State aid — United Kingdom — Aid C 17/04 (ex N 566/03) — Enterprise capital funds — Invitation to submit comments pursuant to Article 88(2) of the EC Treaty
Date: 2004-09-09
Institutions: European Commission
Subjects: State aid, United Kingdom, control of State aid, early-stage capital, financial aid, small and medium-sized enterprises

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EN

Official Journal of the European Union

9.9.2004

STATE AID — UNITED KINGDOM

Aid C 17/04 (ex N 566/03) — ‘Enterprise capital funds’

Invitation to submit comments pursuant to Article 88(2) of the EC Treaty

(2004/C 225/02)

(Text with EEA relevance)

By means of the letter dated 7 May 2004 reproduced in the authentic language on the pages following this
summary, the Commission notified the United Kingdom of its decision to initiate the procedure laid down
in Article 88(2) of the EC Treaty concerning the abovementioned aid scheme.

Interested parties may submit their comments on the measure in respect of which the Commission is initi-
ating the procedure within one month of the date of publication of this summary and the following letter,
to:

European Commission
Directorate-General for Competition
State Aid Greffe
B-1049 Brussels
Fax (32-2) 296 12 42

These comments will be communicated to the United Kingdom. Confidential treatment of the identity of
the interested party submitting the comments may be requested in writing, stating the reasons for the
request.

SUMMARY

By letter dated 25 November 2003, registered at the Commis-
the UK authorities notified,
sion on 26 November 2003,
pursuant to Article 88(3) of the EC Treaty,
the 'Enterprise
capital funds' scheme. By letter D/58191 dated 19 December
information
2003 the Commission requested additional
concerning the abovementioned measure. This information was
submitted by the United Kingdom authorities by letter dated 30
January 2004 and letter dated 19 March 2004, registered at the
Commission on 3 February 2004 and 25 March 2004, respec-
tively.

1. OBJECTIVE OF THE SCHEME

The scheme intends to improve access to growth capital for
small and medium-sized enterprises (SMEs)
the
United Kingdom. SMEs seeking to raise initial equity funding of
between GBP 250 000 (EUR 357 000) and GBP 2 million
(EUR 2,9 million) will approach licensed enterprise capital
funds (ECFs) to be set up under the scheme. The licensing
process will be overlooked by the Small Business Service (SBS)
of the UK Department of Trade and Industry.

throughout

2. BENEFICIARIES OF THE SCHEME

The scheme is exclusively aimed at unquoted small and
medium-sized enterprises (1) in the United Kingdom. Firms in
difficulty as defined by the Community guidelines on State aid
for rescuing and restructuring firms in difficulty (2) are excluded

(1) The definition of small and medium-sized enterprises applied by the
United Kingdom authorities for the purposes of the scheme is
always in line with the definition given in Annex I to Commission
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 (OJ L 10, 13.1.2001, p. 33).

(2) OJ C 288, 9.10.1999, p. 2.

from investment. Enterprise capital funds (ECFs) will not invest
in sensitive sectors under State aid restrictions or in sectors to
which the Commission Communication on State aid and risk
capital (3) does not apply.

3. FUNDING OF THE SCHEME

The notified scheme is intended to be self-financing over the
medium term. In terms of accounting for the scheme in its
initial phase, the United Kingdom has allocated […] (*) to cover
the cash-flow cost of the initial leverage.

4. DURATION OF THE SCHEME

The United Kingdom seeks approval for an initial period of 10
years.

5. THE INVESTMENT INSTRUMENTS

Enterprise capital funds will be required to invest in small and
medium-sized enterprises by means of equity or quasi-equity
instruments.

6. CUMULATION OF AID UNDER THE SCHEME

The United Kingdom authorities have committed themselves
that the beneficiary SMEs' eligibility for other publicly funded
grants, loans or other forms of investment aid outside of this
notification will be restricted by 30 % of the aid intensity that
would otherwise be permissible.

(3) OJ C 235, 21.8.2001, p. 3.
(*) Business secret.

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7. ASSESSMENT OF THE SCHEME

outside of this notification will be restricted by 30 % of the
aid intensity that would otherwise be permissible.

Existence of State aid

The Commission considers, at this stage of the procedure, that
the measure constitutes State aid within the meaning of Article
87(1) of the EC Treaty. According to the provisions of the
Commission Communication on State aid and risk capital (4),
the assessment of the presence of State aid must consider the
possibility that a measure may confer aid on at least three
different levels:

— aid to investors,

— aid to any fund or other vehicle through which the

measure operates,

— aid to the companies invested in.

At the level of investors, the Commission considers that there
is State aid within the meaning of Article 87(1) of the EC
Treaty.

At the level of the fund, the Commission does not consider the
enterprise capital funds to be separate aid beneficiaries.

At the level of the companies invested in, the Commission
considers that there is State aid within the meaning of Article
87(1) of the EC Treaty.

Preliminary assessment of conformity of the measure

The measure fulfils several of the conditions laid down in the
Commission communication on State aid and risk capital.

— ECFs will be restricted to investments in small and medium-

sized enterprises within the Commission definition.

— ECFs will be required to invest capital in SMEs by means of

equity or quasi-equity instruments.

— The public authorities will have no involvement in the
investment choices and decision-making of any ECFs apart
from setting restrictions to ensure that
investments are
limited to SMEs.

— The United Kingdom authorities will ensure that the ECF
scheme is publicised and that applications are invited from
across the EEA with notices in the Official Journal of the
European Union and the relevant trade press. There will be
no restriction on location for any investor or operator.

— Enterprise capital funds (ECFs) will not invest in sensitive
sectors under State aid restrictions or in sectors to which
the Commission Communication on State aid and risk
capital (5) does not apply.

— The United Kingdom authorities have committed them-
selves that the beneficiary SMEs' eligibility for other publicly
investment aid
loans or other forms of
funded grants,

Evidence of market failure

Point VI.5 of the Commission Communication on State aid and
risk capital stipulates that the Commission will require evidence
of market failure for risk capital measures. It may however be
failure when each
the case for market
prepared to accept
tranche of finance for an enterprise from risk capital measures
which are wholly or partially financed through State aid will
contain a maximum of EUR 500 000, or EUR 750 000 in
regions qualifying for assistance pursuant to Article 87(3)(c), or
EUR 1 million in regions qualifying for assistance pursuant to
Article 87(3)(a) of the EC Treaty.

Taking into account that the United Kingdom consists of non-
assisted areas as well as Article 87(3)(c) and Article 87(3)(a)
areas as outlined in the Regional Aid Map 2000-2006 for the
United Kingdom (6), and bearing in mind that
the United
Kingdom authorities intend to grant tranches of investment aid
of up to GBP 2 million (EUR 2,9 million) regardless of the
location of
the Commission
concludes that the existence of market failure cannot be taken
for granted without further evidence. The intended tranche size
under the present scheme significantly exceeds the thresholds
outlined in the Commission Communication on State aid and
risk capital and the Commission must therefore require provi-
sion of evidence for the existence of market failure.

the beneficiary

enterprise,

In order to demonstrate the existence of market failure, the
United Kingdom authorities have submitted a paper entitled
‘Assessing the Scale of the Equity Gap in the UK Economy’,
written in 2003, as well as a paper entitled ‘Assessing the
Finance Gap’. The key finding of these papers is that there is a
gap in the provision of venture capital for SMEs in the deal size
range of GBP 250 000 (EUR 357 000)
to GBP 2 million
(EUR 2,9 million).

investment

tranches considerably higher

The Commission, after a first preliminary assessment of the
measure, has doubts if the arguments presented by the United
Kingdom authorities can sufficiently justify the granting of risk
capital
than the
maximum investment tranches foreseen by the Commission
Communication on State aid and risk capital. The Commission
is of the opinion that a more thorough analysis of this complex
question is necessary. The Commission wishes to collect infor-
mation from other interested parties, notably from potential
providers of risk capital to SMEs in the United Kingdom. In
order to do so, the Commission must, for legal reasons, open
the procedure provided for in Article 88(2) of the EC Treaty. It
is only with the help of such observations that the Commission
can decide whether
such aid is necessary and does not
adversely affect trading conditions to an extent contrary to the
common interest.

(4) OJ C 235, 21.8.2001, p. 3.
(5) OJ C 235, 21.8.2001, p. 3.

(6) Commission decision of 26 July 2000 (OJ C 272, 2000).

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TEXT OF LETTER

‘The Commission wishes to inform the United Kingdom that,
having examined the information supplied by your authorities
on the aid measure referred to above, it has decided to initiate
the procedure laid down in Article 88(2) of the EC Treaty.

Service (SBS). It will monitor ongoing investments undertaken
by ECFs without having any direct control over ECFs' individual
investment decisions. It will also ensure that each ECF complies
with its business plan and adheres to the terms of its successful
bid.

8. PROCEDURE

1.1.5. Funding of the scheme

By letter dated 25 November 2003, registered at the Commis-
sion on 26 November 2003,
the UK authorities notified,
pursuant to Article 88(3) EC, the “Enterprise Capital Funds”
scheme. By letter D/58191 dated 19 December 2003 the
Commission requested additional information concerning the
above-mentioned measure. This information was submitted by
the UK authorities by letter dated 30 January 2004 and letter
dated 19 March 2004, registered at the Commission on 3
February 2004 and 25 March 2004.

The notified scheme is intended to be self-financing over the
medium term. In terms of accounting for the scheme in its
initial phase, the UK has allocated […] (*) to cover the cash-
flow cost of the initial leverage.

1.1.6. Duration of the scheme

The UK seeks approval for an initial period of 10 years.

9. DESCRIPTION OF THE AID MEASURE

2.1. General background of the scheme

2.2. The mechanics of the scheme

1.1.1. Objective of the scheme

1.1.7. The role of the Enterprise Capital Funds (ECFs)

The scheme intends to improve access to growth capital for
small and medium-sized enterprises (SMEs) throughout the UK.
SMEs
seeking to raise initial equity funding of between
£ 250,000 (EUR 357,000) and £ 2 million (EUR 2.9 million)
will approach licensed Enterprise Capital Funds (ECFs) to be set
up under the scheme. The licensing process will be overlooked
by the Small Business Service (SBS) of the UK Department of
Trade and Industry.

1.1.2. Legal basis of the scheme

The legal basis of the scheme is section 8 of the “Industrial
Development Assistance Act 1982”.

1.1.3. Beneficiaries of the scheme

rescuing and restructuring firms

The scheme is exclusively aimed at unquoted small and
medium-sized enterprises (7) in the United Kingdom. Firms in
difficulty as defined by the “Community guidelines on State aid
in difficulty” (8) are
for
excluded from investment. Enterprise Capital Funds (ECFs) will
not invest in sensitive sectors under State aid restrictions or in
sectors to which the “Commission Communication on State
Aid and Risk Capital” (9) does not apply. Low-risk sectors
including property, land, finance and investment companies, or
finance-type leasing companies will not be eligible for invest-
ment under the scheme. Enterprise Capital Funds will also be
prevented from investing in other ECFs.

1.1.4. Administration of the scheme

The Enterprise Capital Funds (ECFs) foreseen under the scheme
will combine private and public money for investment into
SMEs. Following a licensing process attributing ECF status, the
funds will then be entitled to receive public leverage at market
rates or above.

1.1.8. Restrictions on public leverage and repayment obligations

Leverage to licensed Enterprise Capital Funds will be limited to
no more than two times the private capital raised by the fund.
The leverage, interest on the leverage and a profit-share for the
public contribution will need to be repaid by the Enterprise
Capital Funds, thereby ensuring that over the medium term the
programme will be self-financing.

1.1.9. Minimising public intervention

The exact amounts of leverage, profit-share and repayment
priorities will be determined by a competitive bidding process,
thereby ensuring minimal public support
to attract private
capital. Open invitation for applications through publication of
the scheme in the Official Journal of the European Union and the
relevant trade press will safeguard this general principle. As
part of applying for ECF status, applicants will be asked to
specify how much leverage (maximum two times private
capital) they wish to use, the profit share with the public and
the prioritisation of repayments of:

The UK Department of Trade and Industry (DTI) will have stat-
utory responsibility through its executive agency Small Business

— Interest on the leverage

(7) The definition of small and medium-sized enterprises applied by the
UK authorities for the purposes of the scheme is always in line with
the definition given in Annex I to the Commission Regulation No
70/2001 on the application of Articles 87 and 88 of the EC Treaty
to State aid to small and medium-sized enterprises (OJ L 10,
13.1.2001, p. 33).

(8) OJ C 288, 09.10.1999, p. 2.
(9) OJ C 235, 21.8.2001, p. 3.

— Leverage

— Private capital

— Profit distribution.

(*) Business secret

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1.1.10. Conditions for ECF eligibility

2.2. Cumulation of aid under the scheme

Potential ECF operators will be asked to submit a robust busi-
ness plan including:

— The proposed management team, their relevant experience
and evidence that they possess the competencies necessary
to run an ECF effectively

— The amount of private capital to be raised and the intended

sources of capital

— Evidence of investor interest for the proposed ECF business

plan

— The proposed ECF's investment strategy,

including the
proportion of the fund which is intended to be invested in
early stage and start up companies

— Repayment arrangements,

including the sequencing of
repayments of leverage, interest repayments on the leverage,
profit distribution, as well as the public's profit share.

ECFs will be required to abide by British Venture Capital Asso-
ciation (BVCA) guidelines on accounting standards.

1.1.11. Assuring profit-driven investment decisions

The public administrative body will not accept bids in which
the public leverage is exposed to greater risk than the private
capital. At the same time, private investors in Enterprise Capital
Funds may be exposed to greater downside risk than the public.
This will ensure commercial best practice in the operation and
decision making of the Enterprise Capital Funds.

1.1.12. Drawing down leverage

Once an Enterprise Capital Fund has been approved and has
started to make investments, it will be eligible to receive public
leverage in proportion to the amount of capital drawn down
from private investors in the form of a participating stake in
the Enterprise Capital Fund. The size of the leverage entitlement
will be capped at up to two times the private capital committed
for Enterprise Capital Funds.

1.1.13.

Investments in SMEs

Enterprise Capital Funds will invest in eligible SMEs and will be
allowed to participate in initial equity funding rounds of up to
£ 2 million (EUR 2.9 million) in total. Follow-on investments
will be permitted so long as the total equity funding raised by
any beneficiary SME is no greater
than the £ 2 million
(EUR 2.9 million) limit. After a period of at least 6 months
from the Enterprise Capital Fund's initial investment in an SME,
follow-on investments in excess of the £ 2 million (EUR 2.9
million) limit will also be permitted where necessary to prevent
dilution. This will be subject to an upper limit of 10 % of each
ECF's committed capital that may be invested in any single
company, to ensure a satisfactory level of portfolio diversity.

1.1.14. The investment instruments

Enterprise Capital Funds will be required to invest in small and
medium-sized enterprises by means of equity or quasi-equity
instruments.

The UK authorities have committed themselves that the benefi-
ciary SMEs' eligibility for other publicly funded grants, loans or
other forms of investment aid outside of this notification will
be restricted by 30 % of the aid intensity that would otherwise
be permissible.

10. ASSESSMENT OF THE SCHEME

In accordance with Article 6(1) of Council Regulation
659/1999 of 22 March 1999, the decision to initiate proceed-
ings shall summarise the relevant issues of fact and law, shall
include a preliminary assessment from the Commission as to
the aid character of the proposed measure, and shall set out the
doubts as to its compatibility with the common market.

3.1. Legality

By notifying the scheme, the UK authorities respected their
obligations under Article 88(3) EC.

3.2. Existence of State aid

The Commission considers, at this stage of the procedure, that
the measure constitutes State aid within the meaning of Article
87(1) of the EC Treaty. According to the provisions of the
“Commission Communication on State Aid
and Risk
Capital” (10), the assessment of the presence of State aid must
consider the possibility that a measure may confer aid on at
least three different levels:

— Aid to investors

— Aid to any fund or other vehicle through which the

measure operates

— Aid to the companies invested in.

At the level of investors, the Commission considers that there is
State aid within the meaning of Article 87(1) EC. The
involvement of state resources is demonstrated by the fact that
the UK authorities will provide up to two times the amount
provided by private investors in Enterprise Capital Funds as
public leverage. Private investors in Enterprise Capital Funds,
who may be undertakings within the meaning of
the EC
Treaty, receive an advantage as the measure allows them to
raise capital provided by the public. In the absence of public
participation in the Enterprise Capital Funds, the private investors
would not have been able to raise the same amounts of capital
at the same conditions. Furthermore,
in the case of profits
earned by the Enterprise Capital Funds, private investors are
entitled to higher returns than the public. Even though no
person or organisation is debarred from investing in the funds,
the limited size of the funds will not guarantee that all potential
investment will be accepted and the Commission therefore
considers that there is selectivity. Finally, the scheme affects
trade between Member States, as investment in capital
is an
is the subject of considerable trade between
activity that
Member States.

(10) OJ C 235, 21.8.2001, p. 3.

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At the level of the fund, the Commission in general tends to the
view that a fund is a vehicle for the transfer of aid to investors
and/or enterprises invested in, rather than being an aid benefi-
ciary itself. However, in certain cases, notably measures invol-
ving transfers in favour of existing funds with numerous and
diverse investors, the fund may have the character of an inde-
pendent enterprise. Under the present scheme, the Enterprise
Capital Funds will be newly created and will be prevented from
diversifying into other activities than those intended by the
scheme. The Commission therefore does not consider the Enter-
prise Capital Funds to be separate aid beneficiaries. This principle
is in line with the Commission decisions on the “Viridian
Growth Fund” (11), the “Coalfields Enterprise Fund” (12) and the
“Community Development Venture Fund” (13).

proportionate share of any losses made by ECFs. Investment
decisions will be taken by commercial managers of the ECF
funds with an interest in ensuring a maximum return for the
fund. ECFs or their operators will be required to act in line
with industry standards (BVCA guidelines).

1.1.15.4. Minimisation of level of distortion

The UK authorities will ensure that the ECF scheme is publi-
cised and that applications are invited from across the EEA
with notices in the Official Journal of the European Union and the
relevant trade press. There will be no restriction on location for
any investor or operator.

the level of

invested in,

the companies

the Commission
At
considers that there is State aid within the meaning of Article
87(1) EC as risk capital would not be available to SMEs in the
same amounts and at the same conditions in absence of the
scheme. The stated objective of the scheme is to extend the
to SMEs in the United
opportunity to access risk capital
Kingdom and the scheme is
therefore considered to be
selective.

3.1. Preliminary assessment of conformity of the measure

1.1.15.5. Sectoral focus

Enterprise Capital Funds (ECFs) will not invest in sensitive sectors
under State aid restrictions or in sectors to which the “Commis-
sion Communication on State Aid and Risk Capital” (14) does
not apply. Low-risk sectors including property,
land, finance
and investment companies, or finance-type leasing companies
will not be eligible for investment under the scheme.

1.1.15. Conformity with the positive elements of the Commission
Communication

1.1.15.6. Avoidance of cumulation

1.1.15.1. Restriction of investments

ECFs will be restricted to investments in small and medium-
sized enterprises within the Commission definition. In addition,
there will be restrictions preventing investments within speci-
fied sectors, including low risk firms as described under point
2.1.3 above.

1.1.15.2. Focus on risk capital market failure

ECFs will be required to invest capital in SMEs by means of
equity or quasi-equity instruments.
that are
composed wholly of debt instruments with no equity features
will not be permitted.

Investments

1.1.15.3. Decisions to invest should be profit driven

The public authorities will have no involvement in the invest-
ment choices and decision making of any ECFs apart from
setting restrictions to ensure that investments are limited to
SMEs. The administrative body SBS will only approve ECFs
where operators have a clear incentive to maximise returns.
The terms on which the public authorities will invest in ECFs
will give private investors very strong incentives to ensure that
their funds are profit-driven and perform successfully. These
incentives arise because private investors will have to pay
interest on the public capital, and fully repay capital to both
the public and private investors, before any profits can be
distributed. As a result, private investors will bear at least a

(11) State Aid C 46/2000.
(12) State Aid N 722/2000 .
(13) State Aid N 606/2001.

The UK authorities have committed themselves that the benefi-
ciary SMEs' eligibility for other publicly funded grants, loans or
other forms of investment aid outside of this notification will
be restricted by 30 % of the aid intensity that would otherwise
be permissible.

1.1.16. Evidence of market failure

Point VI.5 of the “Commission Communication on State Aid
and Risk Capital” stipulates that the Commission will require
evidence of market failure for risk capital measures. It may
however be prepared to accept the case for market failure
when each tranche of
finance for an enterprise from risk
capital measures which are wholly or partially financed
through State aid will contain a maximum of EUR 500,000, or
EUR 750,000 in regions qualifying for assistance under Article
87(3)(c) or EUR 1 million in regions qualifying for assistance
under Article 87(3)(a) EC.

Taking into account that the UK consists of non-assisted areas
as well as Article 87(3)(c) and Article 87(3)(a) areas as outlined
in the Regional Aid Map 2000–2006 for
the United
Kingdom (15), and bearing in mind that
the UK authorities
intend to grant tranches of investment aid of up to £ 2 million
(EUR 2.9 million) regardless of the location of the beneficiary
enterprise,
the existence of
market failure cannot be taken for granted without further
evidence. The intended tranche size under the present scheme
significantly exceeds the thresholds outlined in the “Commis-
sion Communication on State Aid and Risk Capital” and the
Commission must therefore require provision of evidence for
the existence of market failure.

the Commission concludes that

(14) OJ C 235, 21.8.2001, p. 3.
(15) Commission decision of 26 July 2000 (OJ C/272/2000).

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1.1.16.1. Provision of evidence of market failure

In order to demonstrate the existence of market failure, the UK
authorities have submitted a paper “Assessing the Scale of the
“Equity Gap” in the UK Economy” written in 2003, as well as a
paper “Assessing the Finance Gap”. The key finding of these
papers is that there is a gap in the provision of venture capital
for SMEs in the deal size range of £ 250,000 (EUR 357,000)
to £ 2 million (EUR 2.9 million) for the following reasons:

— A failing in the provision of equity-type growth finance in
the UK that has persisted at least since 1999 as evidenced
from the most recent 2003 UK survey.

— Although access to finance, particularly debt finance, has
improved for the majority of businesses in the UK, small
businesses with the potential for high growth still have
problems in attracting equity capital. They can fall between
the scope of individual business angels to provide sufficient
financial backing and the desire of formal venture capitalists
to incur the relatively higher costs of investing in SMEs.

— A larger level of demand for equity type finance than is
presently being met exclusively by professional investors. If
the supply of equity finance would be increased, particu-
larly in the equity gap region, awareness of equity could be
raised overall and firms would be more willing to use
external sources as a mechanism for financing growth.

— A perception that many of the firms which do not succeed
in accessing growth finance are unsuccessful because they
are not (as yet) suitable recipients for professional finance.
Many, if not a majority, of the new businesses seem to be
un-financable in their present state. A supply of seed and
start-up finance would increase investor awareness over
time.

— Qualitative evidence that there are shortfalls in the funding
for small entrepreneurial and high growth businesses. This
equity gap has the greatest impact for firms wishing to
attract
approximately
£ 250,000 and £ 2 million (EUR 357,000 and EUR 2.9
million).

investments

between

initial

— Capital rationing does exist within the UK economy and
particularly affects SMEs seeking small amounts of external
finance for early stage, firm growth and development. The
availability of external finance, and particularly sources of
equity from professional
is particularly proble-
matic below an investment size in the region of £ 1.5 to
£ 2 million (EUR 2.17 million to EUR 2.9 million).

investors,

in

— A majority of UK professional equity providers are not
interested
than
investments which
£ 3 million (EUR 4.35 million). While smaller tranches of
money from informal investors/business angels and govern-
ment/private schemes such as the regional venture capital
funding sources below
funds are helping to address

smaller

are

£ 500,000 (EUR 725,000), the UK does not yet have a
system in operation that would allow the provision of
“tiered” or
funding to attractive but capital
“escalator”
constrained businesses.

— The evidence also points to a gap that has been growing
over time, driven in part by the success of the private
equity industry moving to larger size investments. The
prognosis is that this gap is likely to grow in scale as fixed
cost issues will encourage professional venture capital firms
to increase the size of both their funds and their minimum
acceptable deal sizes.

risk capital

The Commission, after a first preliminary assessment of the
measure, has doubts if the arguments presented above can
sufficiently justify the granting of
investment
tranches up to 5.7 times than the maximum investment
tranches foreseen by the “Commission Communication on
State Aid and Risk Capital”. The Commission is of the opinion
that a more thorough analysis of this alleged market failure is
necessary. The Commission wishes to collect information from
other interested parties, notably from potential providers of
risk capital to SMEs in the United Kingdom on this complex
question. In order to do so, the Commission must, for legal
reasons, open the procedure provided for in Article 88(2) ECT.
It is only with the help of such observations that the Commis-
sion can decide whether such aid is necessary and does not
adversely affect trading conditions to an extent contrary to the
common interest.

11. DECISION

In the light of the foregoing considerations, the Commission,
acting under the procedure laid down in Article 88(2) of the
EC Treaty,
its
comments and to provide all such information as may help to
assess the aid scheme, within one month of the date of receipt
of this letter.

the United Kingdom to submit

requests

The Commission wishes to remind the United Kingdom that
Article 88(3) of the EC Treaty has suspensory effect, and would
draw your attention to Article 14 of Council Regulation (EC)
No 659/1999, which provides that all unlawful aid may be
recovered from the recipients.

The Commission warns the United Kingdom that it will inform
interested parties by publishing this letter and a meaningful
summary of it in the Official Journal of the European Union. It
will also inform interested parties in the EFTA countries which
are signatories to the EEA Agreement, by publication of a
notice in the EEA Supplement to the Official Journal of the
European Union and will
inform the EFTA Surveillance
Authority by sending a copy of this letter. All such interested
parties will be invited to submit their comments within one
month of the date of such publication.’