Proposal for a Council Decision on the fulfilment of the conditions laid down in Article 3 of the Additional Protocol to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and Bulgaria, of the other part, with regard to an extension of the period foreseen in Article 9(4) of Protocol 2 of the Europe Agreement
Date: 2004-06-02
Institutions: European Commission
Subjects: Bulgaria, State aid, aid for restructuring, association agreement (EU), derogation from EU law, iron and steel industry

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 2.6.2004 
COM(2004) 411 final 

Proposal for a 

COUNCIL DECISION 

on the fulfilment of the conditions laid down in Article 3 of the Additional Protocol to 
the Europe Agreement establishing an association between the European Communities 
and their Member States, of the one part, and Bulgaria, of the other part, with regard to 
an extension of the period foreseen in Article 9(4) of Protocol 2 of the Europe Agreement 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

According  to  Article  9(4)  of  Protocol  2  of  the  Europe  Agreement  with  Bulgaria, 
during  the  first  five  years  after  the  entry  into  force  of  the  Agreement,  and  by 
derogation from paragraph 1 (iii) of the same Article, Bulgaria could exceptionally, 
as  regards  steel  products,  grant  public  aid  for  restructuring  purposes,  provided  that 
this leads to the viability of the benefiting firms under normal market conditions at 
the end of the restructuring period, the amount and intensity of such aid are strictly 
limited  to  what  is  absolutely  necessary  in  order  to  restore  such  viability  and  are 
progressively  reduced  and  the  restructuring  programme  is  linked  to  a  global 
rationalisation and reduction of overall production capacity in Bulgaria. 

This initial period expired on 31 December 1997 for Bulgaria. 

Bulgaria  requested  an  extension  of  the  above-mentioned  period  on  21  November 
2002. 

A  realistic  restructuring  programme,  including  individual  company  viability  plans, 
respecting the criteria set out in Article 9(4) of Protocol 2 of the Europe Agreement, 
are  the  necessary  basis  for  agreeing  the  requested  extension  of  the  period  during 
which Bulgaria may grant state aid for restructuring purposes.  

In  May  2002,  the  Commission  proposed  an  extension  of  the  period  during  which 
Bulgaria,  the  Czech  Republic,  Poland  and  Romania  may  grant  aids  to  restructure 
their steel sector, in view of the urgent need to find an acceptable solution to move 
forward  the  steel  restructuring  process  in  the  candidate  countries  concerned,  and 
pave the way for bringing the accession negotiations on the Competition Chapter to a 
conclusion. 

This  extension  would  provide  the  legal  basis  for  granting  restructuring  aid  in  the 
period before accession in the framework of the required restructuring plans (i.e. the 
aid provided should be limited and proportional to capacity reduction); it would also 
have  the  effect  of  retroactively  legalising  aid  that  may  have  been  granted  illegally 
since the entry into force or the Europe Agreement. 

The  extension  will  come  into  effect  only  after  the  adoption  and  assessment  of  a 
restructuring  plan  and  business  plans,  which  fulfil  the  criteria  of  Protocol  2  of  the 
Europe Agreements. 

With  a  view  to  achieving  this  aim,  and  considering  that  Protocol  2  of  the  Europe 
Agreement  with  Bulgaria  does  not,  as  in  the  case  of  the  Europe  Agreement  with 
Poland,  grant  the  authority  to  the  Association  Council  to  decide  on  such  an 
extension, an Additional Protocol to the Europe Agreement with Bulgaria was drawn 
up.  

The Additional Protocol to the Europe Agreement was signed by the Community and 
Bulgaria on 21 November 2002. A provisional application before entry into force, as 
envisaged by Article 300 (2) of the Treaty establishing the European Community is 
in place, as foreseen by Article 1 of Council Decision (EC) No […..] of 29 July 2002 
on the signature and provisional application of an Additional Protocol to the Europe 
Agreement.  

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The Additional Protocol provides for extension of the period foreseen by Protocol 2 
by  a  further  eight  years  starting  on  1  January  1998  or  until  the  date  of  Bulgaria's 
accession to the European Union, whichever comes first, subject to the fulfilment of 
certain conditions. 

The first condition has been fulfilled by Bulgaria, by submitting to the Commission a 
restructuring programme and a business plan, which have been assessed and agreed 
by its National State Aid Authority (the Commission for Protection of Competition);  

The  second  condition  is  the  final  assessment  of  the  restructuring  programme  and 
business  plan  by  the  Commission,  with  a  view  to  determining  whether  the 
requirements of Article 9(4) of Protocol 2 of the Europe Agreement are met; 

The  Commission  services  have  made  a  final  assessment  which  concludes  that  the 
restructuring  programme  and  plan  submitted  by  Bulgaria  meet  the  requirements  of 
Article 9(4) of Protocol 2 of the Europe Agreement; 

The Commission is proposing a Council Decision approving the Commission's final 
assessment, as foreseen in Article 3 of the Additional Protocol. Once the Council has 
granted its approval, the conditions laid down in Articles 2 and 3 of the Additional 
Protocol will have been met and the extension of the period foreseen by Protocol 2 
will take effect. 

The  Council  is  therefore  requested  to  approve  the  attached  draft  proposal  for  a 
Decision on the fulfilment of the conditions laid down in Article 3 of the Additional 
Protocol to the Europe Agreement establishing an association between the European 
Communities  and  their  Member  States,  of  the  one  part,  and  Bulgaria,  of  the  other 
part, with regard to an extension of the period foreseen in Article 9(4) of Protocol 2 
of the Europe Agreement. 

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Proposal for a 

COUNCIL DECISION 

on the fulfilment of the conditions laid down in Article 3 of the Additional Protocol to 
the Europe Agreement establishing an association between the European Communities 
and their Member States, of the one part, and Bulgaria, of the other part, with regard to 
an extension of the period foreseen in Article 9(4) of Protocol 2 of the Europe Agreement 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty Establishing the European Community; 

Having  regard  to  Council  Decision  (EC)  No  […..]  of  29  July  2002  on  the  signature  and 
provisional  application  of  an  Additional  Protocol  to  the  Europe  Agreement  establishing  an 
association between the European Communities and their Member States, of the one part, and 
Bulgaria, of the other part, with regard to an extension of the period foreseen in Article 9(4) of 
Protocol 2 of the Europe Agreement; 

Having regard to the Additional Protocol to the Europe Agreement establishing an association 
between the European Communities and their Member States, of the one part, and Bulgaria, 
of  the  other  part,  with  regard  to  an  extension  of  the  period  foreseen  in  Article  9(4)  of 
Protocol 2 of the Europe Agreement, and in particular Article 3 thereof; 

Having regard to the proposal of the Commission; 

Whereas: 

(1) 

(2) 

A Europe Agreement establishing an association between the European Communities 
and their Member States, of the one part, and Bulgaria, of the other part1, came into 
force on 1 February 1995.  

Article  9(4)  of  Protocol  2  of  the  Europe  Agreement  with  Bulgaria  lays  down  that 
during the first five years after entry into force of the Agreement, and by derogation 
from paragraph 1 (iii) of the same Article, Bulgaria may exceptionally, as regards steel 
products,  grant  public  aid  for  restructuring  purposes,  provided  that  this  leads  to  the 
viability  of  the  benefiting  firms  under  normal  market  conditions  at  the  end  of  the 
restructuring period, the amount and intensity of such aid are strictly limited to what is 
absolutely  necessary  in  order  to  restore  such  viability  and  are  progressively  reduced 
and the restructuring programme is linked to a global rationalisation and reduction of 
overall production capacity in Bulgaria; 

(3) 

The initial period of five years expired on 31 December 1997; 

1 OJ L 358, 31.12.1994, p.3 

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(4) 

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Bulgaria  requested  an  extension  of  the  above-mentioned  period  on  21  November 
2002; 

It is appropriate to grant an extension of this period for an additional period of eight 
years  starting  on  1  January  1998  or  until  the  date  of  Bulgaria’s  accession  to  the 
European Union, whichever comes first; 

To  this  effect,  an  Additional  Protocol  to  the  Europe  Agreement  was  signed  by  the 
Community and Bulgaria on 21 November 2002 and is provisionally applied from that 
date. 

Under  Article  2  of  the  Additional  Protocol,  the  extension  of  the  above-mentioned 
period  is  made  conditional  on  the  submission  by  Bulgaria  to  the  Commission  of  a 
restructuring programme and business plans that meet the requirements of Article 9(4) 
of  Protocol  2  of  the  Europe  Agreement  and  have  been  assessed  and  agreed  by  its 
National State Aid Authority (the Commission for Protection of Competition); 

In March 2004, Bulgaria submitted to the Commission a restructuring programme and 
a business plan for its only company having benefited or benefiting of a state support 
for restructuring; 

Under  Article  3  of  the  Additional  Protocol,  the  extension  of  the  above-mentioned 
period is made conditional on a final assessment of the restructuring programme and 
business plans by the Commission; 

(10)  The Commission has made a final assessment of the restructuring programme and the 
business plan submitted by Bulgaria; this assessment indicates that the implementation 
of  the  restructuring  programme  and  the  business  plan  will  allow  the  company 
concerned  to  reach  viability  under  normal  market  conditions.  It  also  shows  that  the 
amount of State aid for restructuring purposes as specified in the plan is strictly limited 
to  what  is  necessary  to  allow  the  company  concerned  to  reach  viability  and  will  be 
progressively  reduced  and  stopped  by  2005.  The  assessment  provides  also  that  a 
global rationalisation and reduction of excess capacity of the beneficiary company will 
be reached. The assessment therefore concludes that the restructuring programme and 
the  business  plan  meet  the  requirements  of  Article  9(4)  of  Protocol  2  of  the  Europe 
Agreement; 

HAS DECIDED AS FOLLOWS:  

Article 1 

The  restructuring  programme  and  business  plans  submitted  to  the  Commission  by  Bulgaria 
pursuant  to  Article  2  of  the  Additional  Protocol  to  the  Europe  Agreement  establishing  an 
association between the European Communities and their Member States, of the one part, and 
Bulgaria, of the other part, with regard to an extension of the period laid down in Article 9(4) 
of  Protocol  2  to  the  Europe  Agreement  are  in  compliance  with  the  requirements  of 
Article 9(4) of Protocol 2. 

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Article 2 

The period during which Bulgaria may exceptionally, as regards steel products, grant public 
aid for restructuring purposes in accordance with the provisions of Article 9(4) of Protocol 2 
is hereby extended by an additional period of eight years starting on 1 January 1998 or until 
the date of Bulgaria's accession to the European Union whichever comes first, as foreseen by 
Article 1 of the Additional Protocol. 

Done at Brussels, 

For the Council 
The President 

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