2006/177/EC: Commission Decision of  19 May 2004  on State aid No C 4/2003 (ex NN 102/2002) implemented by Italy for WAM SpA  (notified under document number C(2004) 1812)   (Text with EEA relevance)
Date: 2004-05-19
Institutions: European Commission
Subjects: Italy, State aid, United Kingdom, aid to undertakings, control of State aid, interest rate subsidy, subsidiary

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Official Journal of the European Union

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 19 May 2004

on State aid No C 4/2003 (ex NN 102/2002) implemented by Italy for WAM SpA

(notified under document number C(2004) 1812)

(Only the Italian version is authentic)

(Text with EEA relevance)

(2006/177/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 regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having regard to the decision (1) by which the Commission
the
initiated the procedure laid down in Article 88(2) of
Treaty in respect of aid No C 4/2003 (ex NN 102/2002),

Having called on interested parties to submit their comments
pursuant to the provisions cited above and having regard to
their comments,

Whereas:

I. PROCEDURE

(1)

By letter dated 26 July 1999, the Commission received a
complaint from a competitor against WAM Engineering
Ltd. It was alleged in the complaint that WAM SpA had
been granted illegal public subsidies by Italy.

(2)

Requests for information were addressed to the Italian
authorities by letters of 5 August 1999 and 10

(1) C(2003) 35 fin (published in OJ C 142, 18.6.2003, p. 2).

(3)

(4)

(5)

(6)

September 1999. The complainant submitted additional
information by letter A/36636 of 2 September 1999. By
the
letter
dated 13 December 1999 (D/65224),
Commission communicated to the complainant
the
submitted by letter
reply of
A/37761 of 11 October 1999, and announced that it
intended to carry out a formal investigation.

the Italian authorities

At the same time, a survey on national support schemes
for foreign direct investment outside the EU (FDI) was
being carried out by the Commission and was expected
to result in a Commission communication on the matter.

for

asked

the
By letter dated 18 December 2001 (D/55270),
information
Commission
Italy
following renewed action by the complainant
(two
reminders were addressed to the Commission by letters
A/32799 of 31 March 2000 and A/38320 of 11
October 2000), given that
the FDI survey had been
postponed by the Commission.

further

In the light of the information provided by the letters of
20 February 2002 (A/31323) and 27 March 2002
(A/32370),
to the Italian
authorities by letter of 12 April 2002 (D/51694).

further questions were put

The Italian authorities replied by letter of 21 May 2002
the
(A/33699). By letter of 5 June 2002 (D/52840),
Commission informed the Italian authorities
it
considered the information submitted to be incomplete
and asked for the missing information and further cla-
rification to be provided within 20 working days of
receipt of the letter.

that

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(7)

(8)

(9)

As no reply was received, and in spite of a request from
the Italian authorities by letter A/34670 of 25 June 2002
for an extension of the deadline until 31 July, an infor-
mation injunction within the meaning of Article 10(3) of
Regulation (EC) No 659/1999 of 22 March 1999 laying
down detailed rules for the application of Article 93 of
the EC Treaty (2) was adopted by the Commission on 26
September 2002. Meanwhile, the case had been trans-
ferred to the non-notified aid register and had been
given the number NN 102/2002.

By letters D/53325 of 26 June 2002 and D/55544 of 4
October 2002, the complainant was kept informed of
the progress of the dossier. By letter A/37992 of 31
October 2002,
it asked to know the outcome of the
injunction.

The Italian authorities submitted the requested infor-
mation by letter A/37537 of 16 October 2002 and
supplied additional elements by letter A/37783 of 24
October 2002.

(10)

The Commission informed Italy by letter SG(2003)
D/228223 of 24 January 2003 that, by decision
C(2003) 35 fin, it had decided to initiate the procedure
laid down in Article 88(2) of the Treaty in respect of the
aid in question.

for presentation of observations on confidentiality, as laid
down in the Commission’s decision.

(15)

By letter A/31812 of 10 March 2003, Italy asked the
Commission not to publish the decision, given the will-
ingness of the recipient to repay the aid, as also stated by
WAM SpA itself in letter A/31907 of 13 March 2003
sent direct to the Commission.

(16)

By letter D/51799 of 18 March 2003, the Commission
pointed out that, in order to avoid publication, a final
decision closing the case was necessary, this being condi-
tional on proof being submitted that
the two aid
tranches plus interest, calculated in a way acceptable to
the Commission, had actually been recovered.

(17) As the amount proposed by the Italian Government by
letter A/33347 of 13 May 2003 was significantly lower
than the first estimate of the grant equivalent of the aid
calculated by the Commission on the basis of
the
elements available at the time of the opening of the
the Commission informed Italy, by letter
procedure,
D/53393 of 22 May 2003,
that, since the proposed
amount to 19 be repaid was considered not to satisfy
its criteria, the publication would take place shortly.

(11)

By letter D/50629 of 29 January 2003, the complainant
was informed accordingly.

(18)

(12) Having not yet received the above mentioned letter, the
complainant sent the Commission a reminder by letter
A/31086 of 10 February 2003.

information about

By letter A/34156 of 13 June 2003, the complainant
asked for
the
decision. The Commission replied by letter D/53949 of
18 June 2003. A further communication was sent the
same day, via e-mail to the complainant informing it
promptly that publication had just taken place.

the publication of

(13)

Further to the communication to the Italian authorities
concerning the opening of the procedure, WAM SpA
immediately sent a letter to the Commission (A/31070
of 10 February 2003).

(19)

By letter of 1 July 2003, preceded by a fax (A/34620 of
the same date), a request for access to the whole file was
submitted by WAM SpA The request was rejected by
DG COMP by letter D/54522 of 14 July 2003.

(14)

By letter A/31552 of 27 February 2003, Italy asked for
an extension, until 7 March, of the fifteen-day deadline

(20)

(2) OJ L 83, 27.3.1999, p. 1.

By letter A/34306 of 20 June 2003, WAM SpA reacted
directly to the Commission’s communication to Italy to
the effect
it had published the decision. The
Commission replied by letter D/54497 of 11 July 2003.

that

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(21)

(22)

By letter A/34527 of 27 June 2003, the complainant
expressed the intention to claim compensation from
WAM SpA in view of the losses it had incurred, if the
Commission’s final decision was negative. It asked to be
informed of the procedure to be followed.

refusal of access to the documents was confirmed by the
Secretariat-General by letter SG/B/2/IS/D(2003) 330353
of 16 September 2003.

Limited, which

By letter A/34750 of 4 July 2003, Morton Machine
complainant,
Company
announced that
it had been summoned to appear
before an Italian court by WAM SpA, which in its turn
claimed compensation,
and asked the Commission
whether it could have the summons withdrawn.

the

is

(30)

The folders missing from the reply of 19 September
2003 (A/36444) were provided by Italy by letter
A/30263 of 14 January 2004.

II. DESCRIPTION OF THE AID

(23)

By letter D/54481 of 10 July 2003, the Commission
from
replied to the
Morton Machines Company.

two above mentioned letters

(31)

(24)

By letter A/35044 of 16 July 2003,
interested third
parties submitted comments, with the request that they
be dealt with confidentially.

The complainant, referring to the pricing policy of WAM
Engineering Ltd in the United Kingdom, claimed that the
latter was able to offer the same products (industrial
itself manufactured
mixing machinery)
its prices — a
and marketed for about one third of
level at which,
to
the necessary raw materials — and this
purchase
thanks
in particular
under Law No 394/81.

to Italian Government

it would be different

in its view,

funding,

that

it

the meeting,

(25) On 23 July 2003 a meeting took place between the
Commission departments and the Italian authorities.
the Italian Government had
Ahead of
provided some information by letter No 9601 of 22
registered as received on 25 July 2003
July 2003,
(A/35269). Additional
to
the Commission by letter A/35577 of 8 August 2003
from the Prime Minister’s Office (Department
for the
Coordination of Community Policies).

information was sent direct

(26)

By letter A/35785 of 21 August 2003, Morton Machines
Company asked whether a final decision had already
been taken and asked to be kept
the
situation. The Commission replied by letter D/55473 of
28 August 2003.

informed of

(27)

Italy
By letter A/36444 of 19 September 2003,
submitted to the Commission its observations on the
opening of the procedure.

(28)

By letter A/37525 of 3 November 2003, Italy submitted
its observations on the comments notified by third
parties and transmitted to it by Commission letter
D/56068 of 25 September 2003.

(29)

Further to the request for compensation submitted by
the
WAM SpA (2003/A/35486 of 30 July 2003),

(32) WAM Engineering Ltd is the subsidiary for the United
Kingdom and Ireland of WAM SpA. The relevant market
segment is the design, manufacture and sale of industrial
mixing machinery used mainly in the food, chemical,
pharmaceutical and environmental industries.

(33) According to the complainant, WAM Engineering Ltd
benefited from Italian Law No 394/81, which seems to
provide
penetration
programmes in non-EU countries. In particular, Law No
394/81 allegedly supports Italian companies wishing to
establish a subsidiary abroad,
in the form of represen-
tative offices, shops and warehouses.

financial

support

trade

for

(34)

(some

EUR 1,18 million)

The Italian authorities confirmed the granting in 1995 of
aid in the form of a subsidised loan amounting to
ITL 2 281 450 000
for
WAM SpA for projects in Japan, South Korea and
Italian authorities,
the
Taiwan. According
of
recipient was
amount
ITL 1 358 505 421 (some EUR 0,7 million) as
the
planned projects in Korea and Taiwan were not imple-
mented on account of
the economic crisis in those
countries.

to the

actually

granted

an

(35)

The subsidised loan covers 85 % of the eligible expen-
diture. The interest-rate subsidy may amount to 60 % of
the reference rate. The loan is to be repaid over five years
on a straight-line basis and in equal half yearly portions,
interest being due on the balance outstanding. A grace
period of two years is envisaged.

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(36)

The subsidised interest rate on the specific loan (equal to
4,4 %) was calculated with reference to a market rate of
11 %. In the light of the above and on the basis of the
information available at the time of the opening of the
procedure, the aid intensity seemed to be equivalent to
16,38 % gross grant equivalent (gge), which would have
resulted in presumed aid of ITL 222,523 million (some
EUR 115 000).

1995 under Law No 394/81 was significantly below the
de minimis threshold and that no other de minimis aid had
been granted to the same recipient over the same three-
year period. Furthermore, they stressed that the aid could
not in any way be considered as being directly linked to
the quantities exported.

(37)

The eligible costs of this aid have been divided into two
categories: costs relating to permanent structures abroad
and trade promotion costs. The
costs,
expressed in ITL million, were taken into account:

following

(41)

Eligible costs

Loan granted
(ITL million)

The Commission pointed out that most of the eligible
costs taken into account for the specific aid granted to
WAM SpA in 1995, such as rent, insurance, and miscel-
laneous facilities and operating costs (in particular for
personnel,
for a permanent
place of business abroad, might have to be classified as
aid for the establishment and operation of a distribution
network.

furniture and equipment)

PERMANENT STRUCTURES

Rent, insurance, miscellaneous facilities

Operating costs (in particular, personnel,
fittings, equipment for permanent structures)

Display models

Consultancy

TRADE PROMOTION

Storage of goods

Market surveys

Fairs and exhibitions

Advertising

Business trips

122,56

556,94

38,23

29,43

Subtotal 1

747,18

456,28

40,95

12,19

94,39

7,52

Subtotal 2

611,33

Grand total

1 358,51

(38) Moreover, by letter A/33699 of 21 May 2002, the Italian
in reply to a precise question from the
authorities,
stated that WAM SpA was granted
Commission,
another subsidised loan of
ITL 1 940 579 808 (some
EUR 1 million) under the same scheme on 9 November
2000.

(42)

in the Commission’s opinion,
related to permanent

costs
for
Likewise,
structures
consultancy services
abroad, advertising and business trips had to be classified
as current expenditure linked to the export activity.

(43)

In accordance with the last paragraph of the Commission
notice on the determination of the applicable rules for
the assessment of unlawful State aid (3), where, at the
time of a decision, guidelines have been replaced by a
regulation, the Commission considers that the rules set
out in the regulation have to be applied to the extent
that they are more favourable than those set out in of the
guidelines (4). Accordingly, as regards de minimis aid, the
rules of Commission Regulation (EC) No 69/2001 of 12
January 2001 on the application of Articles 87 and 88 of
the EC Treaty to de minimis aid (5) have, in principle, to
be applied.

(39)

The Commission was not aware, at
the
opening of the procedure, of any other details concerning
this additional aid.

the time of

(44)

Regulation (EC) No 69/2001 does not apply to aid for
export related activities, namely aid directly linked to the
quantities exported as well as to the establishment and
operation of a distribution network or to other current
expenditure linked to the export activity, as provided for
in Article 1(a).

III. GROUNDS FOR INITIATING THE PROCEDURE

Aid granted to WAM SpA in 1995

(40)

The Italian authorities maintained in their letter A/33699
of 21 May 2002 that the aid granted to WAM SpA in

(3) OJ C 119, 22.5.2002, p. 22.
(4) See Cases C 85/98 D Thüringen — Konsolidierungsprogramm;
C 87/98 D Thüringen — Darlehensprogramm; C 28/99 D Thüringen
Umlaufmittelprogramm, not yet published.

(5) OJ L 10, 13.1.2001, p. 30.

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(45) As regards compliance of

the aid at

issue with the
it has to be noted that the
relevant de minimis rules,
Community guidelines on State
aid for SMEs of
1992 (6), which included the de minimis rule in force at
the time the aid was granted, did not explicitly exclude
export aid but set a lower threshold of ECU 50 000.

(51)

The Italian authorities then pointed out in their letter of
24 October 2002 (A/37783) that no aid has ever been
granted directly to ‘WAM Engineering’ and that there was
no undertaking registered as such in the Italian business
register.

(46)

In the light of the above, the Commission expressed
doubts as to whether the aid granted to WAM SpA in
1995 under Law No 394/81 could be considered to
comply with any relevant de minimis rule.

(52)

(47)

Furthermore, in the light of a preliminary examination,
the Commission had serious doubts whether the aid to
WAM SpA could be declared compatible with the EC
Treaty on the basis of any provision.

following their

First of all, it has to be noted that ‘WAM Engineering Ltd’
is the subsidiary for the United Kingdom and Ireland of
‘WAM SpA’. Secondly,
letter of 11
October 1999, the Italian authorities announced that in
1995 ‘WAM SpA’ had been granted a subsidised loan
under Law No 394/81 and added, by letter A/33699
the ‘WAM group’ has been
of 21 May 2002,
granted another subsidised loan under the same scheme
on 9 November 2000.

that

(48)

(49)

small

(SME),

enterprise

or medium-sized

In particular,
in view of the fact that, at the time the
procedure was initiated, WAM SpA was not regarded as
a
the
Commission also stressed that aid for market surveys
and for participation in fairs and exhibitions, which in
principle could qualify as aid for consultancy and other
services and activities within the meaning of Article 5 of
Regulation (EC) No 70/2001 of 12 January 2001 on the
application of Articles 87 and 88 of the EC Treaty to
State aid to small and medium-sized enterprises (7), could
not be granted an exemption in the present case.

(53) According to Article 10(1) of Council Regulation (EC) No
659/1999 of 22 March 1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (10),
‘Where the Commission has in its possession information
from whatever source regarding alleged unlawful aid, it
shall examine that information without delay.’

(54)

regard to the

In conclusion, having
the
Commission expressed strong doubts as to whether the
aid granted in 1995 to WAM SpA under Law No 394/81
an
might qualify, pursuant
exemption under Article 87(3) of the EC Treaty.

to any provision,

above,

for

in the case of

if the aid were to be assessed as foreign
Furthermore,
direct investment (FDI),
it should be noted that, until
now, the Commission has not authorised State aid for
large enterprises. By Decision
FDI
97/241/EC of 5 June 1996 (8),
the Commission
to the aid being granted
approved a scheme subject
only for foreign direct investment by SMEs — provided
that all the conditions laid down for the granting of state
aid to SMEs were met — and subject to any aid for large
enterprises being notified individually.

Aid granted to WAM SpA in 2000

(55) At

the time the formal

the Commission was not

investigation procedure was
initiated,
any
specific feature, such as aid intensity or eligible expen-
diture, of the aid granted to the ‘WAM group’ (as defined
by the Italian authorities) in 2000, again in the form of a
subsidised loan under Law No 394/81. No relevant infor-
mation had been submitted by the Italian authorities.

aware of

(50)

The only notification of an individual aid to a large
enterprise on the basis of
above mentioned
decision resulted in a negative decision (9).

the

(6) OJ C 213, 19.8.1992, p. 2.
(7) OJ L 10, 13.1.2001, p. 33.
(8) Decision concerning aid that the Republic of Austria intends to
grant pursuant to the ERP Eastern European progamme (OJ L 96,
11.4.1997, p. 23).

(9) Decision of 14 October 1998 concerning LiftgmbH (OJ L 142,

5.6.1999, p. 32).

(56) Accordingly, the Commission was not able at that stage
to assess the specific aid in depth. However, given that it
served the same purpose and was granted on the same
legal basis as the aid granted in 1995, it doubted whether
the aid could be deemed to be in compliance with the
provisions of the Treaty pursuant to any relevant rule.

(10) OJ L 83, 27.3.1999, p. 1.

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(58)

(59)

(60)

IV. COMMENTS FROM INTERESTED PARTIES

(57)

Comments on the opening of proceedings were received
from a third party interested in the case at hand, who
asked for confidentiality to be preserved.

These comments applaud the Commission’s efforts to
in the
restore a level playing field for competitors
sector concerned and complain about the engineering
skills and jobs being lost on account of the position of
WAM SpA on the market.

(63)

the

aware of

third party’s

By letter A/37525 of 3 November 2003, Italy, which was
made
comments by
Commission letter D/56068 of 25 September 2003,
pointed out that, in its opinion, these comments made
no new contribution as they simply confirmed some
points already made in the case,
including by the
complainant. In particular, Italy considers that sufficient
proof has been provided of the lack of any link between
the facts claimed in the above-mentioned comments and
the funding of WAM SpA under Law No 394/81.

V. COMMENTS FROM ITALY

Evidence has been provided that, at the moment of the
granting of the first aid measure and of the introduction
of the relevant application, WAM SpA, on the basis of its
1994 annual accounts, complied with the definition of
medium-sized enterprise given at point 2.2 of the 1992
small and
Community guidelines on State aid for
medium-sized enterprises (11), on the grounds that
it
turnover of
had 163 employees, had an annual
EUR 16,8 million
of
total
a
EUR 20,1 million and was owned by two undertakings,
both fulfilling the definition of an SME. But the Italian
authorities themselves agree that WAM SpA was no
longer an SME after 1998 or when the second aid
measure was granted (2000).

balance-sheet

and

overall

procedure, by letter A/35269 of 25 July 2003 that its
ITL 3 603 574 689
amount was
actual
(EUR 1 861 091,01),
ITL 1 940 579 808
instead of
(about EUR 1 million), as previously declared by letter
A/33699 of 21 May 2002 and mentioned in the decision
to initiate the procedure, since the latter figure referred
only to the part of the loan which had already been paid
at the moment the letter was written, irrespective of the
overall amount of aid granted.

Two more instalments of the aid were, in fact, paid. In
particular, the last one, amounting to EUR 248 091,01,
was paid on 29 January 2003, while the Commission
decision to initiate the procedure had been taken on
21 January 2003 and the Commission letter notifying
is dated 24 January 2003. The
Italy of
conditions on which this loan was granted are the
loan since both were
same as
the first
granted under Law No 394/81. The granting of
the
entire amount of the loan in question was decided on
9 November 2000 and the contract was signed on 20
December 2000.

those for

that

fact

(64) A schedule of the eligible costs taken into consideration
Italian
is

in the Annex to letter A/35269,

transmitted by

issue,

the

aid at

for
the
Government
reproduced below.

Eligible costs

Loan granted
(EUR 000)

PERMANENT STRUCTURES

Rent and fitting-out of premises, vehicles

Operating costs (management, goods
and personnel)

(61) No new substantive element concerning the first aid
the
measure has been added to the information that
the
the time of
Commission already possessed at
opening of procedure, save for the fact that the loan
was made available to the recipient in several instalments
for which the grace period could vary from 2 years to
zero. Apparently, there was no provision in the original
contract for reviewing the interest rate. This aid should
have been repaid in full by April 2004.

(62) As far as the second subsidised loan granted to WAM
Italian authorities
the
opening

SpA in 2000 is concerned,
provided

clarification,

the
the

after

of

(11) See footnote 6.

Display models

Training

Consultancy

TRADE PROMOTION

Storage of goods

Fairs and exhibitions

Advertising

Business trips

Trips by customers to Italy

331,27

973,50

0,87

25,24

30,29

Subtotal 1

1 361,17

353,39

6,37

42,74

94,84

2,59

Subtotal 2

499,92

Grand total

1 861,09

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(65)

Furthermore, it transpires from the documents annexed
to letter A/30263 of 14 January 2004 that
the
programme in question was to be carried out jointly
by WAM SpA and ‘WAM Bulk Handling Machinery
Shangai (Co Ltd’, which is a local firm wholly owned
by WAM SpA.

(66)

(67)

for offices,

Eligible costs were considered to include the rent of
premises
a
storage,
technical assistance workshop (with a total surface area
of 7 500 m2),
the purchase, renting or leasing of 3
vehicles, personnel
firm and
abroad (in particular 1 sales manager and 6 technicians).

showrooms

the parent

costs

and

for

The interest rate applied to the specific loan is 2,32 %,
i.e. 40 % of the reference rate of 5,8 % in force when the
aid was granted. Once again, no change in the interest
rate during the duration of the loan seems to have been
provided for in the contract. The loan was paid to the
recipient in several instalments, so that the grace period
varies from 2 years to zero.

(68) As regards repayment, the data supplied by Italy show
that the grace period of two years, during which only the
interest on the loan instalments already made over to the
recipient was paid, elapsed on 20 February 2003. On 20
August 2003 the five-year repayment period started.
Repayment was on a straight-line basis and in equal
interest being due on the
half-yearly
balance
schedule,
repayment should therefore be completed by February
2008.

outstanding. According

instalments,

the

to

the

amount of

(70) With regard to both loans, the Italian authorities claim
that the cost of the compulsory bank guarantee, which
was requested prior to the granting of the loans, has to
be deducted from the
aid. The
Commission observes, first of all, that such a guarantee,
or its equivalent, would normally have been requested
even by a private credit
institution granting loans
according to the market economy investor principle
and, secondly, that it emerges from letter A of the speci-
fications annexed to the contract that the overlapping of
aid for the same programme is not permitted, except for
aid related to the guarantee, which consequently is
deemed itself to be eligible for aid.

(71) As regards WAM SpA’s exports inside and outside the

EU, the following data were provided:

Year

1995

1996

1997

1998

1999

Exports inside
EU

Exports outside
EU

Total exports

10 237 196

4 477 951

14 715 147

9 338 640

5 592 951

14 930 762

9 974 814

5 813 442

15 788 256

10 780 161

5 346 514

16 126 675

11 885 473

5 276 525

17 161 998

(72)

The Italian authorities informed the Commission that the
total export figures above represent between 52 % and
57,5 % of WAM SpA’s total annual turnover.

(73)

Finally, while the Italian authorities acknowledge that the
two loans under examination are covered neither by
Regulation (EC) No 69/2001 nor by Regulation (EC)
No 70/2001, they take the view that the incentives for
Community enterprises designed to support programmes
to be implemented outside the EU do not fall within the
scope of Article 87 of the EC Treaty.

(69) As regards modification of the interest rate during the
repayment period,
the Italian authorities argue that
general rules allowing such reductions did exist within
the Italian legal
the Ministerial
framework. However,
Decree of 31 March 2000, which is the only legal
basis provided for this purpose, applies only to the
initiatives funded by Laws Nos 394/81 and 304/1990,
and is therefore very selective. No further evidence has
rate on the aid in
the interest
been provided that
question was modified. Lastly,
such a modification
could have been made only to the first subsidised loan
granted to WAM SpA as it applied to the funding in
existence when it came into force, while the second
loan had not as yet been granted to WAM SpA.

VI. ASSESSMENT OF THE AID

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

(74) Article 87(1) of the EC Treaty states 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
production of certain goods shall,
insofar as it affects
trade between Member States, be incompatible with the
common market.’

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Official Journal of the European Union

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(75)

loans

improve

transfers of public
The aid under scrutiny consist of
in the form of subsidised loans, to a specific
funding,
undertaking, WAM SpA. These
the
financial situation of the aid recipient. As regards the
potential effect on trade between Member States, it has
been stressed by the Court of Justice (12) that, even if the
aid is intended to promote exports outside the EU, intra-
Community trade may be affected. Moreover, having
regard to the interdependence between the markets on
it is possible
which Community undertakings operate,
that
such aid might distort competition within the
Community.

all

the

in almost

stressed that

EU Member

subsidiaries all around the world,
(76) WAM SpA has
States,
including
including France, the Netherlands, Finland, the United
Kingdom, Denmark, Belgium and Germany. In particular,
the complainant
it competed on the
Community market directly with ‘WAM Engineering
Ltd’, which is the subsidiary for the United Kingdom
and Ireland of WAM SpA, and that it was losing many
orders to the Italian company. Furthermore, as regards
outward-looking competition among Community under-
takings, it transpired that the programme financed by the
second loan and designed to support business pene-
tration in China, was to be jointly carried out by
WAM SpA and ‘WAM Bulk Handling Machinery
Shangai Co Ltd’, a local firm wholly owned by WAM
SpA.

(77) According to the case law of the Court of Justice, even if
the recipient exports almost its entire production outside
the EU, the EEA and the accession countries, any subsi-
trade between
dising of export activities can affect
Member States.

(78) Moreover,

in the case at hand,

it has been ascertained
that in the period 1995-1999 sales abroad accounted for
between 52 % and 57,5 % of the overall annual turnover
of WAM SpA, two thirds of which was generated inside
the EU (in absolute figures,
some EUR 10 million
compared with EUR 5 million).

(79) Accordingly,

irrespective of whether

the aid under
consideration supports exports to other Member States
it has the potential to affect trade
or outside the EU,

(12) Case 142/87 Kingdom of Belgium v Commission (Tubemeuse ruling)

1990 ECR I-959.

(80)

(81)

between Member States and is,
Article 87(1) of the Treaty.

therefore, caught by

Lawfulness of the aid

The Italian authorities declared,
in their letter of 11
October 1999 (A/37761), that the legal basis for the
aid granted to WAM SpA, namely Law 394 of 29 July
1981, had been notified to the Commission and to the
World Trade Organisation (WTO) under Article 25 of the
Agreement on Subsidies and Countervailing Measures
(WTO-GATT 1994) (13).

The Commission observes that, by way of notification,
the Italian authorities
intend to include some very
concise data relating to the scheme in the aid schedule
transmitted to the Commission for the purposes of the
annual report on State aid in the European Union, at
least since the sixth report
(1996). This cannot be
deemed to be in compliance with Article 88(3) of the
EC Treaty, which states that ‘the Commission shall be
in sufficient time to enable it to submit its
informed,
comments, of any plans to grant or alter aid.’

(82)

The Commission has been also informed of the existence
of the scheme as part of its survey on national support
schemes for foreign direct investment (FDI) outside the
European Union that exist in the Member States.

(83)

Since it was not previously notified to the Commission
as regards its compatibility with the State aid rules, the
aforementioned aid scheme has been implemented in
the EC Treaty and is
breach of Article 88(3) of
therefore unlawful. As
the aid to WAM SpA was
granted under that scheme, it too is unlawful.

Compatibility of the aid with Article 87 of the EC
Treaty

(84)

To the extent that the support measures in question fall
within the scope of Article 87(1) of the EC Treaty, they
have to be assessed to verify whether they are elgible for
any exemption under the relevant Community State aid
rules.

(13) Uruguay Round of Multilateral Trade Negotiations (1986-94) —
Annex 1 — Annex 1A — Agreement on Subsidies and Counter-
vailing Measures (WOTO-GATT 1994)
(OJ L 336, 23.12.1994,
pp. 156-183).

4.3.2006

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Official Journal of the European Union

L 63/19

First loan granted to WAM SpA

(85)

it

for

Evidence has been provided by the Italian Government
that, at the time of the granting of the first loan (1995),
WAM SpA fulfilled the requirements
to be
considered an SME within the meaning of Commission
recommendation 96/280/EC (14). To be more precise,
WAM SpA was a medium-sized enterprise as it had
163 employees,
turnover of EUR 16,8
million and a balance sheet total of EUR 20,1 million.
Lastly, it was controlled by two finance companies which
were themselves SMEs within the meaning of the above
mentioned recommendation.

an annual

for

fittings

equipment

consideration by the Italian Government in granting the
first subsidised loan to WAM SpA in 1995, namely rent
insurance and related
of premises (ITL 81,21 million),
such as
facilities, as well as other operating costs
premises
and
personnel,
(ITL 10,82 million, ITL 30,55 million and ITL 556,94
million respectively), are costs which the firm had itself
to bear; the same applies to display models and spare
parts for after-sales service (ITL 38,23 million). In the
same way, with respect to the eligible costs intended to
support trade promotion, the cost of storage of goods
(ITL 456,28 million)
the
does
Commission’s opinion, with the SME guidelines as it is
not deemed to represent an initial investment; nor do the
advertising costs (ITL 94,39 million) or business trips
(ITL 7,52 million).

comply,

not

in

(86)

To the extent that the Commission bases its assessment
of presumed unlawful aid on the rules in force at the
time the aid was granted (15), it has to be verified whether
the aid granted to WAM SpA in 1995 was in compliance
with the SME guidelines of 1992 (16), which were in
force at the time the specific aid was granted.

(90)

In the Commission’s view, none of these costs can in any
way be regarded as productive investment; aid towards
them has to be classified as operating aid.

(87) As WAM SpA is deemed to belong to the upper end of
the SME range, it has to be borne in mind that, at the
time of the first loan, the 1992 guidelines on State aid
for SMEs stipulated that even investment aid, if available
in non-assisted areas for medium-sized companies, not
only involves a danger of distortion of competition but
also reduces the incentive for smaller SMEs to invest in
disadvantaged areas. They also stated that, while the risk
of such a perverse effect may be low for very small
companies,
company
expands.

it obviously increases

the

as

(88)

Furthermore, the aid granted to WAM SpA in 1995 is
intended to support neither productive investments nor
any other admissible aim laid down in the 1992 SME
guidelines, namely aid for general investment outside or
inside national assisted areas, aid for environmental
protection investment and aid for research and devel-
opment,
the
only exception being ‘soft’ aid for SMEs, which can
include consultancy help, market surveys and partici-
pation in fairs and exhibitions.

training or dissemination of knowledge,

(89) Accordingly, the Commission is of the opinion that the
bulk of
the establishment of
permanent structures abroad which were taken into

the eligible costs

for

(14) Commission recommendation 96/280/EC of 3 April 1996
concerning the definition of small and medium-sized enterprises
(OJ L 107, 30.4.1996, p. 4).

(15) See Commission notice on the determination of the applicable rules
for the assessment of unlawful State aid (OJ C 119, 22.5.2002,
p. 22).

(16) See footnote 6.

(91)

(92)

(93)

Furthermore the Commission considers that aid towards
all the costs mentioned above has to be classified as aid
for export related activities in the sense that it is directly
linked to the establishment and operation of a distri-
bution network or to other current expenditure related
to the export activity. Therefore this aid cannot be
regarded as being linked to foreign direct
investment
(FDI).

This not only results from the analysis of the actual
expenditure taken into consideration in granting the
loan (see the table at point 37 and point 89) but has
also been borne out by the objective of the loan contract,
namely the subsidisation of a commercial penetration
the fund that
programme, and by the purposes of
financed the aid, namely the subsidisation of export
undertakings with a view to commercial penetration
programmes to be carried out outside the European
Union.

(ITL 29,43
By contrast, aid to consultancy services
million) and market surveys (ITL 40,95 million) may
qualify for an exemption on the ground that WAM
SpA was an SME and to the extent
they were
provided and carried out by external advisers; the same
goes for aid for participation in fairs and exhibitions
(ITL 12,19 million). This
falls within the 1992
and in particular points 4.3 ‘Aid for
guidelines,
consultancy
of
and
knowledge’ and 4.5 ‘Aid for other purposes’.

dissemination

training

help,

that

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Official Journal of the European Union

4.3.2006

(94)

(95)

(96)

It was

The Commission has long recognised that not all aid is
liable to have an appreciable impact on trade between
Member States. This concept was laid down for the first
time in the de minimis rule, as included in the 1992 SME
guidelines (17).
subsequently reworded in the
Commission notice on the de minimis rule for State
aid (18) and finally confirmed in Article 2 of Council
Regulation (EC) No 994/98 of 7 May 1998 on the appli-
cation of Articles 92 and 93 of the EC Treaty to certain
categories of horizontal State aid (19), on the basis of
which Commission Regulation (EC) No 69/2001 (20)
was adopted.

The Commission also recognizes that the wording of the
1992 de minimis rule, which was in force when the first
aid measure was granted, did not explicitly exclude
export aid; as a consequence, an amount of aid of up
to ECU (now EUR) 50 000 could be deemed admissible,
even with respect to the costs taken into consideration in
granting the aid under examination, to the extent that
WAM SpA did not benefit from any other subsidy in the
form of de minimis aid during the relevant three-year
period. This has been confirmed by the Italian autho-
rities.

in the light of the last paragraph of the
In addition,
Commission notice on the determination of
the
applicable rules for the assessment of unlawful State
aid (21), where, at
the time of a decision, guidelines
have been replaced by a regulation,
the Commission
considers that the rules set out in the regulation must
apply to the extent that they are more favourable than
those of the guidelines (22).

(97)

Thus, an additional assessment of the aid in question has
to be made in the light of Commission Regulations (EC)
No 70/2001 on the application of Articles 87 and 88 of
the EC Treaty to State aid to small and medium-sized
enterprises (23)
(aid in favour of SMEs) and (EC) No
69/2001 (24) de minimis.

(98)

Regulation (EC) No 70/2001 clearly stipulates in Article
1(2)(b) that it does not apply to aid to export-related
activities (25). Consequently, none of
the expenditure

(17) See footnote 6.
(18) OJ C 68, 6.3.1996, p. 9.
(19) OJ L 142, 14.5.1998, p. 1.
(20) See footnote 5.
(21) See footnote 3.
(22) See footnote 4.
(23) See footnote 7.
(24) See footnote 5.
(25) According to the wording of Regulation (EC) No 70/2001, ‘aid to
export-related activities’ means aid to the establishment and
operation of a distribution network or to other current expenditure
linked to the export activity, as well as aid directly linked to the
quantities exported.

listed at point 89 of
considered to comply with that Regulation.

the present decision can be

(99)

Likewise, export aid does not fall within the scope of
Regulation (EC) No 69/2001.

Second loan granted to WAM SpA

(100) At the time the second loan was granted in 2000, WAM
the Italian authorities
it was

SpA was on the admission of
themselves, a large undertaking. Furthermore,
located in a non-assisted area.

(101) Once again, the Commission has to assess the aid in
question on the basis of the rules in force at the time
the aid was granted. On that basis and given that WAM
the 1996
SpA was no longer
an SME, neither
Community guidelines on State aid for
small and
medium-sized enterprises (26) nor the 1998 regional aid
guidelines (27), which are still in force, apply to the aid in
question.

at point 37 of

the present decision,

(102) On the basis of the analysis of the eligible costs, which
are enclosed with letter A/35269 and specified in the
the
table
Commission takes the view that only training expenses
(EUR 25 240 out of a total
loan of EUR 1,8 million)
may be exempted pursuant to Commission Regulation
(EC) No 68/2001 on the application of Articles 87 and
88 of the EC Treaty to training aid (28), irrespective of
whether the assessment is based on Article 4(2)
(spe-
cific training) or (3) (general training), given that both
conditions are met in respect of the aid intensity applied.

(103) The aid in question does not seem to promote any other
horizontal Community objective within the meaning of
Article 87(3)(c) of the Treaty, such as research and devel-
opment, employment, the environment, or rescue and
relevant
restructuring within the meaning of
guidelines, frameworks and regulations.

the

(26) OJ C 213, 23.7.1996, p. 4.
(27) OJ C 74, 10.3.1998, p. 9.
(28) OJ L 10, 13.1.2001, p. 20.

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Official Journal of the European Union

L 63/21

(104)

In the Commission’s opinion, the costs engendered by
rent, fittings for the premises, vehicle purchases, display
models, storage of goods, advertising, and business trips
abroad and by foreign customers to Italy are strictly
linked to the establishment and operation of a distri-
bution network or to current expenditure related to the
export activity.

WAM SpA did not benefit from any other de minimis
subsidy during the relevant
the de
minimis threshold cannot apply to the aid in question.

three-year period,

(105) Compliance with the relevant de minimis rules has also to
be assessed. At the time the specific aid was granted, the
1996 Commission notice on the de minimis rule for State
aid (29) was in force. It clearly stipulates that export aid is
excluded from its scope.

(111) The Commission notes that the exemptions provided for
in Article 87(2) (a) to (c) of the EC Treaty (32) do not
apply to the loans in question since they do not pursue
any of the objectives listed in that Article, nor has the
Italian Government argued that this was the case.

VII. CLOSING REMARKS

(106) The Commission notes that the expenses listed at point
104 have to be classified as aid to export-related activities
and stresses that,
in particular, aid towards technical
assistance workshop premises and personnel abroad (a
sales manager, a general manager, 4 employees and 6
technicians) hardly seems to be compatible with a non-
sales activity.

(107)

It should also be noted that the specific programme had
to be carried out jointly by WAM SpA and the local firm,
WAM Bulk Handling Machinery Shangai Co Ltd, a
wholly owned subsidiary of WAM SpA. This
is
evidence of the established presence of WAM SpA on
the specific market in question.

(108)

In addition, the same wording as at point 92 of the
present decision, which classifies the first loan to WAM
SpA as an incentive to undertake commercial penetration
programmes, has been used in the contract for granting
the aid in question.

(109) Moreover,

in the light of point 96, an additional
assessment of the aid under scrutiny has to be made in
the light of the 2001 de minimis rule,
i.e. Commission
Regulation (EC) No 69/2001 (30).

(110) The two relevant de minimis

rules explicitly exclude
export aid from their respective scope (31). Thus, even if

(29) See footnote 18.
(30) See footnote 5.
(31) ‘Export aid’

is defined in the 1996 de minimis notice as ‘any aid
directly linked to the quantities exported, to the establishment and
operation of a distribution network or to current expenditure linked
to the export activity’. This definition is
reproduced, almost
unchanged,
in Article 1(b) of Commission Regulation (EC)
No 69/2001.

(112) The loans were 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, nor were they intended to promote
culture or heritage
conservation. The Commission
therefore considers that neither Article 87(3)(b) (33) nor
Article 87(3)(d) (34) of the EC Treaty applies to the loans
under consideration.

VIII. CONCLUSION

(113) Both loans to WAM SpA were granted without being
'previously notified to the Commission. Accordingly,
the Commission finds that, having been implemented
in breach of Article 88(3) of the EC Treaty, the loans
were granted unlawfully to the recipient.

(114) The aid granted to WAM SpA in 1995, except for the
portion of the loan granted in respect of expenses for
consultancy services, market surveys and participation in
fairs and exhibitions, is incompatible with the common
market
threshold of
EUR 50 000.

in so far as

exceeds

the

it

(32) Article 87(2) stipulates that the following aid is compatible with the
common market: (a) aid having a social character, granted to indi-
vidual consumers, provided that such aid is granted without discri-
mination related to the origin of the products concerned; (b) aid to
make good the damage caused by natural disasters or exceptional
occurrences; (c) aid granted to the economy of certain areas of the
Federal Republic of Germany […].

‘aid 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’.

‘aid to promote culture and heritage conservation where
such aid does not affect trading conditions and competition in the
Community to an extent that is contrary to the common interest’.

(33) Namely,

(34) Namely,

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4.3.2006

(115) As regards the overall grant equivalent of the specific aid,
consideration has been given to the fact that the loan
was made available to the recipient in several instalments
(three in the case at hand, between 24 April 1996 and
24 April 1998) and that the grace period subsequently
varied from 2 years to zero. The interest rate stipulated
by the loan contract (4,4 %) relative to the reference rate
periodically fixed by the Commission (35) and in force at
the time the loan was granted (11,35 %) has also been
resulted in a grant
taken into consideration. This
equivalent as at 24 April 1996 (date on which the first
instalment of
the loan was paid to WAM SpA) of
EUR 104 313,20.

the loan at hand has been considered
(116) As part of
compatible,
indicated at point 93, be
it must, as
deducted from the aid component and be reflected in
the calculation of the present grant equivalent. Given
the impossibility of establishing a direct link between a
given instalment of
loan and certain specific
expenses,
the same percentage as represented by the
compatible items in the overall loan (ITL 82,57 million
out of ITL 1 358,51 million, i.e. 6 %) has been applied
to the present overall grant equivalent. As 6 % of
EUR 104 313,20 is EUR 6 258,79,
the present grant
equivalent of the incompatible part of the aid is the
EUR 98 054,41 exceeding the threshold of EUR 50 000.

the

(120) As regards the compatible portion of the loan, the same
reasoning as in the case of the first loan applies. Hence
the percentage of the compatible portion of the loan
with respect to the entire loan, namely 1,35 %, has to
be deducted from the grant equivalent of the aid. As a
result, the grant equivalent of the second loan at the time
the final decision was adopted has been calculated at
EUR 104 930,65 (106 366,60 – 1 435,95).

(121) Since it has been classified as aid to export related
activities, neither the 1996 de minimis rule (36), nor the
2001 de minimis Regulation (37) applies to this specific
aid.

(122)

It is the Commission’s standard practice, in accordance
with Article 87 of the EC Treaty, to require recovery
from the recipient of aid which, under that Article, has
been unlawfully granted and is incompatible with the
common market, provided that the aid is not covered
by the
rules. This practice was been
confirmed by Article 14 of Council Regulation (EC)
No 659/1999.

de minimis

(117) The aid granted to WAM SpA in 2000, except for the
portion in support of training activities amounting to
EUR 25 240, is incompatible with the common market.

(123)

In accordance with Article 14(2) of that Regulation, the
aid to be recovered pursuant to a recovery decision must
include interest at an appropriate rate fixed by the
is payable from the date on
Commission.
Interest
the
which the unlawful aid was at
recipient until the date of its recovery.

the disposal of

(118)

loan,

In this case, the loan was made available to WAM SpA in
five instalments between 12 February 2001 and 29
the
January 2003; consequently, with the first
grace period varies from 2 years to zero. Likewise, the
interest rate stipulated in the loan contract
(2,32 %)
relative to the reference rate periodically fixed by the
Commission and in force at
the time the loan in
question was granted (5,70 %) has been taken into
consideration by the Commission in calculating the
grant
including
repayment,
is expected to be completed in
principal and interest,
2008. Accordingly,
the aid
component of the entire loan as at 24 February 2001
(date on which the first instalment of the specific loan
was made available to WAM SpA) would have been
EUR 180 203,70,
the repayments
to the extent
had been made according to the repayment schedule.

the grant equivalent of

equivalent. The overall

that

(119) At the date on which the present decision is expected to
be adopted (19 May 2004), the benefit deriving from the
loan, calculated by the Commission,
to
EUR 106 366,60.

is equivalent

(124) The way in which the interest rate has to be applied has
been spelt out in the Commission communication on the
interest rates to be applied when aid granted unlawfully
is being recovered (38).

(125) The Commission would point out

that

the present
decision is without prejudice to the compatibility of the
national
framework represented by Law No 394/81,
which is the legal basis for the State aid granted to
in
WAM SpA, with respect to which the Commission,
line with the case law of the Court of First Instance (39),
did not find necessary in the present case to initiate
proceedings. It nevertheless does not rule out the possi-
bility of so doing at a later stage,

(36) See footnote 18.
(37) See footnote 5.
(38) OJ C 110, 8.5.2003, p. 21.
(39) See Cases T-92/00 and T-103/00 Diputación Foral de Álava v

(35) Published regularly in the Official Journal of the European Communities.

Commission (Ramondín) [2002] ECR II-1385.

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HAS ADOPTED THIS DECISION:

Article 1

(a)

from 24 April 1996 as regards the aid referred to in
paragraph 1 and

The aid granted to WAM SpA pursuant to Law No 394/81 falls
within the scope of Article 87(1) of the EC Treaty.

(b) from the date of this decision as regards the aid referred to

in paragraph 2.

Since it has not been previously notified to the Commission in
breach of Article 88(3) of the EC Treaty, it constitutes unlawful
aid.

Article 2

for

1.
The aid of EUR 104 313,20 that Italy granted to WAM
SpA in the form of an interest-rate subsidy from 24 April 1996,
except
the portion corresponding to eligible costs for
consultancy services, participation in fairs and exhibitions and
market surveys and amounting to EUR 6 258,79, constitutes
unlawful aid to the extent
it exceeds the threshold of
that
EUR 50 000 laid down in the 1992 de minimis rule (40).

Italy shall take all necessary measures to recover the excess
amount of EUR 48 054,95.

Article 3

1.
Italy shall refrain from granting WAM SpA any further aid
in the form of an interest-rate subsidy by way of the measure
which is the subject of this decision and which is referred to in
Article 2(2) above by either ordering the immediate repayment
of the loan granted or by adjusting, as of the date of this
decision,
rate on the loan in line with the
reference rate applicable at the time the loan was granted and
fixed by the Commission for the purpose of calculating the
grant equivalent of regional aid.

the interest

2.
this
The reference rate referred to in paragraph 1 of
Article shall be applied on a compound basis throughout the
periods referred to in points (a) and (b) of the second subpar-
agraph of Article 2(3).

2.
The aid of EUR 106 366,60 that Italy granted to WAM
SpA in the form of an interest-rate subsidy from 9 November
2000 up to the date of the present decision constitutes unlawful
aid except for the portion corresponding to eligible costs for
training measures and amounting to EUR 1 435,95.

Article 4

Italy shall inform the Commission, within two months of noti-
fication of this decision, of the measures taken to comply with
it, using the questionnaire in Annex to the decision.

Italy shall take all necessary measures to recover the resulting
amount of EUR 104 930,65.

Article 5

This decision is addressed to the Republic of Italy.

3.
Recovery of the aid referred to in paragraphs 1 and 2
above shall be effected without delay and in accordance with
law, provided that they allow the
the procedures of national
immediate and effective execution of the decision.

Done in Brussels, 19 May 2004.

The aid to be recovered shall include interest until the date of its
recovery and with effect respectively:

For the Commission

Mario MONTI
Member of the Commission

(40) See footnote 6.

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ANNEX

Information regarding the implementation of the Commission decision C(2004) 1812

1. Calculation of the amount to be recovered

1.1. Please provide the following details regarding the amount of unlawful state aid that has been put at the disposal

of the recipient:

Concise identification of the measure (1)

Date(s) of payment (2)

Amount (*)

Date(s) of repayment (**)

If a measure consists of several instalments and reimbursements, use separate rows.

(1)
(2) Date or dates on which individual instalments of aid have been put at the disposal of the recipient.
(*) Amount of aid put at the disposal of the recipient, in gross grant equivalents.
(**) Date or dates on which individual instalments of the aid were repaid by the recipient.

Comments:

1.2. Please explain in detail how the interest payable on the amount to be recovered will be calculated.

2. Recovery measures planned or already taken

2.1. Please describe in detail what measures are planned and what measures have been taken to bring about the
immediate and effective recovery of the aid. Please also indicate, where relevant, the legal basis for the measures
planned or taken.

2.2. By what date will the recovery of the aid be completed?

3. Recovery already effected

3.1. Please provide the following details of aid that has been recovered from the recipient:

Concise identification of the measure

Date(s) (1)

Amount of aid repaid

(1) Date or dates on which the aid was repaid.

3.2. Please attach supporting documents for the repayments shown in the table at point 3.1.