funds concerned have been used up.

— 4.1, on investment in agricultural holdings;

— 4.2, on investment in connection with the processing
and marketing of agricultural products (the appli-
cation of this point cannot be ruled out because,
according to the information transmitted by the
Italian authorities, the recipients are owner farmers
(‘coltivatori diretti’) and farmers generally (‘impren-
ditori agricoli’); according to Article 2135 of Italy’s
‘imprenditori agricoli are persons who
Civil Code,
carry on activities aimed at cultivation of the soil,
livestock farming and related activities’,
silviculture,
and the latter could include the processing and
marketing of agricultural products);

(1) OJ L 160, 26.6.1999, p. 80. Regulation as last amended by Regu-

(2) OJ C 28, 1.2.2000, p. 2. Corrigendum published in OJ C 232,

lation (EC) No 2223/2004 (OJ L 379, 24.12.2004, p. 1).

12.8.2000, p. 17.

L 103/34

EN

Official Journal of the European Union

22.4.2005

— 4.3, on the diversification of farm activities, which

refers back to 4.1 and 4.2.

the Commission,
respect.

laid down precise criteria in that

(17)

letter of 7 August 2001,

In its
the Commission
department concerned invited the Italian authorities to
describe in detail how each of these points had been
complied with for each type of recipient. In their letter
of 11 September 2001 the Italian authorities replied only
that Community rules and provisions would not be over-
looked and that,
the
Region would follow the same approach as for the
management of EAGGF Guidance funds.

to ensure greater compliance,

(18)

Taking account of that reply the Commission verified
whether the above-mentioned points of the Guidelines
were effectively being complied with.

B. Doubts

regarding the nature and rate of

financing of

certain types of eligible expenditure

(19) While on the one hand it could be assumed that the rates
of aid would be complied with irrespective of which
the Guidelines was applicable, since in the
point of
case of measures for the processing/marketing of agri-
cultural products, Molise is among the Objective 1
regions and thus qualifies for an aid rate of 50 %, i.e. a
figure which is not below the maximum indicated by the
Italian authorities in their initial notification, on the
other, the percentage of eligible expenditure represented
by planning costs was not specified, whereas under the
Guidelines it is limited to 12 % of the other items of
eligible expenditure.

When proceedings were initiated it was not possible to
determine the nature of certain costs covered by the term
‘etc.’ in the notification.

(20)

There was thus a possibility that some of the expenditure
in that category might not be eligible and that the aid
concerned might constitute operating aid incompatible
with the common market.

It

from the

emerged
the

(22) On the question of viability, the Italian authorities had
referred to Measure 4.9 under the Commission-approved
Regional operational programme, which in turn referred
to supplementary programming as regards the criteria
supplementary
applicable.
programming that
indicators used were gross
income and the number of man-work units (MWUs)
employed on the holding. In order to be regarded as
viable, the holding had to have a gross income of at
four or six ‘gross income economic size units’,
least
depending on the area, and had to employ one MWU
at least. This criterion was somewhat vague since, on the
basis of the information available, it was not possible to
establish what a ‘gross income economic size unit’ was.
the number of MWUs employed on the
Moreover,
holding does not necessarily reflect its viability. Conse-
quently, when it initiated proceedings, the Commission
had doubts
regarding the criteria for assessing the
viability of the recipients.

(23) As

standards,

regards compliance with the minimum environ-
mental, hygiene and animal welfare
the
Commission pointed out that the aid was intended to
finance work to be carried out pursuant to decrees trans-
directives which,
posing
supplementary
the minimum
programming, were
listed
to
requirements which agricultural holdings have
comply with in order to be eligible for aid under the
Regional operational programme.

in
the
among

(24)

the

investment

to be granted if

By virtue of the rules governing State aid, agricultural
holdings must
above-mentioned
comply with the
minimum requirements in order to be eligible for the
aid. Moreover, point 4.1.1.3 of the Guidelines allows
is
the assistance
intended to satisfy newly introduced minimum environ-
mental, hygiene or animal welfare standards. It adds that
that in such cases account must be taken of any period
specified in accordance with the second paragraph of
(EC)
Commission
Article
No 1750/1999 of 23 July 1999 laying down detailed
rules for
the application of Council Regulation (EC)
No 1257/1999 on support for rural development from
the European Agricultural Guidance and Guarantee Fund
(EAGGF) (1).

Regulation

of

2

C. Doubts regarding the reliability of

the criteria used for
the recipients and the latter’s
assessing the viability of
compliance with minimum environmental, hygiene and
animal welfare standards.

(25)

(21)

Points 4.1 and 4.2 of the Guidelines stipulate that the
holdings receiving the aid are to be assessed for viability
on the basis of their prospects and are to comply with
certain minimum environmental, hygiene and animal
welfare standards. Moreover, aid may be granted only
for products for which there are market outlets. The
matter of outlets was not at issue, since the Regional
operational programme, which had been approved by

In its letter of 7 August 2001 to the Italian authorities
the Commission enquired as to the possible nature of
any newly introduced standards and when they would
be applicable. In their reply, the Italian authorities stated
that they would order an expert survey to be carried out
to verify that the minimum standards applicable under
the Community, national
legislation
applicable had been complied with.

regional

and

(1) OJ L 214, 13.8.1999, p. 31. Regulation as last amended by Regu-

lation (EC) No 1763/2001 (OJ L 239, 7.9.2001, p. 10).

22.4.2005

EN

Official Journal of the European Union

L 103/35

(26)

(27)

(28)

(29)

(30)

answer

however,

initiated proceedings,

information did not,

the
This
Commission’s questions,
insofar as it was not possible
to determine which new requirements might be
introduced and when they would be applicable. When
the Commission could not,
it
therefore, rule out the possibility that the planned aid
might be intended solely to fund compliance with
standards that were already applicable and were part of
the minimum requirements which holdings had to satisfy
in order to be awarded aid. Aid granted to holdings
which are in breach of Community rules could not be
regarded as compatible with the common market.

The Commission therefore had grave doubts as
to
whether potential recipients satisfied the minimum envir-
standards
onmental,
applicable by virtue of the Guidelines and, accordingly,
as to the eligibility not only of the expenditure concerned
but also of the recipients themselves.

animal welfare

hygiene

and

D. Doubts regarding the possible retrospective nature of the

aid

that

guarantees

to provide

The Commission departments concerned had invited the
Italian authorities
the
measures provided for in the Decision of the Provincial
Executive would be implemented in accordance with the
non-retrospectiveness principle laid down at 3.6 of the
Guidelines and to undertake not to grant aid for activities
or work initiated prior to the recipient submitting an
application and its binding approval by the relevant
authorities, once the aid had been approved by the
Commission.

reply from the

Information transmitted by the Italian authorities shows
that aid has neither been paid, nor will be paid, without
the scheme being approved by the Commission;
the
Italian authorities does not,
latest
however, contain the requested undertaking not
to
grant aid for activities or work initiated prior to a
recipient submitting an aid application and its binding
approval by the relevant authorities. Accordingly the
Commission could not, when it initiated proceedings,
rule out
the possibility that retrospective aid without
an incentive effect might be granted under the scheme.
In this respect too, therefore, the Commission could not
but doubt whether the aid was compatible with the
common market.

mitted to the Commission departments concerned any
the
comment on the
Commission
from other
interested parties.

aid in question. Nor has
comments

received

any

(31)

(32)

IV. LEGAL ASSESSMENT

1. Existence of aid within the meaning of Article
87(1) of the Treaty

By virtue of Article 87(1) of the Treaty, any aid granted
by a Member State or through State resources in any
form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the
production of certain goods shall, in so far as it affects
trade between Member States, be incompatible with the
common market.

The measures in question conform to that definition, in
so far as they favour certain types of production (basic
agricultural production, since the investment is made at
primary production level) and can affect trade, given the
wide range of products concerned (in 1998, for instance,
Italy’s
imports and exports of agricultural products
totalled ECU 15 222 billion and ECU 9 679 billion
respectively;
that same year the corresponding figures
for intra-Community trade in agricultural products were
ECU 128 256 billion and ECU 132 458 billion respec-
tively).

(33)

The measure in question thus falls within the definition
of state aid laid down in Article 87(1) of the Treaty.

(34)

The ban on the granting of state aid is not unconditional.
In this particular case the exceptions provided for in
Article 87(2) of the Treaty are manifestly inapplicable
and indeed have not been invoked by the Italian
authorities.

(35) Nor is Article 87(3)(a) of the Treaty applicable, since the
intended to promote the economic devel-
aid is not
opment of areas where
living is
abnormally low or where there is serious underem-
ployment.

standard of

the

III. COMMENTS SUBMITTED BY ITALY AND OTHER
PARTIES

(36)

Italy has not,
proceedings under Article 88(2) of

in the wake of the Decision to initiate
trans-

the Treaty,

Regarding Article 87(3)(b) of the Treaty,
it should be
pointed out that the aid in question 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.

L 103/36

EN

Official Journal of the European Union

22.4.2005

(37)

intended to achieve the
The aid in question is not
objectives referred to in Article 87(3)(d) of the Treaty.

(44)

(38)

(39)

(40)

(41)

In view of the nature of the measure in question, the
only exception which may be invoked is that provided
for in Article 87(3)(c) of
the Treaty, whereby aid to
facilitate the development of certain economic activities
or of certain economic areas, where such aid does not
adversely affect trading conditions to an extent contrary
to the common interest, may be considered to be
compatible with the common market.

2. Scrutiny of the compatibility of the aid

The Decision of
the Provincial Executive must be
is
examined in the light of
aimed at introducing an investment aid scheme in the
agriculture sector and was duly notified by the Italian
authorities in accordance with Article 88(3) of the Treaty.

the Guidelines since it

(45)

The Guidelines are, by virtue of 23.3 thereof, applicable
to new State aids in the agriculture sector,
including
pending notifications by Member States, with effect
from 1 January 2000.

Commission Regulation (EC) No 1/2004 of 23 December
2003 on the application of Articles 87 and 88 of the
EC Treaty to State aid to small and medium-sized enter-
prises active in the production, processing and marketing
of agricultural products (1) is not applicable in this case
because it is not possible, on the basis of the information
provided regarding the recipients, to determine in every
instance whether
the aid is intended for small and
medium-sized enterprises which are eligible under that
Regulation (2).

down

(42) According to the information transmitted by the Italian
the maximum aid intensities allowed are
authorities,
those
Regulation
in Article
laid
(EC) No 1257/1999, which correspond to those
specified at 4.1 of the Guidelines concerning investment
in agricultural holdings. The Italian authorities also
referred to Measure 4.9 under the Regional Operational
Programme, which covers only investment in agricultural
holdings.

of

7

The aids concerned can, however, be classified as
belonging to three types of investment, the conditions
for approval of which are laid down at various points of
the Guidelines:

— investment in agricultural holdings (4.1);

— investment in connection with the processing and

marketing of agricultural products (4.2);

— investments to promote the diversification of farm
activities (4.3, which refers back to points 4.1 and
4.2).

By virtue of 4.1 of
investment
subject to the following requirements:

for
in agricultural holdings may be granted

the Guidelines,

state aids

(a)

the investment should pursue one or more of the
following objectives: to reduce production costs, to
improve and redeploy production, to increase quality,
to preserve and improve the natural environment,
hygiene conditions and animal welfare standards or
to promote the diversification of farm activities;

(b) the intensity of the aid must not exceed 40 % (50 %
in less-favoured areas). However,
in the case of
investments made by young farmers the maximum
rate of aid rises to 45 % and 55 % respectively;

(c)

investment aid may be granted only to holdings the
economic viability of which can be demonstrated by
an assessment of the prospects of the holding and
where the farmer processes adequate occupational
skill and competence. Moreover the holding must
standards
comply with minimum Community
regarding the environment, hygiene and animal
welfare;

(d) aid may not be granted for

investment whose
increased production unless normal
the products

objective
market outlets can be found for
concerned;

is

(43)

In the light of these indications and the above-mentioned
reference, the following aid rates are applicable: 40 % in
areas other than less-favoured areas and 50 % in less-
five
favoured areas with,
percentage points if the investment is made by young
farmers.

in both cases, an additional

(e)

(1) OJ L 1, 3.1.2004, p. 1.
(2) Cf. first subparagraph of Article 20(2) of the Regulation.

the eligible expenses cover only: the construction,
acquisition or improvement of immovable property;
new machinery and equipment, including computer
software; general costs, such as architects, engineers
and consultation fees, feasibility studies, the acqui-
sition of patents and licences, up to 12 % of the
expenditure
land purchase,
including legal fees, taxes and land registration costs;

to above;

referred

22.4.2005

EN

Official Journal of the European Union

L 103/37

(f)

the maximum expenses eligible for support may not
exceed the limit
investment eligible for
support set by the Member State in accordance
with Article 7 of Regulation (EC) No 1257/1999.

for total

(48)

(46) Aid may, in accordance with 4.2 of the Guidelines, be
in connection with the
agricultural products,

granted
processing and marketing of
subject to the following requirements:

investments

for

(a)

the economic viability of the holdings receiving the
aid must be demonstrated on the basis of an
assessment of their prospects;

and

regarding the

(b) the holdings receiving the aid must comply with
environment,
minimum standards
animal welfare. However, where
hygiene
to comply with
investments are made in order
newly introduced minimum standards regarding the
environment, hygiene and animal welfare, aid may be
granted in order to reach these new standards;

(c)

the aid rate may not exceed 40 % (50 % in the case of
Objective 1 regions).

irrespective of the
The description clearly shows that,
exact nature of the investment aids provided for in the
Decision of the Provincial Executive, compliance with
many of the above-mentioned requirements applicable
under the Guidelines, requirements which are intended
to determine the compatibility of
the investment aid
with the common market,
is not guaranteed by the
Italian authorities, viz.:

(a)

the exact nature of the expenses eligible referred to
by ‘etc.’ and a guarantee that the limit of 12 % of the
other eligible expenses will be complied with as
regards planning costs;

(b) the reliability of the criteria used for assessing the

economic viability of the recipients;

(c) compliance, on the part of
minimum environmental,
welfare standards;

the recipients, with
animal
and

hygiene

(d) ruling out the possibility of aid being granted retro-
any

i.e. without

scheme,

the

spectively under
incentive effect.

(d) eligible expenses may include only: the construction,
acquisition or improvement of immovable property;
new machinery and equipment, including computer
software; general costs, such as architects, engineers
and consultation fees, feasibility studies, the acqui-
sition of patents and licences, up to 12 % of the
expenditure
land purchase,
including legal fees, taxes and land registration costs;

to above;

referred

(49) Moreover, the Italian authorities submitted no comment
and provided no additional
information in response to
the Commission letter of 13 November 2001 initiating
proceedings.

(e) aid may not be granted for products for which

normal market outlets cannot be found;

(50)

The Commission has thus not received any additional
information which can dispel the doubts it harboured
when it initiated proceedings under Article 88(2) of the
Treaty.

(f) aids for investments with eligible expenses in excess
of EUR 25 million must be specifically notified to the
Commission in accordance with Article 88(3) of the
Treaty.

(51)

In the light of the above the Commission feels that the
measure notified is incompatible with the Community
rules on competition and in particular with Article
87(3)(c) of the Treaty.

(47)

By virtue of 4.3 the compatibility of aids to promote the
diversification of
farm activities must be assessed in
accordance with 4.1 where the total eligible expenses
do not exceed the limit for total investment eligible for
support set by the Member State in accordance with
Article 7 of Regulation (EC) No 1257/1999.
that
limit is exceeded the requirements applicable are those
set out at 4.2 of the Guidelines.

If

V. CONCLUSIONS

(52)

It may accordingly be concluded that the aid provided
for in the Decision of the Provincial Executive constitutes
state aid within the meaning of Article 87(1) of the
Treaty and does not qualify under any of the exceptions
provided for in Article 87(3).

L 103/38

EN

Official Journal of the European Union

22.4.2005

(53)

Executive was notified

Since Decision No 629 of 29 December 1999 of the
Campobasso Provincial
in
accordance with Article 88(3) of the Treaty, and since,
according to information transmitted by the Italian
authorities, no aid has been paid under the scheme in
question, it is not necessary to require recovery of the aid
provided for therein,

The aid scheme may accordingly not be implementsed.

Article 2

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

HAS ADOPTED THIS DECISION:

Article 3

This Decision is addressed to the Italian Republic.

Article 1

Done at Brussels, 7 May 2004.

The aid which Italy is planning to grant, on the basis of
Decision No 629 of 29 December 1999 of the Campobasso
Provincial Executive, to finance agricultural activities aimed at
improving the quality of products and the quality of life of
operators is incompatible with the common market.

For the Commission

Franz FISCHLER
Member of the Commission