2005/467/: Commission Decision of 19 May 2004 on State aid which Belgium is planning to implement for Sioen Fibres SA (notified under document number C(2004) 1622) Text with EEA relevance
Date: 2005-05-19
Institutions: European Commission
Subjects: Belgium, State aid, aid to undertakings, control of State aid, investment aid, man-made fibre

25.6.2005

EN

Official Journal of the European Union

L 165/15

COMMISSION

COMMISSION DECISION

of 19 May 2004

on State aid which Belgium is planning to implement for Sioen Fibres SA

(notified under document number C(2004) 1622)

(Only the French and Dutch versions are authentic)

(Text with EEA relevance)

(2005/467/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

The Commission invited interested parties to submit their
comments on the aid.

Having regard to the Treaty
establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

(4)

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

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

(1)

(2)

I. PROCEDURE

By letter dated 20 December 2002, Belgium notified a
proposal to grant aid to the company SIOEN Fibres SA
(hereinafter ‘Sioen’) in connection with an investment in
filament yarn production facilities.
polyester industrial
information by
The Commission requested additional
letter dated 12 February 2002,
to which Belgium
replied by letter dated 11 March 2003.

By letter dated 2 May 2003, the Commission informed
Belgium that it had decided to initiate the procedure laid
down in Article 88(2) of the EC Treaty in respect of the
aid.

(5)

(6)

(3)

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (2).

(CIRFS)

(Profibra)

The Commission received comments from Belgium on
8 July 2003. The International Rayon and Synthetic
submitted comments on
Fibres Committee
10 July 2003 and the Spanish Association of Chemical
Fibres Producers
submitted comments on
15 July 2003. These comments from interested parties
were sent to Belgium, which provided its observations on
8 October 2003. A meeting with the Belgian authorities
and Sioen took place on 7 November 2003. On
27 November 2003 CIRFS agreed that certain infor-
mation in its submission of 10 July 2003, which was
initially classified strictly confidential, could be made
available to the Belgian authorities. This information
was sent
to Belgium on 1 December 2003. Belgium
gave its comments on 19 January 2004.

II. DESCRIPTION

It

SIOEN is a large company active in the synthetic fibres
is 99,99 %–owned by Sioen Industries SA,
sector.
which in 2001 had a turnover of EUR 226,02 million
and a workforce of some 3 900 employees.

Sioen has declared eligible investment amounting to
EUR 19,46 million during the period from May 2001
to June 2003 and designed to expand its production
capacity for high–tenacity polyester industrial
filament
yarn (3). The yarn is intended for the production of
final
coated fabric
fabric or
for
products
lorries,
airbags. According to Belgium,
it is not intended for
use in the textile sector
(production of clothing or
carpets). The investment is expected to create 39 jobs.

in the production of

such as canvas

for use

tent

(1) OJ C 141, 17.6.2003, p. 4.
(2) See footnote 1.

(3) The CN number of the relevant product is 5402 20 00.

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(7)

(8)

(9)

types of

The investment increases the production capacity from
8 500 tonnes in 2002 to 14 850 tonnes per year from
2003 onwards (4). Belgium states that
the machinery
could not be adapted easily and at low cost to produce
fibre. Actual production in 2002
other
amounted to 7 650 tonnes and increased to 13 543
tonnes per year from 2003 onwards. Given the vertically
integrated structure of Sioen Industries,
entire
production volume is intended exclusively for internal
use within the group.

the

The proposed aid of EUR 2,86 million is to be granted
under an approved aid scheme (5) which does not,
however, cover aid to the synthetic fibres sector. The
aid application had been submitted by the Walloon
authorities on 18 May 2001 and approved by them on
29 August 2002,
to authorisation by the
Commission. The applicable aid ceiling allowed under
Community
region (Article
87(3)(c)) is 17,5 % net grant equivalent for large firms.

the Hainaut

subject

rules

for

In the decision to open the investigation procedure, the
Commission,
in view of the market situation and the
effect of the aided investment on production capacity,
expressed doubts as to the conformity of the aid with
the criteria set out in the Code on aid to the synthetic
fibres industry (6) (the ‘Code’) for compatibility with the
common market.

(12) With respect to the question whether there is a structural
supply shortage, CIRFS notes that, taking annual averages
for the two years preceding that in which notification
was given, the Belgian authorities' calculations do not
supply shortage. This assumption
show a structural
would correspond to confidential CIRFS data based on
returns
for non
members which show that capacity utilisation in the
Community amounted to 91,45 % in 2000, 88,06 % in
2001 and 88,23 % in 2002.

from its members

and estimates

it also notes

the sector as a whole.

(13) As regards the effect on the market, CIRFS points out
that the Sioen investments for which aid is proposed
increase in capacity, both for
represent a significant
Sioen itself and for
In this
respect,
that no producer among its
members is currently making a satisfactory return on
capital or sales, with the result that the impact of State
aid on their competitive position would be particularly
negative. CIRFS also explains
competing
producer has only recently re-emerged from receivership
and its recovery plan could be seriously affected by the
granting of State aid to a competitor. Other Community
producers have invested an estimated EUR 59 million
over the last
five years in this activity without any
access to State aid for investment, even investment in
assisted regions. Lastly, CIRFS expects the market
to
remain highly competitive and low-margin for several
years, not only because of
competition between
Community producers but also because of the pressure
from dumped imports.

that one

III. COMMENTS FROM INTERESTED PARTIES

(10)

The comments submitted by CIRFS can be summarised
as follows:

(14)

The comments from Profibra can be summarised as
follows:

(11)

CIRFS points out that the synthetic fibres industry is
acutely sensitive to distortions of competition from
In this sector, which includes high–tenacity
state aid.
polyester industrial filament yarn, State aid, unless very
strictly controlled, would have an inherent tendency to
affect trading conditions to an extent contrary to the
common interest.

(4) The average decitex on which the calculation of

texturisation

capacity is based is 1 100 dtex.

(5) Aid N 226/2000, Belgium, Regional aid scheme under the Law of
30 December 1970 on economic expansion in the Walloon Region,
as amended by the Decree of 25 June 1992 (OJ C 37, 3.2.2001,
p. 48).

(6) OJ C 94, 30.3.1996, p. 11; period of validity extended in OJ C 24,

29.1.1999, p. 18, and OJ C 368, 22.12.2001, p. 10.

(15)

Profibra expressed its concerns regarding the aid to Sioen
by letter dated 15 July 2003. There would be no circum-
in which Sioen’s aid application would be
stances
justified. Profibra points out that the capacity increase
sought by Sioen is equivalent to 74,4 % of its current
capacity, which accounts for 3,5 % of total European
capacity. In the current employment circumstances, in a
globalised environment and with no barriers to access to
the European market, the aid application would lack any
entrepreneurial or economic logic. Profibra also contests
the view that there would be a supply shortage, given
that the capacity utilisation rate was 86,7 % in 2000 and
89,5 % in 2001. It also refers to a major increase in
imports and points out that a company in the sector is
most likely to make losses if it is not using at least 85 %
to 90 % of its capacity.

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IV. COMMENTS FROM BELGIUM

(16)

The comments from Belgium on the doubts raised by the
Commission when it opened the investigation procedure
and on the third-party comments can be summarised as
follows:

not a change in capacity is significant, the Commission
should,
in line with the Code, consider a number of
different elements.

(17)

Belgium points out that CIRFS and Profibra are trade
associations which represent
the main producers of
filament yarn and of
high-tenacity polyester industrial
which Sioen is not a member. It questions the impar-
tiality of
considered
unfounded, imprecise and ambiguous. The Commission
is asked to evaluate the comments carefully, particularly
as there are no official statistics available for the relevant
market.

comments, which are

these

that

(18) As regards the question whether there is a structural
there are no
supply shortage, Belgium notes
official
statistics available for high-tenacity polyester
industrial filament yarn. Sioen gathered information on
production capacity and consumption from the main
producers present on the market in order to obtain the
best possible estimate of the capacity utilisation rate. On
the basis of this information, which was provided in
tempore non suspecto, Belgium explains that the capacity
industrial
utilisation rate
the
filament yarn exceeds 90 %.
sector was characterised by a structural supply shortage
during the period 2000 to 2002, and it is claimed that
this has been confirmed by several experts.

for high-tenacity polyester

It concluded that

(19)

In this connection, Sioen also explains that
the yarn
which it produces has a high value added and that the
market has been characterised by a relatively high degree
of price stability since 1999. It also rejects the allegations
made by CIRFS regarding the strong pressure on profit
margins in the sector, arguing that its members are active
in less profitable markets than the one for high-tenacity
polyester filament yarn, while Sioen’s good results are
due to extensive R & D activities aimed at continuous
quality improvements and to the fact that it is present on
very profitable niche markets.

(21)

Firstly, Belgium points out that the additional production
resulting from Sioen's capacity increase is used entirely
within the group. Sioen's production would not have any
impact on the prices or profit margins of
the other
producers of high-tenacity polyester filament yarn.

(22)

(23)

that has very specific

Secondly, the aid concerns a high-technology investment
project which will allow Sioen to supply its group with a
product
characteristics. This
internally developed and constantly improved polyester
industrial filament yarn is not available on the market.
Consequently, Sioen's capacity increase is motivated by
its vertical integration and the production will be used
entirely within the group.

Thirdly, Belgium underlines the fact that the capacity
increase of 3,5 % is not significant in relation to the
European market and is below the rate of 5 %, which
was not considered as a significant
increase by the
Commission in its decision with regard to Sioen in
1999 (7).
the Commission were to decide in the
present case to assess the capacity increase at company
level and not in relation to the European market, this
would be in contradiction with its 1999 decision.

If

(24)

that an assessment of

Lastly, Belgium stresses
the
capacity increase at company level would discriminate
against small producers as a given capacity increase
would lead to a relatively lower increase in the case of
a large company with an already high production
capacity.

V. ASSESSMENT OF THE AID

1. Existence of aid

(25) Article 87(1) of the Treaty lays down the principle that,
except where otherwise provided, aid which distorts or
threatens to distort competition by favouring certain
undertakings or the production of certain goods is,
in
so far as it affects trade between Member States, incom-
patible with the common market.

(20)

Belgium considers Sioen’s capacity increase to be in
accordance with the Code. In determining whether or

(7) Aid N 118/99 (OJ C 340, 27.11.1999, p. 5).

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(26)

the investment

The proposed aid to Sioen consists of a grant to be
It will allow the
financed through State resources.
company to carry out
in question
without having to bear the full cost. Sioen operates in
a sector of activity where trade between Member States is
substantial and where the conditions of competitions are
difficult, as evidenced by the existence until 31 December
2002 of a specific Code (8). The proposed grant to Sioen
therefore constitutes aid within the meaning of Article
87(1) of the EC Treaty.

2. Compatibility of the aid

(27) Article 87(2) of the Treaty lists the types of aid that are
compatible with the Treaty. In view of the nature and
purpose of the aid and the geographical location of the
firm, subparagraphs (a), (b) and (c) are not applicable to
the plan in question. Article 87(3) specifies other forms
of aid which can be regarded as being compatible with
the common market. The Commission notes that the
project
in
Mouscron (Hainaut region), which qualifies for assistance
under Article 87(3)(c). The maximum aid intensity is
17,5 % net grant equivalent
for large firms. Belgium
intends to grant an aid intensity equivalent to 50 % of
the regional aid ceiling.

located in the area of Blanc Ballot

is

the Commission has authorised the scheme
or not
concerned, where the aid would not satisfy the de
minimis criterion, to synthetic fibres producers by way
of direct support for:

— extrusion/texturisation of all generic types of

fibre
and yarn based on polyester, polyamide, acrylic or
polypropylene, irrespective of their end-uses, or

— polymerisation (including polycondensation) where it
is integrated with extrusion in terms of the machinery
used, or

— any ancillary process linked to the contemporaneous
installation of extrusion/texturisation capacity by the
prospective beneficiary or by another company in the
group to which it belongs and which, in the specific
is normally integrated
business activity concerned,
with such capacity in terms of the machinery used.

(28)

the

fibres

synthetic

Since 1977 the conditions under which aid may be
granted to synthetic fibres producers by way of support
for such activities are set out in a Code whose terms and
scope have been amended from time to time, most
recently in 1996 (9). On 1 January 2003 the Code
ceased to apply and no more regional aid is admissible
in
for
accordance with the last sentence of point 39 of the
the multisectoral
Commission
investment
framework on regional
large
projects (11),
the
registered
Commission before 1 January 2003 for
the
synthetic fibres sector will be examined in the light of
the criteria in force at the time of notification’. As the aid
in the present case was notified on 20 December 2002,
it has therefore to be assessed under the Code.

communication
aid

industry (10). However,

notifications

by
(…)

on
for

‘(…)

(29)

The Code requires the notification of any proposal to
grant aid, in whatever form and irrespective of whether

(8) See footnote 6.
(9) See footnote 6.
(10) See Commission communication, Multisectoral

framework on
regional aid for large investment projects (OJ C 70, 19.3.2002,
p. 8), and in particular points 30 and 39 for the year 2003, and
Commission communication on the modification of
the multi-
sectoral framework on regional aid for large investment projects
(2002) with regard to the establishment of a list of sectors facing
structural problems and on a proposal of appropriate measures
pursuant to Article 88(1) of the EC Treaty concerning the motor
vehicle sector and the synthetic fibres sector (OJ C 263, 1.11.2003,
p. 3), and in particular the second paragraph.

(11) See footnote 10.

(30)

(31)

In the case in question,
the proposed aid would be
granted in support of the production of synthetic fibres
which fall within the scope of the Code, namely the
extrusion of
installation of new capacity for
polyester
therefore,
filament yarn.
correctly notified to the Commission.

the
It was,

industrial

for

the proposed aid,

The Code sets out the criteria to be applied when the
Commission scrutinises proposals coming within the
in
scope of control. It states among other things that,
assessing the compatibility of
the
fundamental consideration is the effect of that aid on
the markets
the relevant products, namely the
fibre/yarn whose production would be supported by
investment aid for
the aid. According to the Code,
larger firms,
i.e. firms that are not small or medium-
sized enterprises, will be authorised only at up to 50 %
of the applicable aid ceiling if the aid would result in a
significant reduction in the relevant capacity or if the
market for the relevant products was characterised by a
structural shortage of supply and the aid would not result
in a significant increase in the relevant capacity. Sioen
ranks as a large firm since the group to which it belongs
has more than 250 employees and an annual turnover
exceeding EUR 40 million (12).

(12) See 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).

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(32)

(33)

the capacity increase
The Commission considers that
must be assessed at company level. Consequently,
in
assessing the capacity changes associated with the aided
project, the beneficiary’s capacity before the aid is granted
has to be compared with its capacity after the aid is
granted (adding the increase in capacity arising from
the aid and deducting the capacity that will be scrapped).

In its comments, Belgium referred to the Commission
decision of 28 July 1999 (13),
in which no objections
were raised to aid for Sioen. It points out that, in that
case, Sioen’s capacity increase was assessed in relation to
the total market capacity and the resulting 5 % capacity
increase was not considered significant. However,
the
Commission considers that the situation then was quite
exceptional and differed from the present case in that, at
the time,
the company did not have any extrusion
capacity at all before the investment. The assessment of
the new capacity in relation to total market capacity was
justified in that particular case because Sioen was a new
market entrant without any production capacity for the
If the Commission had assessed the
relevant product.
capacity at company level, any new capacity of
the
new market entrant would, by definition, have resulted
in a ‘significant’ increase. Such an approach would have
discriminated against new market entrants. Sioen is now
an established producer with pre-existing production
capacity and there is, therefore, no longer any justifi-
cation for deviating from the Commission's standard
practice of assessing capacity at company level.

(34) As

that,

regards Belgium's argument

in case of a
structural supply shortage, the capacity increase should
be assessed in relation to total market capacity,
the
Commission notes that the Code does not provide for
different capacity measurements depending on whether
or not there is a structural supply shortage. The Code
already sets less strict conditions if there is a structural
supply shortage in that, in the case of large firms, it does
not require that the aid result in a ‘significant capacity
reduction’ but only that it does ‘not result in a significant
capacity increase’. It does not provide, as an additional
advantage, that the capacity increase is measured, in the
case of a structural supply shortage, not at company level
but
in relation to total market capacity. Accordingly,
irrespective of whether the market is characterised by a
structural supply shortage, the aid may not, in any event,
result in a significant capacity increase.

types of

the Commission accepts

facturer that tailor-made machines could not easily be
fibre. On this
adapted to produce different
basis,
the method used to
measure capacity. According to Belgium, the investment
raises the production capacity for polyester industrial
filament yarn from 8 500 tonnes per year in 2002 to
14 850 tonnes per year from 2003 onwards (based on
an average decitex of 1 100 dtex), which represents a
significant increase of around 75 % at company level.

(36)

In the Commission's view, the fact that Sioen increases
its capacity significantly dispenses with the need to
decide whether or not the market is characterised by a
structural supply shortage in this particular case.

(37)

(38)

The Commission does not accept Sioen’s argument that
the production resulting from its capacity increase is used
entirely within the Sioen group and would not have any
impact on the prices or profit margins of
the other
producers of polyester industrial filament yarn. Even if
the new production is used entirely within the Sioen
group on account of its vertical
it cannot
be ruled out that the yarn could, under other circum-
stances, be supplied by other producers, a fact underlined
in the reactions from the two interested parties.

integration,

the effect on production capacity of

In view of
the
investment for which aid is planned, the Commission
considers that the aid does not fulfil the main criteria
of the Code determining compatibility with the common
market in so far as it would lead to a significant increase
in the relevant capacity. There is therefore no need to
assess the two other criteria set out in the Code (state of
for the relevant product, and innovative
the market
character of
the
the relevant product).
Commission notes that it is not clear that the market
for the relevant product is characterised by a structural
supply shortage, given the information from the third
parties (CIRFS and Profibra) on the capacity situation in
the Community and given the figures provided by
Belgium in the initial notification for the two years
prior to the notification (capacity utilisation rate of less
than 90 %).

In any case,

(35)

Following the opening of
the procedure, Belgium
confirmed and explained to the Commission on the
basis of documents provided by the machine manu-

(13) See footnote 7.

(39) None of the other derogations provided for in Article
87(3) of the Treaty is applicable in the present case.
The investment
located in an Article 87(3)(a)
region. The aid is clearly not designed to promote the

is not

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execution of an important project of common European
interest or
to remedy a serious disturbance in the
economy of a Member State, as provided for in Article
87(3)(b). Lastly, the Belgian authorities did not claim and
the aid could be
the Commission did not
designed to meet
sectoral
objective within the meaning of Article 87(3)(c) or (d),

another horizontal or

find that

HAS ADOPTED THIS DECISION:

Article 1

The state aid which Belgium is planning to implement for Sioen
Fibres SA, amounting to EUR 2,86 million, is incompatible with
the common market.

The aid may accordingly not be implemented.

Article 2

Belgium shall inform the Commission, within two months of
notification of this Decision, of the measures taken to comply
with it.

Article 3

This Decision is addressed to Belgium.

Done at Brussels, 19 May 2004.

For the Commission

Mario MONTI
Member of the Commission