2006/237/EC: Commission Decision of  22 June 2005  on the aid measures implemented by the Netherlands for AVR for dealing with hazardous waste  (notified under document number C(2005) 1789)   (Text with EEA relevance)
Date: 2005-06-22
Institutions: European Commission
Subjects: Netherlands, State aid, control of State aid, hazardous waste, waste management

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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 22 June 2005

on the aid measures implemented by the Netherlands for AVR for dealing with hazardous waste

(notified under document number C(2005) 1789)

(Only the Dutch version is authentic)

(Text with EEA relevance)

(2006/237/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,

(2)

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:

service of general economic interest (‘SGEI’) within the
meaning of Article 86(2) of the Treaty. The case was
registered under No N 43/2003.

The Commission requested additional
information by
letters of 7 February 2003 (D/50847) and 22 April
2003 (D/52566). The Netherlands submitted that infor-
mation by letters of 24 March 2003 (registered as
received on 28 March 2003 under No A/32279) and
19 June 2003 (registered as received on 25 June under
No A/34394). Representatives of the Netherlands and of
the Commission met on 21 May 2003. Two competitors
submitted a joint complaint on the aid by letter of 2 May
2003 (registered as
received on 5 May under No
A/33155). By letter of 20 May 2003 (registered as
received the
they
informed the Commission that a subsidiary of one of
them supported the complaint as well.

same day under No A/33548),

1. PROCEDURE

(3)

(1)

By letter of 7 January 2003 (registered as received on 10
January under No A/30189),
the Netherlands notified
operating aid for AVR Nutsbedrijf Gevaarlijk Afval B.V.
(hereinafter ‘AVR Nuts’) for treating hazardous waste in
the Netherlands with a view to disposal. The bulk of the
aid was for the incineration of such waste in two rotating
drum furnaces (‘RDFs’). The Netherlands invoked Article
86(2) of the Treaty and asked the Commission to decide
that the measure does not constitute state aid within the
meaning of Article 87(1) of the Treaty since it represents
appropriate compensation for the obligation to provide a

By decision C(2003)1763 of 24 June 2003,
the
Commission initiated the Article 88(2) procedure in
respect of the notified measure. The case was registered
as aid measure No C 43/2003. This decision was sent to
the Netherlands by letter of 26 June 2003 (D/230250). It
was published in the Official Journal of the European Union
dated 20 August 2003 (2). The Commission received
comments from four interested parties (registered under
Nos A/36309, A/36463, A/36645, A/36679, A/36870,
A/37077, A/37480 and A/37569),
including from the
two competitors that had submitted the complaint in
May, also on behalf of another company belonging to
the group to which one of the two original competitors
belongs
together are
competitors’). The
referred to as

these four entities

(hereinafter

two joint

‘the

(1) OJ C 196, 20.8.2003, p. 5, and OJ C 250, 9.10.2004, p. 6.

(2) See footnote 1.

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Commission forwarded these comments to the Neth-
erlands by letters of 1 October 2003 (D/56129),
29 October 2003 (D/56898), 7 November 2003
(D/57120) and 12 November 2003 (D/57185). These
letters also contained some further questions from the
Commission.

effect that the Netherlands would grant some compen-
sation for the costs of closure.

(4)

(5)

By letter of 13 August 2003 (registered as received on 14
August 2003 under No A/35706), the two joint compe-
titors informed the Commission that part of the aid had
been paid to AVR Nuts and they asked the Commission
to take an injunction decision to suspend further
payments and a decision ordering the Netherlands to
provisionally recover the aid pursuant to Article 11 of
Council Regulation (EC) No 659/1999 of 22 March
1999 laying down detailed rules for the application of
the EC Treaty (3). As requested by the
Article 93 of
Commission on 20 August 2003 (D/55321), the Neth-
erlands confirmed by letter of 25 September 2003
received on 30 September under No
(registered as
A/36690) that, as regards 2002 and the first quarter of
2003, the notified aid had been paid to AVR Nuts. By
letter of 20 October 2003 (D/56735), the Commission
informed the two joint competitors that it did not intend
to take the decisions requested. The two joint compe-
titors restated their request by letters of 14 November
2003 (registered as received on 17 November under No
A/37909) and of 1 December 2003 (registered as
received on 2 December under No A/38325). The
letter of 1 December and the Commission’s reply of
24 November 2003 (D/57541) confirming its position
actually crossed in the post.

After requesting an extension (letter of 14 July 2003,
registered as received on 18 July under No A/35109
and letter of 29 October 2003, registered as received
on 5 November under No A/37568) that was granted
by letter of 23 July 2003 (D/54737), the Netherlands
commented on the Commission’s decision by letter of
18 December 2003 (registered as received on 8 January
2004 under No A/30088). It gave its observations on the
comments
from interested parties by letters of 23
December 2003 (registered as received on 8 January
2004 under No A/30090), 23 January 2004 (registered
as received on 29 January under No A/30621), 25
February 2004 (registered as received on 27 February
under No A/31451) and 23 April 2004 (registered as
received on 30 April under No A/33118). By means of
the last two letters, the Netherlands also informed the
Commission of ongoing developments at AVR Nuts.
Since the mounting deficits would require increasing
amounts of aid, it was decided to close one of the two
RDFs with effect
the
second RDF was still under consideration. It transpired
that the original aid contract contained provisions to the

from 1 July 2004. Closure of

(6)

(7)

In view of the new information, the Commission adopted
on 14 July 2004 decision C(2004) 2640 fin extending
the Article 88(2) procedure to the compensation for the
costs of the (possible) closure of the RDFs. On 16 July
this decision was sent to the Netherlands, which asked
for an extension of the deadline for comments and for a
meeting to be convened to discuss the ongoing devel-
opments (letter of 30 July 2003, registered as received on
4 August under A/35996). A meeting between represen-
tatives of the Netherlands and of the Commission took
place on 23 August 2004. Another meeting between
representatives of the Commission and of the two joint
competitors took place on 26 August 2004. For the rest,
the law firm represented yet another competitor. The
Netherlands commented on the Commission’s decision
by letter of 10 September 2004 (registered as received
on 17 September under No A/36999). By letter of 30
September 2004 (D/56902), the Commission requested
further information which the Netherlands provided by
letter of 22 October 2004 (registered as received on
27 October under No A/38271). In that letter, the Neth-
erlands confirmed that further aid had been paid to the
recipient
three
quarters of 2004 and the closure of one of the instal-
lations.

for the remainder of 2003,

the first

The decision to extend the procedure was published in
Journal of 9 October 2004 (4). The
the Official
Commission received comments from the two joint
competitors (letters of 16 and 19 November 2004,
It
registered under Nos A/38860 and A/38978).
forwarded these comments to the Netherlands by letter
of 22 November 2004 (D/58307). The Netherlands
made observations on these comments and answered
the Commission's questions by letters of 22 December
2004 (registered as received on 5 January 2005 under
No A/30171) and 12 January 2005 (registered as
received on 17 January under No A/30525).
In these
letters, the Netherlands informed the Commission not
only of the decision to close the remaining RDF but
also of the corresponding compensation for the costs
of closure.

(8)

Lastly, the two joint competitors confirmed their oppo-
sition to the aid by letters of 25 April 2005 (registered as
received the same day under No A/33476) and 2 May
2005 (registered as received on 12 May under No
A/33884). Following these letters, yet another meeting

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

(4) See footnote 1.

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between representatives of the Commission and of the
two joint competitors took place on 26 May. Again, the
law firm also represented the same third competitor
(hereinafter this competitor together with the other two
are referred to as the ‘three joint competitors’). At the
meeting, a document was presented suggesting that
further aid for 2004 had been paid to AVR Nuts.

2. DETAILED DESCRIPTION OF THE MEASURE

2.1 Background and objective

Article 5(1) of Council Directive 75/442/EEC of 15 July
1975 on waste (5) stipulates that ‘Member States shall
take appropriate measures,
in cooperation with other
Member States where this is necessary or advisable, to
establish an integrated and adequate network of disposal
installations, taking account of the best available tech-
nology not involving excessive costs. The network must
enable the Community as a whole to become self-
sufficient in waste disposal and the Member States to
move
into
aim individually,
that
the need for
account geographical circumstances or
for certain types of waste.’
specialized installations
Article 5(2) of the Directive stipulates that ‘the network
must also enable waste to be disposed of in one of the
nearest appropriate installations, by means of the most
appropriate methods and technologies in order to ensure
a high level of protection for the environment and public
health.’

towards

taking

(9)

(10)

In the early 1990s, with a view to meeting these
objectives, a special landfill site (‘C2 depot’) and several
RDFs began operations in the Netherlands. The C2 depot
is used for the appropriate disposal of hazardous waste
that cannot be incinerated (‘C2 waste’). The RDFs are
used for the appropriate disposal of hazardous waste
that, despite a low calorific value, can still be incin-
(‘RDF waste’). This incineration requires co-
erated (6)
fuelling and,
is
in practice, the most cost-efficient fuel
hazardous waste with a high calorific value.

(11)

In accordance with Article 8(3) of Directive 75/442/EC
and Article 4(3) of Council Regulation (EEC) No 259/93

(5) OJ L 195, 25.7.1975, p. 39; as subsequently amended by Regulation
(EC) No 1882/2003 of the European Parliament and the Council (OJ
L 284, 31.10.2003, p. 1).

(6) The concession agreement defines RDF waste as follows: that part of
the waste streams the incineration of which is regarded as disposal,
i.e. hazardous waste with a calorific value of less than 11,5 MJ/kg
(≤1 % chlorine) or 15 MJ/kg (>1 % chlorine), packaged hazardous
waste, specific hospital waste and waste containing PCBs.

It

‘waste

export of

on the supervision and control of shipments of waste
into and out of the European Community (7),
within,
Member States may prohibit
for
disposal’.
is only after various controls have been
carried out that such waste may be traded. However,
Member States are not generally allowed to prohibit
the exportation to other Member States of ‘waste for
recovery’ (8). The concepts of
‘waste for disposal’ and
recovery’ have been clarified in various
‘waste for
the European
judgments by the Court of
Communities (9). As a result, compared with the inter-
pretation given to date by the Netherlands, a smaller
amount of hazardous waste qualifies as waste for
disposal while a larger amount qualifies as waste for
recovery. The distinction does not depend on the
calorific value of the waste, but rather on the primary
objective of the installation in which the waste is treated
and on the nature of the waste.

Justice of

(12)

(13)

C2 waste and RDF waste are supplied by companies in
all sectors of the economy.
Important sectors include
metalworking, business and public services, the (petro-)
industry, transport and mining. Most of the
chemical
waste
that
is handled by specialised intermediaries
typically offer a service covering the various types of
waste produced by a company, i.e. C2 and RDF waste,
other hazardous waste and non-hazardous waste. Such
services are, of course, largely tied to the place where the
waste is produced, but the more specific types of waste
are transported over
large
industrial waste companies operate internationally, with
establishments in various countries.

longer distances. Several

industry (in particular

In recent years, the options for putting hazardous waste
to effective use have increased. More and more of it is
in
being used in the cement
Belgium) or for filling abandoned mines (in particular
in Germany). The Court’s strict interpretation of ‘waste
for disposal’ has facilitated this development. At the same
time, producers have further reduced the amounts of
limits they can, at
waste they generate. Within legal
least
it with less
hazardous waste, thereby reducing the costs of disposal
or recovery. As a result, the supply of RDF waste fell
from about 80 000/100 000 tonnes in 1995 to about
34 000 tonnes in 2002, compared with an anticipated
figure of
In mid-2004 AVR
estimated that only 16 000 tonnes of RDF waste

to some extent, blend some of

some 38 500 tonnes.

(7) OJ L 30, 6.2.1993, p. 1; as subsequently amended by Commission
Regulation (EC) No 2557/2001 (OJ L 349, 31.12.2001, p. 1).

(8) See,

in particular, Case C-203/96 Chemische Afvalstoffen Dusseldorp
B.V. and Others v Minister van Volkshuisvesting, Ruimtelijke Ordening
en Milieubeheer [1998] ECR I-4075.

(9) See, in particular, Case C-288/00 Commission v Germany [2003] ECR

I-1439.

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would be offered to it annually (10). The supply of C2
waste decreased from about 6 000 tonnes in 2000 to
4 000 tonnes in 2002. Exports of hazardous waste
produced in the Netherlands have increased to some
36 000 tonnes, of which some 4 000 tonnes is RDF
waste,
regards disposal
facilities. This has become
a wider phenomenon
affecting,
for example, the United Kingdom, Germany
and Belgium.

resulting in overcapacity as

(16) AVR Nuts

is obliged to keep separate accounts

in
accordance with Commission Directive 80/723/EEC of
25 June 1980 on the transparency of financial relations
between Member States and public undertakings (11).

2.3 The aid

2.3.1 The operating deficits

(17)

(18)

(19)

(14)

2.2 Recipient

The C2 depot and the various RDFs were originally set
up by AVR Chemie C.V. (‘AVR Chemie’), which is owned
30 % by the State and 70 % by Holding AVR Bedrijven
N.V. (‘AVR-Holding’ or ‘AVR’ in short). AVR is a major
player on the Dutch waste market. It is currently 100 %-
owned by Rotterdam municipality, which has though
recently announced its intention to sell
its shares in
AVR. As from the mid-1990s, AVR Chemie incurred
losses (€10,9 million in 2000 and €7,2 million in
2001). For this reason, AVR wished to close down the
three RDFs operating at
time. The Netherlands,
that
however,
reached an agreement on a restructuring.
AVR Chemie was split up and AVR Nuts was created
in order to continue with the disposal of C2 and RDF
waste after the closure of one of the three RDFs. AVR-
Industrial Waste Services Rotterdam B.V. (‘AVR IW’) was
set up to take over the remaining activities on the
(hazardous) waste markets, on which AVR wanted to
remain active for its own commercial reasons. Both are
wholly owned by AVR. AVR Chemie’s only remaining
activity is renting out the facilities to AVR Nuts. AVR
Nuts and AVR IW cooperate closely. A service contract
stipulates that most of AVR Nuts’ management and
commercial functions are carried out by AVR IW.

(15)

(both RDF and other)

The capacity of the two RDFs for which AVR has a
permit is 100 000 tonnes of hazardous waste per year.
The theoretically available capacity is 80-85 % of
the
permitted capacity. AVR treated 84 880 tonnes of
hazardous waste
in 2001,
81 274 tonnes in 2002 and 78 297 tonnes in 2003.
Incineration of RDF waste requires more or less the
same quantity of other hazardous waste as fuel. The
actual volume of RDF waste treated in the RDFs is
estimated at 19 000 tonnes
for 2002 and 23 000
tonnes for 2003. Certain types of RDF waste can also
be disposed of in municipal waste incinerators, which
operate at a lower temperature.

the

and

Spatial

Planning

The aid and the activities for which it is granted are
defined in a concession decision by the Minister for
Housing,
Environment
(VROM) dated 3 July 2002 and in a concession
agreement between the Netherlands, AVR Holding,
AVR Nuts, AVR IW and a number of other subsidiaries
signed on 10 July 2002. By virtue of the decision, the
State ‘grants AVR Nuts the exclusive right for a period of
5 years to operate the C2 depot and deal with hazardous
waste in the RDFs subject to the obligation to offer the
services of general
services of
economic interest
trans-
parent and non-discriminatory conditions and against
in compliance with the
socially acceptable
conditions and provisions laid down in greater detail in
the concession agreement.’ The agreement determines in
detail the conditions for AVR Nuts’ operations. It was to
run from 1 January 2002 to 31 December 2006.

to the public on reasonable,

these installations as

tariffs,

The aid amounts
the predetermined
to 100 % of
operating deficit, which is calculated on the basis of a
methodology laid down by an independent accountant.
In the event of a predetermined operating surplus, 70 %
it would be used to pay back the aid granted
of
previously. The predetermined deficits for 2002 and
2003 amounted to €1,5 million and €2,8 million respec-
tively. Annex I to this decision provides a summary of
the methodology and its application for 2002, 2003 and
2004. Most of the aid concerns the RDFs. For the C2
the predetermined deficit amounted to €0.37
depot,
million in 2003, for example.

For

In accordance with the service contract, AVR IW carries
out most of AVR Nuts’ administrative and operational
it
functions.
compensation the
this,
included in the predetermined
amount of which is
‘activity-based costing’.
deficit on the basis of
In
for the years 2002-04, an
that,
practice,
average of 30 % of AVR’s overheads was allocated to
AVR Nuts.

this meant

receives

(10) Source: Toekomst verbranden specifiek gevaarlijk afval, AOO-2004-12,
prepared by the Afval Overleg Orgaan, July 2004, www.aoo.nl.

(11) OJ L 195, 29.7.1980, p. 35, as

last amended by Directive

2000/52/EC (OJ L 193, 29.7.2000, p. 75).

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(20) One additional cost element which is included in the
predetermined budget and for which AVR Nuts receives
aid that it passes on to AVR IW concerns waste acqui-
sition. Given the important weight of fixed costs, active
to
acquisition of waste was
maximise capacity utilisation and thus
to minimise
operating costs. The predetermined and actual costs are
presented in Table 1 below.

considered necessary

(23)

Table 1

Predetermined and actual acquisition costs

2002

2003

2004

514 000

532 000

550 000

400 000

400 000

–

Predetermined additional
costs

Predetermined start-up
costs - international acqui-
sition

Total predetermined costs

914 000

932 000

550 000

Actual costs

875 000

900 000

930 000

The concession agreement provided that the State would
compensate AVR financially for the remaining book
value of investments carried out in favour of AVR-Nuts
during the period covered by the agreement with the
approval of the State but not yet written off. Applying
this clause in advance, the Dutch authorities calculated
compensation of €8 670 108 for the costs of closing
down the first RDF. This amount concerns various
investments which were written off
to the extent of
50 % if they concerned both RDFs or to the extent of
100 % if they were made specifically for the RDF that
was being closed down. The main items in this amount
are €1,9 million for investments in fire safety, €3,3
million for a homogenisation plant, €1,5 million for
replacing coke funnels and €0,5 million for a drum
end and Stefferson ring. For the closure of the second
the calculation includes €11 151 000 for
RDF,
the
remaining book value of the installations and tangible
fixed assets. This amount includes the other 50 % of
the remaining book value of
the above investments
carried out with the approval of the State and 100 %
of the remaining book value of the investments carried
out with the approval of the State but concerning only
the second RDF. This latter item includes notably the
investment
the remaining
RDF, which was carried out during 2004. The overall
cost was €3 273 000, which was more than expected.
With the benefit of hindsight, this turned out to be an
unfortunate investment.

in the general overhaul of

(21) At the outset, the deficit was expected to increase to €3,8
million in 2006, but market and operating conditions
proved to be much more difficult
than anticipated,
with little hope for improvement. For the period 2002-
03, in addition to the predetermined deficit, AVR Nuts
incurred losses of €12 million. The predetermined
deficits for 2004 and thereafter were expected to be
the prede-
much higher
to €8,898
deficit
termined
million (12). The
the
decision to close the RDFs.

for 2004 amounted
calculation took

than foreseen and,

account of

indeed,

2.3.2 Compensation for closure costs

(22)

In view of the mounting operating deficits, the Neth-
erlands, as already indicated in points 5 and 7, recon-
sidered its policy. At the end of 2003, it was decided to
close one of the two RDFs with effect from 1 July 2004.
In the summer of 2004,
it was decided to close the
second one with effect from 1 January 2005. For the
remaining years, the predetermined losses for accepting
C2 waste were, as expected, small.

(12) The aid is, however, reduced by €75 000 for each month that the
Province of South Holland allows ‘peakshaving of CO emissions’.
When the operating deficit was established, this was not yet known.
The amount represents the expected monthly cost saving where
peakshaving is allowed.

(24)

Since the Netherlands was, in principle, also required by
the concession agreement to compensate for the budget
the State had to
deficits up to and including 2006,
negotiate with AVR on compensation for the additional
costs of closing down the second RDF with effect from 1
January 2004, instead of the original date on which the
agreement would have expired. The compensation thus
includes the following additional amounts:

— €1,7 million to compensate for the negative impact
in 2004 resulting from the fact that customers would
need (gradually) to shift their waste streams to other
facilities;

— €5,843 million for recurrent fixed costs in the period
costs
to ICT infrastructure, office
costs of
such as a canteen. AVR had

2005-06 (‘doorlopende vaste kosten’),
related,
space
common facilities
calculated a higher amount of €8,208 million;

for example,
rental,

contracts,

security

and

i.e.

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— €7,868 million for the additional redundancy costs
the remaining
attributable to the early closure of
is calculated as the difference
RDF. This amount
between the estimated redundancy costs
in the
event of immediate closure and those in the event
of closure at the end of the aid contract, i.e. two years
later. The accepted amount is based on a detailed
estimate that concerns some 244 workers and takes
account of the fact that most of them can be rede-
ployed internally;

to provide the services

— other costs, such as the remaining book value of
certain assets of other AVR companies acquired in
order
stipulated in the
service contract, the costs of site management and
forgoing the contributions (‘dekkings-
the cost of
bijdrage’) that AVR IW would have received if the
contract had been extended into 2005 and 2006,
the non-budgeted costs of closure, and the costs of
buying out multiannual contracts. AVR had put these
costs at €29,567 million in total, which included, for
example, an amount of €11,716 million for the addi-
losses incurred by AVR Nuts in 2002 and
tional
2003.
the State and AVR
In their negotiations,
agreed on an amount of only €1,238 million.

(25)

own estimates,

In those negotiations, the Netherlands was assisted by an
independent accountant whose report was made available
to the Commission. Altogether, the agreed compensation
for closure of the second RDF amounted to €27,850
million. This is significantly lower than the sum of
AVR’s
viz. €58,544 million (or
€46 828 million when the additional losses incurred by
AVR Nuts in 2002 and 2003 are excluded). The Neth-
erlands
remaining RDF had
if
continued operating until the end of 2006, the sum of
the estimated operating deficits for 2005 and 2006 and
the compensation for the costs of closure at the end of
2006 would have amounted to €31 million. The
agreement on early closure therefore reduced the cost
to the State.

explained that,

the

(26)

This compensation for closure brings the total amount of
the period 2002-04 to €49 718 108 (see
aid for
overview in Table 2).

(27)

(28)

(29)

Table 2

Overview of compensation paid to AVR

Predetermined budget deficit 2002

Predetermined budget deficit 2003

Predetermined budget deficit 2004

Compensation for remaining book value first
RDF

1 500 000

2 800 000

8 898 000

8 670 108

Compensation for remaining book value
second RDF

11 151 000

Compensation for additional closure costs
– additional operating costs 2004
– recurrent fixed costs 2005-06
– additional redundancy costs
– other

Total aid

1 750 000

5 843 000

7 868 000

1 238 000

16 699 000

49 718 108

totalling
acknowledged
The Netherlands
€19 543 608 had been paid to AVR. The compensation
for the closure of the second RDF has been paid into a
blocked account.

that

aid

2.3.3 The guarantee for removal and follow-up costs

The concession agreement also contains a guarantee by
the State that, if AVR Chemie is wound up, the State will
pay a maximum of 30 % of the removal and follow-up
costs of dismantling and decontaminating the instal-
to the State’s
lations. This percentage
holding in AVR Chemie.

corresponds

2.4 Operational aspects

Prior to the concession agreement, the gate fees charged
by AVR Chemie had been increased to a level of NLG
700/tonne (€317,6). Increasing fees even further would,
lead to practices such as
according to the Netherlands,
mixing hazardous waste with other waste streams and
illegal
landfill, and this would not be conducive to
reducing the operating deficit. The fees are high in
comparison with those in neighbouring Member States,
this being possible thanks to the Dutch policy of prohi-
biting exports of waste for disposal. The objective of the
aid measures was to maintain the fees unchanged, not to
reduce them. To this end,
the concession agreement
contains an annex laying down the structure and
coverage of
the fees and the method of calculating
them. The Dutch authorities have control over the level
of the fees as the predetermined budget deficit requires
their approval beforehand and the fees are, of course, a
crucial element in the calculation.

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(30) Gate fees for high-calorific hazardous waste used as fuel
are much lower than those for RDF waste. AVR Nuts
‘buys’ the former at market rates, i.e. fees that would be
charged in the event of treatment, say, in foreign RDFs or
in the cement industry.

(31)

Fixed costs are very high compared with variable costs
so, in order to minimise its losses, AVR Nuts seeks to
maximise capacity utilisation. Therefore,
the gate fees
charged to suppliers of hazardous waste are reduced
when the annual volume supplied increases. These
‘staggered rebates’ are fixed in advance and apply when
RDF waste is offered together with at least 75 % of the
same volume of high-calorific waste.

(32) All fees are fixed in advance for the entire concession
period (13) and apply equally to AVR’s competitors and
AVR IW. As from the start of the concession agreement,
the fees for C2 and RDF waste were publicly available to
any supplier. As from early 2004, this was also the case
for high-calorific hazardous waste.

(33)

In order to be able to plan capacity utilisation, AVR IW
asks suppliers each year to indicate how much waste they
plan to supply and gate fees are calculated during the
year on the basis of the corresponding staggered rebate.
If the actual volume supplied at the end of year is higher
or lower than indicated, a repayment
is made or an
additional charge calculated to take account of the appro-
priate staggered rebate based on actual supply. The
agreements generally did not contain an obligation to
supply the quantity indicated in advance.

(36)

(37)

regarding
the Commission expressed doubts
Second,
possible overcompensation that could spill over into
other segments of the waste market. It was concerned
that overcompensation may also stem from the fact that
the aid was based on an ex ante calculation, allowing
AVR Nuts
to keep part of any positive difference
between actual and predetermined profits or losses.

Third, if the measure were to be assessed under Article
87, the Commission doubted whether the Community
guidelines on state aid for environmental protection (14)
(the ‘guidelines on environmental aid’) would provide
finding the aid compatible with the
justification for
common market.

(38)

In its decision to extend the Article 88(2) procedure, the
Commission explained that
it had similar doubts as
regards the much higher amount of aid for 2004 and
the compensation for the untimely closure of the RDFs.

4. COMMENTS FROM INTERESTED PARTIES

(39)

Four interested parties sent in their comments following
the Commission’s decision to initiate the Article 88(2)
procedure.

(40)

The first of them argued that the measure would distort
competition on the Irish market as it would enable AVR
to charge prices below cost and significantly below
normal market prices on the Irish market through its
50 % shareholding in a joint venture with the Irish
company Safeway Warehousing/South Coast Transport.

3. REASONS FOR INITIATING THE ARTICLE 88(2)
PROCEDURE

(41)

(34)

In its decision to initiate the Article 88(2) procedure, the
Commission expressed the following doubts.

The second interested party also pointed to the unfair
competitive advantage enjoyed by the AVR/Safeway
joint venture. Large quantities of hazardous waste are
imported from Ireland. This interested party maintained
too that the measure would distort competition on the
international market for ‘turnkey clean-up’ operations of
PCBs, pesticides and other hazardous organic waste.

(35)

the Commission doubted whether AVR Nuts’
First,
activities could properly be regarded as an SGEI within
the meaning of Article 86(2) of the Treaty as it was not
clear,
for example, whether AVR would be the only
company capable of offering such services on the same
or similar conditions. It also doubted whether the Neth-
erlands had followed the appropriate procedure in
selecting AVR Nuts. Furthermore,
it doubted whether
‘polluter pays’ principle was
infringement of
the
avoided under all circumstances as producers of
waste concerned must pay gate fees at a level that can
be considered as a normal cost.

the

(42)

The third interested party, Edelchemie, was concerned
It had developed its own
about the domestic market.
technology
and galvanic
treating photographic
for
waste (ECO option) and recovering valuable materials
from this waste
and
obsidian). The measures to assist AVR would not only
harm its business but would also stifle technological
concern AVR
development. Edelchemie's
Nuts, AVR Chemie and its predecessors as from 1963,
providing details on Dutch hazardous waste policy over
the years.

precious metals

comments

(including

(13) For high-calorific hazardous waste,
exceptions due to ongoing contracts.

there were initially a few

(14) OJ C 37, 3.2.2001, p. 3.

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(43)

(44)

(45)

(46)

Lastly, the three joint competitors drew attention to the
domestic market for RDF waste. Equivalent capacity to
AVR’s RDFs would exist both in the Netherlands and in
other Member States. The expansion of AVR’s activities
would have created overcapacity on the Dutch market for
RDF waste and the data on RDF waste would not give a
complete and correct picture.
In the mid-1990s AVR
closed one of its RDFs and, even then, the supply of
hazardous waste could be expected to decline further.
it had been appropriate
In view of those expectations,
to close one of the two remaining RDFs. At the meeting
on 26 May 2005, a representative stated literally that
‘The right decision [in 2002] had been to close down
one RDF’. Moreover, AVR would abuse its dominant
the
position by charging high fees, by requiring that
RDFs be supplied at the same time with high-calorific
waste and because the fee structure would not be trans-
parent and publicly available.
furthermore,
enable AVR IW to charge fees for certain types of RDF
waste and subsequently to treat this waste in the grate
incinerators of the municipal waste incinerators, and this
would result in lower operating costs as these furnaces
can operate at a lower temperature.

It would,

determine whether

The measure would constitute incompatible operating
aid. The service would not constitute an SGEI and the
four criteria resulting from the Altmark judgment and
which
compensation
constitutes state aid (15) would not be fulfilled. For the
the aid, various
Commission to approve (part of)
conditions would have to be met to prevent cross-subsi-
tying practices and price discrimination.
disation,
In
addition,
the Netherlands should not be allowed to
extend the measure by another ten years.

not

or

in comments
The two joint competitors also sent
following the Commission’s decision to extend the
procedure. They restated all the elements of their first
to
submission and provided additional documents
demonstrate
In
cross-subsidisation.
existence of
addition, the following issues were raised.

the

First, it was surprising that, despite the closure of one of
the RDFs, the predetermined operating deficit was so
fourth
much higher
than initially foreseen.
Altmark criterion (efficiency) had been respected,
the
operating deficit should have fallen.

the

If

(47)

Second, they objected to the aid as compensation for
closing down the RDFs. There was no countervailing

(15) Case C-280/00 Altmark Trans Gmbh, Regierungspraesidium Magde-
burg/Nahverkehrsgesellschaft Altmark GmbH [2003] ECR I-7747.

the

amount

to be written off,

obligation on AVR. This compensation should not be
referred to as an indemnification and was not justified,
among other things because the investments were made
with a view to maintaining operations for 10 years,
whereas they have been used for less than 3 years.
They questioned as well the details of the calculations,
in particular
the
redundancy costs and the recurrent
fixed costs. The
total amount was very high, much higher than the
amount of €2 million referred to in Article 21(2) of
the concession agreement. Furthermore,
in a parlia-
mentary document, it was stated that ‘when establishing
the compensation to be paid to AVR for closure of the
RDF, an agreement was reached on an outstanding claim
of the Ministry for Housing, Spatial Planning and the
Environment on AVR in connection with dioxine
the Lickebaertpolder’. As a consequence,
pollution of
the Ministry received an amount of €2,5 million that
was not expected for 2004. The three joint competitors
were concerned that settling this dispute may have
‘polluted’ the calculation of the compensation.
It gave
them the feeling that ‘things are being covered up’.

Third, they objected to other advantages conferred on
AVR by Article 21(5) of the concession agreement,
in
particular payment by the State of 30 % of the costs of
removal and decontamination of the installations in the
event of AVR-Chemie's being wound up. In the light of
the state aid rules, the State should never have taken on
such obligations.

to be

loss-making. The

Fourth, no SGEI would exist, especially since such a
service was not necessary in the light of the various
alternatives that existed such as pyrolysis, treatment in
the cement industry, disposal in salt mines or treatment
in energy plants and foreign RDFs. The
activities
concerned would be defined as an SGEI only when
concession
they proved
agreement had been concluded merely with a view to
financing the investments in the RDFs for which AVR
Nuts had obtained an exclusive right. Furthermore, the
two joint competitors doubted whether the aid guar-
anteed affordable prices for the service since AVR’s gate
fees were higher than those in neighbouring countries.
The high fees would be explained by AVR’s practices of
tying and cross-subsidisation with respect
to high-
calorific waste used as fuel. They would not be trans-
parent or publicly available. The profits would be
booked with AVR IW, the losses with AVR Nuts. This
enabled AVR IW to charge higher gate fees for RDF
waste. Furthermore, AVR would refuse to accept RDF
accompanied by high-calorific waste,
waste
thereby not complying with its obligations under the
concession agreement by not providing the service to
all customers. Finally, unlike with other alternatives, the
quality of the service would be neither maintained nor
improved.

if not

(48)

(49)

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Official Journal of the European Union

L 84/45

(50)

tender procedure

the aid would not respect

the Altmark criteria.
Fifth,
There had been no public
for
granting the concession and the aid would not be estab-
lished on the basis of the costs of an average, well-
managed undertaking. Nor would it be established on
the basis of criteria laid down in an objective and trans-
it would be higher than necessary and it
parent way,
would spill over
into other markets. RDFs abroad
would be able to charge lower tariffs without state aid.
Cheaper alternative disposal methods had not been taken
into account either. Furthermore, AVR would be allowed
to retain some of the profits if it operated more effi-
ciently than expected.

(51)

the two joint competitors remarked that

Finally,
the
Dutch authorities intended to continue to infringe the
state aid rules since, in the case of a negative decision
by the Commission, they would discuss it with AVR and
look for a solution to the financial problems this might
cause for AVR.

(55)

It would be absolutely wrong for AVR Nuts to accept
only RDF waste when offered in combination with high-
calorific waste. It also has been explicitly stated that the
fees charged to other AVR companies for treating other
waste should be the same as those charged to third
parties (16). The Netherlands asked an accountancy firm
for advice on the possibilities of increasing transparency
with regard to the agreements between AVR Nuts and
AVR IW. The recommendations given were accepted and
implemented.

(56) As regards AVR Nuts’ results, the Netherlands noted that
the calculation of the operating deficit did not take into
account any profit margin. In the unexpected event of a
predetermined operating surplus,
the profit would be
limited to only 30 % of the surplus until such time as
all previous aid had been repaid.

5.3 Comments on the comments from interested
parties

T h e I r i s h m a r k e t

5. COMMENTS FROM THE NETHERLANDS

(57)

5.1 The applicable legislation

(52)

Since Community legislation allows Member States to
prohibit the exportation of waste for disposal, the aid
would not distort competition between Member States.

5.2 Service of general economic interest

(53)

The Netherlands argued that the aid is granted exclusively
for an SGEI carried out by AVR Nuts. A public invitation
to tender was not considered appropriate as AVR Nuts
was the only company in the Netherlands able and
willing to deal with all
the C2 and RDF waste
concerned. The concession, however, was published in
the Staatscourant, following which any interested party
had the possibility to lodge an appeal. No appeals were
lodged. Furthermore, before the decision to close the
RDFs,
the Dutch authorities had already made the
necessary arrangements for organising a public tender
procedure for a prolongation.

(58)

treatment

The Netherlands noted that
the comments did not
demonstrate how aid could affect the cost price of the
joint venture between AVR and Safeways. That company
in
would have to pay the same fees for
Rotterdam as those charged to domestic suppliers of
waste. Moreover, only one third of the waste collected
by the joint venture would be treated in Rotterdam and
only a small part of that would be C2 and RDF waste as
defined in the concession agreement. Competitive prices
might be explained by various other factors: 1. Safeway is
the only company in Ireland operating transfer station
where waste is efficiently sorted and separated before
being sent to the most appropriate treatment facility; 2.
link with the transport company
there is a direct
Southcoast, and this gives rise to logistic advantages
and cost savings; and 3.
fees
used to be relatively high on account of the absence of
competition.

in Ireland the level of

T h e
p r o j e c t s

m a r k e t

f o r

t u r n k e y

c l e a n - u p

For the treatment of waste resulting from turnkey clean-
fees than it
up projects, AVR would charge higher
charges domestic suppliers. The average fee for all
waste flows from other countries would be somewhat
higher
charged domestically.
Furthermore, lower fees would not result in higher aid
as the aid depends on the predetermined operating
deficit.

than the

average

fee

(54)

The measure would comply with the Altmark criteria and
should therefore not be regarded as state aid. Taking the
predetermined deficits, for example, the State was assisted
by an independent accountancy firm. The measure would
not infringe the ‘polluter pays’ principle as the fees are
higher than those in neighbouring Member States.

(16) Article 5.3 of the Concession Agreement and Article 5.2 of the
(Annex 7.2.A to the
for AVR companies

Service Agreement
Concession Agreement).

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D o m e s t i c
t o t h e R D F s

c o m p e t i t i o n a n d a l t e r n a t i v e s

(59) When the concession agreement was signed, both RDFs
were operating at full capacity. Full capacity utilisation
was expected in view of plentiful stocks. The current
overcapacity was probably caused not by any increase
in the market share of competitors but
instead by
increased reuse of the waste, e.g. after legally permitted
dilution with other types of waste.

of AVR IW. The latter served as an intermediary but
could not, and did not, exploit this position to obtain
overcompensation. For example, the waste supplied by
AVR Nuts’ competitors, even when, on paper,
it was
received by AVR IW on behalf of AVR Nuts, was not
taken into account in calculating the staggered rebates on
the tariffs for the waste acquired by AVR IW itself. Such
waste was delivered directly to the RDFs, not to AVR
IW’s site, as this would not be worth the additional
logistical costs.

(60) As regards pyrolysis, the Netherlands noted that AVR’s
than those charged by the only

fees were higher
company in the Netherlands with pyrolysis plants.

(64)

P a y m e n t o f p a r t o f

t h e n o t i f i e d m e a s u r e

(61)

The Netherlands explained that part of the aid was paid
because of the financial difficulties of AVR Nuts, in the
light of the Altmark judgment and in view of the time
necessary to conclude the formal investigation procedure
under Article 88(2) of the Treaty.

E d e l c h e m i e

(62)

treatment

The Netherlands noted that Edelchemie was working
primarily in the field of photographic hazardous waste,
which, for reasons of efficiency, cannot be dealt with by
AVR. The company has various facilities of which the
pyrolysis furnace would be most relevant for this case.
However, the technology would not be suitable for all
in contrast to AVR’s installations.
types of RDF waste,
in this
The environmental permit allows
furnace of not more than 10 000 tonnes, which would
be completely insufficient for hazardous waste streams in
the Netherlands. Since AVR would not deal with photo-
graphic waste and would charge market
the
Netherlands do not see how the aid could damage
Edelchemie’s
is
encouraged by,
specific incentive pro-
grammes and by requiring use of the best available tech-
niques when environmental permits are granted. These
five years. Any aid granted
permits are valid for
previously would fall outside the ten-year
laid
down in Article 15 of Regulation (EC) No 659/1999
and, as the installations are written off over ten years,
calculation of AVR’s expected operating deficits would
not be affected in any event.

interests. Technological development

for example,

limit

fees,

(65)

(66)

A l l e g e d o v e r c o m p e n s a t i o n

(63)

The Netherlands maintained that there has been no over-
compensation, either in favour of AVR Nuts or in favour

The aid to compensate for the costs of acquiring waste is
appropriate. Active acquisition of RDF waste would be
necessary as the possibility of diluting such waste or
adjusting the packaging, after which the waste would
not
longer qualify as RDF waste, has been used
increasingly. Without acquisition of such waste, AVR
Nuts would see its market share reduced,
losing it to
alternative treatment options, particularly abroad. This
would reduce capacity utilisation and increase losses.
The compensation granted to AVR IW for the costs of
acquiring high-calorific hazardous waste was explained
by the need to have sufficient quantities of such waste
available as fuel. The allocation of acquisition costs
between AVR Nuts and AVR IW is based on this. With
the closure of the RDFs, the seven jobs that correspond
to the costs charged will be lost. This would prove that
these seven jobs constitute additional acquisition costs
incurred only in the interests of AVR Nuts.

The Dutch authorities submitted a study on the future
development of alternatives for the disposal and recovery
of the waste concerned in the Netherlands and in neigh-
bouring countries (see point 13 above). The study shows
that sufficient alternatives are planned in the future to
guarantee safe and appropriate disposal and recovery of
such waste.

The Netherlands also submitted an economic analysis of
the concession agreement and potential overcompen-
sation that had been carried out by a consultancy at
AVR’s request. The analysis noted firstly that AVR’s
main competitors all had the possibility of benefiting
from higher staggered rebates but apparently preferred
to supply part of the waste they acquired to alternative
disposal or recovery facilities abroad. Secondly, the actual
compensation to be granted by the Netherlands for the
closure of the RDFs was significantly lower than AVR’s
own cost calculation of €45 million and the calculation
almost €40 million made by an independent
of
accountant of
these same costs. The main difference
stemmed from the different cost calculations for redun-
dancies.

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Official Journal of the European Union

L 84/47

(67)

The Netherlands provided the detailed calculation of the
budget deficit for 2004. It was higher than in previous
years despite the closure of one RDF since the market
conditions had worsened and,
the fees
received for high-calorific hazardous waste had decreased.

in particular,

towards the continued operation of the RDFs has had a
restrictive effect on trade between Member States.

(72)

(68)

The payment for dismantling and follow-up in the event
of
the liquidation of AVR Chemie will have to be
discussed between the State and AVR as the State
owns 30 % of AVR Chemie. The possibility of a
negative decision by the Commission on the notified
aid will, of course, also have to be discussed, and
solutions will be sought, but not without taking into
account the Commission's views.

6. ASSESSMENT

6.1 Existence of state aid

(69) Article 87(1) of the Treaty provides 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, in so far as it affects
trade between Member States, be incompatible with the
common market’.

(70)

(71)

The operating aid and the compensation for the costs of
closing down the RDFs for AVR Nuts that are described
in points 17-27 are granted by the State and financed
directly from state resources. They are selective in nature
as they affect in the first place AVR, AVR Nuts and AVR
IW. These are undertakings offering their services on the
markets in waste for disposal and waste for recovery. The
same applies to any payment by the State of the removal
and follow-up costs, for which the State has given a
guarantee of up to 30 %.

The measures must be regarded as affecting trade
between Member States. The markets
in waste for
disposal and waste for recovery are inextricably linked
and, despite the regulatory framework for and strict
controls on waste for disposal, trade between Member
States is common on both markets. By way of illus-
tration, following the announcement of the closure of
the RDFs, the number of applications for permits to
export waste to other Member States increased signifi-
cantly. The Commission deduces from this that the aid

in

the Netherlands

The measures do not favour the suppliers of hazardous
waste. The gate fees for high-calorific waste used as fuel
levels compared with the fees
were set at market
practiced
neighbouring
and
countries. The gate fees for C2 and RDF waste were
set, for policy reasons, at socially acceptable levels that
were, however, higher than those practiced in neigh-
bouring countries. This was possible given the export
restrictions on waste for disposal. Raising the fees was
not a feasible and realistic option under normal market
conditions since more waste would be exported, mixed
into other waste streams or disposed of
legally or
therefore increase AVR
illegally, and this would not
Nuts’ revenues. As a matter of fact, with the closure of
the RDFs, it became easier for suppliers to benefit from
the lower gate fees in Belgium and Germany. Without
the aid, the RDFs would have been closed earlier and the
possibilities of exporting waste for disposal in conformity
with Regulation (EC) No 259/93 would have improved
earlier. This is confirmed by the price and volume
movements following the closure of the second RDF.
For these reasons, the Commission considers that the
measure has not spared the suppliers of hazardous
waste the costs that would normally be included in
their budget.

treatment

(73) Without prejudice to the assessment of the measure on
the basis of Article 86(2) of the Treaty, the Commission
finds that the fourth criterion resulting from the Altmark
judgment is not met. Firstly, AVR Nuts was not selected
following a public tender procedure, and publication of
the concession decision in the Staatscourant, after which
interested parties could raise objections for a period of
six weeks, cannot be the substitute for an open and
transparent
the level of
tender procedure. Secondly,
compensation was not determined on the basis of the
costs which an average, well-managed undertaking
adequately provided with waste
capacity
would have incurred. As a matter of
fact, given the
unique position of the C2 depot and the RDFs in the
country, such an average undertaking does not seem to
in the Netherlands. The predetermined budget
exist
deficit
the particular conditions
under which AVR Nuts operates these installations and
the costs of similar installations abroad have not been
taken into account.
is clear that AVR's treatment
capacity was not appropriate: overcapacity led to under-
utilisation of the RDFs and ultimately to closure. This is
reflected in the aid measures, in particular the deficit for
the
2004 and the compensation for closure. Under
regarded as
the measures must be
circumstances,
conferring a selective advantage on AVR Nuts and not
simply as providing compensation that other companies
in a similar situation could have received under similar
conditions
they had been entrusted with the
performance of this service obligation.

if anything,

reflects,

It

if

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(74) A selective benefit flows not only from the operating
deficits and the compensation for the costs of closure,
the
but also from the state guarantee for 30 % of
removal and follow-up costs incurred. The fact
that
these costs correspond to the State’s shareholding in
AVR Chemie do not alter the state aid character of the
measure since, as a silent partner in AVR Chemie, the
State would be responsible only to the extent of
its
for additional claims that may
shareholding, and not
to
exceed that amount. The guarantee seems rather
from the State’s policy objective of avoiding a
result
situation in which, after the liquidation of AVR Nuts
and AVR Chemie, no other company could be held
liable for the appropriate removal and follow-up. The
guarantee may have conferred benefits for the entire
duration of
the concession agreement since, without
the guarantee, a company would (have to) build up the
necessary reserves during the operational lifetime of the
installations in order to be able to cope with the removal
and follow-up costs without aid.

(75)

Consequently, the notified measures constitute state aid
within the meaning of Article 87(1) of the Treaty.

economic interest, particularly where the service is
designed to deal with an environmental problem’ (19).

(78)

For the following reasons, the Commission agrees with
the service as defined in the
the Netherlands
concession decision and the
concession agreement
constitutes an SGEI.

that

(79)

First, there is an obvious public interest in appropriate
treatment when hazardous waste is disposed of. There is
as well a public and Community interest in ensuring the
availability of
such
disposal. In accordance with the objective laid down in
Article 5(1) of Directive 75/442/EC, Member States
should strive to become self-sufficient in the disposal
of waste.

sufficient domestic capacity for

(80)

Second, public intervention was necessary to safeguard
this public interest. Since the RDFs were operated at a
loss, without the aid AVR would have closed the RDFs
and the C2 depot at the end of 2001.

(76)

The Commission regrets that the Netherlands has imple-
mented a significant part of the aid in question in breach
of Article 88(3) of the Treaty.

(81)

6.2 Assessment on the basis of Article 86(2) of the
Treaty

C l a s s i f i c a t i o n a s a n S G E I

interest (18),

(77) Member States are free to define what they regard as
services of general economic interest on the basis of
the specific features of the activities. This definition can
only be subject to control for manifest error (17). In its
2003 Green Paper and its 2004 White Paper on services
of general
the Commission outlines the
guiding principles of its approach. Section 3.4 of the
‘in line with the Union’s
White Paper stipulates that
policy on sustainable development, due consideration
has to be taken also of the role of services of general
interest for the protection of the environment and of the
specific characteristics of
interest
directly related to the environmental field, such as the
water and waste sectors.’ This is in line with the case law
of the Court, which ruled that ‘the management of a
particular waste may properly be considered to be
capable of forming the subject of a service of general

services of general

(17) Communication from the Commission on services of general

interest in Europe (OJ C 17, 19.1.2001, p. 4, point 22).

(18) Green Paper on services of general interest (COM(2003) 270 final,
interest

21.5.2003) and White Paper on services of general
(COM(2004) 374 final, 12.5.2004).

in

disposed

Third, the public interest was real. Between 2002 and
2004 significant quantities of RDF and C2 waste
produced
of,
the Netherlands were
although they were significantly below expectations on
account, among other things, of the consequences of the
ruling by the Court which clarified the definitions of
‘waste for disposal’ and ‘waste for recovery’. The Neth-
erlands responded to market developments by adapting
the capacity to the new perceived needs and ultimately
by abandoning its policy and closing down the only
remaining RDF. This, however,
incompatible
with the public interest as regards the actual quantities
of RDF and C2 waste disposed of. The quantities of waste
for disposal might have been smaller if the Netherlands
had applied the correct definitions from the outset, but it
is unlikely that all RDF and C2 waste would have been
used for recovery purposes. This is confirmed by the
quantities of RDF and C2 waste offered to AVR Nuts
in 2004 and by the quantities of RDF waste exported
for disposal in RDFs abroad. The interested parties may
have been right in maintaining that all hazardous waste
produced in the Netherlands during that period could
have been disposed of or recovered within the country
or abroad even without AVR’s RDFs. They failed,

is not

(19) Case C 209/98 Entreprenørforeningens Affalds/Miljøsektion (FFAD)
v Københavns Kommune (‘Sydhavnens Sten&Co’)
[2000] ECR
the Commission
3743, paragraph 75. An example where
considered the management of a particular waste to be an SGEI
can be found in the state aid field with regard to the collection of
halons and CFCs (state aid No N 638/2002, OJ C 82, 5.4.2003,
p. 18). See also in this connection Case C 240/83 Procureur de la
République v Association de défense des brûleurs d'huiles usagées
[1985] ECR 531.

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however, to demonstrate that without AVR’s RDFs no
exports of waste for disposal abroad would have been
necessary at all because of
the absence of sufficient
capacity. It is precisely in this connection that the Neth-
erlands could legitimately base its policy on the desire to
defend the public interest, in line with the objective of
Article 5(1) of Directive 75/442/EC.

precise. It is strictly linked to the waste for the C2 depot
and to the low-calorific waste to be incinerated in the
RDFs. The aid measures to compensate for the costs of
the SGEI are also described in sufficient detail. However,
the following must be noted.

(82)

Fourth, the measures do not infringe the ‘polluter pays’
principle. As concluded in point 72, the suppliers of
waste are not spared the costs that should normally be
included in their budget.

Fifth, classification as an SGEI does not circumvent the
rules that normally apply. The measure seeks to protect
the environment since it ensured appropriate treatment
of hazardous waste at a location near its source. The
environmental aid guidelines contain rules on operating
aid to promote waste management (Section E.3.1). These
rules, however, were drawn up in the first place in
respect of operating aid granted to companies
that
produce the waste concerned themselves.

(87)

First,
there have been shortcomings as regards trans-
parency. It may not always have been clear to compe-
titors whether AVR IW acted on its own behalf or on
behalf of AVR Nuts. In addition, the system of fees and
in particular as regards high-calorific waste to
rebates,
fuel
the RDFs, has not been sufficiently transparent
from the outset. For AVR and the State, and for inde-
pendent controllers, however,
these issues were suffi-
ciently clear from the concession agreement, and this
made appropriate control possible.

(88)

The Commission considers that the method described in
Annex I is sufficiently transparent for control purposes,
and deems sufficient the additional measures to increase
transparency in the execution of
that were
the SGEI
adopted pursuant to the comments received.

Sixth, by nature, the bulk of the RDF and C2 waste is
supplied by companies, but collection systems exist for
the safe and easy disposal of any hazardous waste from
households. Some of the hazardous waste collected can
then be disposed of in the RDFs. So the service for which
the aid was granted was general in character and did not
favour a limited number of users.

(89)

The two joint competitors claim that there is no market
failure to justify the SGEI. Moreover,
in some Member
States there were no RDFs at all. The objectives of
Directive 75/442/EEC,
in waste
disposal and waste disposal close to the source of the
waste (proximity principle), may not correspond to a
market outcome but are no less legitimate for that
reason.

self-sufficiency

i.e.

the level

Second, the concept of ‘socially acceptable fees’ for the
disposal of RDF waste is rather vague at first sight. In
practice, however, this has not caused a problem. The
to which they had been
fees remained at
raised in the preceding years.
In accordance with the
‘polluter pays’ principle, they were higher than the fees
for disposal abroad. At
the
interested parties nor the Netherlands have argued that
lower fees were necessary to avoid illegal practices that
could be harmful to the environment. Apparently, the
Netherlands regarded the fees as not being too high,
given the agreement on the predetermined budget
deficits, which were based on more precise assumptions
regarding the fees to be applied.

the same time, neither

P r e c i s e d e f i n i t i o n a n d e n t r u s t m e n t o f
t h e S G E I

(86) A public service mission needs to be clearly defined and
must be explicitly entrusted through an act of public
authority.
In this case, the proper entrustment of the
is clear from the concession decision and the
SGEI
the public
concession agreement. The definition of
sufficiently
is
service obligation in these documents

A b s e n c e o f o v e r c o m p e n s a t i o n

the budget deficits

in 2002 and 2003; 2.

(90) Overcompensation must be avoided for all aid elements
in the system. In this respect, the Commission assesses
the following elements separately: 1. the compensation
for
the
compensation for the budget deficits in 2004, 2005
the costs of
the compensation for
and 2006; 3.
closure, which consists in (a) compensation for closure
costs related to the agreed investments to the extent that
they have not yet been written off, and (b) closure costs
resulting from early closure of the RDFs; and 4. the aid
contained in the guarantee.

(83)

(84)

(85)

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Official Journal of the European Union

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(91) As regards the 2002 and 2003 budget deficits,

appropriate

restrictive. All

and sufficiently

the
Commission considers the methodology for calculating
the expected deficits, which are to be granted as aid, to
be
the
elements, apart from the compensation for acquisition
costs (see points 108-113), are directly related to the
fulfilment of the public service obligation. There is no
reason to believe that cost elements have been artificially
inflated and that
the assistance of an independent
consultant has helped the Netherlands to calculate the
aid in a restrictive way. The methodology contains a
more detailed analysis of AVR Nuts’ opening balance
sheet, which provides a sound basis for the estimates
of AVR Nuts’ costs and revenues in the new situation.
Variable costs, direct fixed costs and costs charged by
other AVR companies are estimated on the basis of
detailed breakdowns.
Investments and depreciation are
duly taken into account by means of a detailed
investment plan for 2002-16 and by writing off new
investments over 7,24 years. This ensured that costs
were not artificially inflated by individual
investments
or disproportionate depreciation. The comments from
interested parties raised various issues, but no proof of
overcompensation was provided. For 2002 and 2003,
moreover, accidents and technical difficulties caused
losses that exceeded the predetermined deficits by a
total of €12 million. Any overcompensation in favour
of AVR Nuts during that period is, therefore, ruled out.

(92)

is

the RDFs,

For the years 2004-06, the aid is based on the same
methodology and so the Commission does not a priori
expect any overcompensation. The predetermined budget
deficit in 2004 is based entirely on the same metho-
dology and the increase in the predetermined deficit,
despite the closure of one of
fully
explained by the various cost elements of this metho-
dology (see the figures in Annex I). Given the high
losses in excess of the predetermined deficits for 2002
and 2003, it need not surprise anyone that the prede-
termined deficit for 2004 was higher. The closure of the
first RDF, moreover, may have reduced the variable costs,
for a
its impact on fixed costs, which account
but
significant part of total costs, has been limited. Never-
theless,
in line with the Commission's general policy,
overcompensation for the cost of an SGEI should be
excluded not only ex ante, but also ex post. The
to
therefore,
Commission,
verify the actual costs and to adjust
if
necessary in order to avoid a situation in which compen-
sation would allow AVR Nuts to earn a profit margin on
its activities higher than is normal for this type of activity
in this sector.

the Netherlands

the aid level

requests

(93)

The Commission accepts that aid can be granted as
compensation for closure costs related to the agreed

substantial

investments. Depreciation of

investments to the extent they have not yet been written
off. Without sufficient guarantees, one cannot expect an
operator to enter into a five-year service contract that
requires
the
the period corresponding to the
investments over
duration of the agreement,
i.e. five years, would have
been just as unreasonable. It would have increased signif-
icantly the predetermined losses over that period and
hence the level of aid. The relevant provisions in the
and
concession agreement
efficient corollary to the compensation system. The fact
that those provisions were applied before the planned
expiry of the concession agreement does not alter this
assessment. On the basis of the information provided by
the Netherlands, the Commission does not expect there
to be any overcompensation for this element. A few
aspects, however, are not sufficiently clear, viz. whether
any proceeds from the sale of assets or any profits from
continued use for other purposes will be properly taken
the
into account. Consequently,
Commission requests
to verify the
actual costs and to adjust the aid level if necessary.

for this element too,

the Netherlands

a necessary

constitute

(94)

The Commission can also accept that compensation is
granted for additional costs resulting from the earlier-
the RDFs. A Member State
than-expected closure of
cannot be obliged to continue with such a contract,
especially if it thereby pays less than what it probably
would have had to pay if
the activities had been
continued. The information provided by the Netherlands
on these additional costs is relatively detailed. Various
elements, however, are based on estimates which seem
to present a rather wide margin of uncertainty. Moreover,
only the costs necessarily linked to the SGEI and to the
earlier-than-expected closure can be included, and it is
from the information available
not
whether this is indeed the case. Consequently, for this
element as well,
the Commission requests the Neth-
erlands to verify the actual costs and to adjust the aid
level if necessary.

sufficiently clear

(95)

Lastly, the Commission can accept that aid is granted
through application of the guarantee covering 30 % of
the costs of removal and decontamination. Had there not
been a guarantee, the operating deficits and the operating
aid would probably have been higher on account of the
corresponding provisions that would have had to be
made. The costs as such are directly linked to the
original policy objective of offering the SGEI concerned
in the Netherlands. The actual costs, however, are not yet
known, so the Commission will require appropriate ex
post control.

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L 84/51

(96)

for all

losses and profits

To sum up, the Commission finds no overcompensation
for the operating deficits for 2002 and 2003 but can
allow the remaining aid elements only on condition
that the Netherlands ensures that there is no overcom-
taking into
pensation ex post over the entire period,
account excess
the years
covered by the concession agreement. The aid may
allow AVR Nuts to earn a reasonable profit margin on
the activities concerned. The risk for AVR under the
limited since predetermined losses
agreement was
would be fully covered by the aid, but AVR remained
largely exposed to the operating risk (20), with the result
that risk was not excluded, as indeed proved to be the
case in practice. Given the market conditions and AVR
Nuts’ risk profile, the Commission can certainly accept a
profit level equivalent to the rate of return on Dutch
government bonds plus 2 percentage points.
in
practice, profit is found to exceed this threshold, the
Netherlands must retroactively adjust the aid level and,
in accordance with Article 88(3) of the Treaty, notify any
aid that allows AVR Nuts to exceed the threshold. The ex
post verification must adequately verify the absence of
overcompensation. To
the Commission
this
reports which must
requires
address at least the issues specified in Annex II.

detailed monitoring

end,

If,

P r o p o r t i o n a l i t y
a n d
t r a d e c o n t r a r y t o t h e c o m m o n i n t e r e s t

d i s t o r t i o n

n o

o f

(97)

The Commission exercises control of proportionality so
as to ensure that the means used to perform the general
interest task do not lead to unnecessary distortions of
to be
trade. Specifically,
ensured that any
restrictions on the rules of
the EC Treaty, especially
restrictions on competition and limitations on the
freedoms of the internal market, do not exceed what is
necessary to guarantee effective fulfilment of the task.

it has

(98)

The Commission considers that the measures adopted by
the Netherlands comply for the most part with the
proportionality requirement. It is difficult to imagine by
which other means the Netherlands could have ensured
the
capacity for
disposing of hazardous waste. None of the interested
parties has argued that there were less distortive alter-
natives available to meet this objective. The following

sufficient domestic

availability of

(20) In addition,

the concession agreement contains a provision for
interim upward adjustment in the event of changed public policy
measures or calamities beyond the influence of AVR. A similar
provision allows downward adjustment of the aid in the event of
a significantly smaller loss than that determined in advance.

aspects of
tionate as well.

the measure are considered to be propor-

refund,

could have

applied for

the non-discriminatory nature of

(99) Gate-fee system based on staggered rebates: Since the aim
of this system is to maintain sufficient capacity for the
proper disposal of RDF waste, the natural consequence is
to aim for maximum capacity utilisation in order to
shown by the Netherlands, all
minimise costs. As
suppliers
either
a
directly or when supplying via intermediaries. The gate-
fee system based on staggered rebates is justified. The
system of non-discriminatory fees and staggered rebates
for all suppliers,
including AVR IW, has limited the
distortion of competition resulting from the measure.
Although there may have been some confusion in
the system
practice,
could have been clear to any interested party The Neth-
erlands has
to
increase transparency when there appeared to be some
confusion. Setting the fee for high-calorific waste at the
limited the
level of competing disposal alternatives
distortion of competition on the market for this waste.
It must be noted that no company in the Netherlands
had an obligation to supply RDF waste or high-calorific
hazardous waste to AVR Nuts or AVR IW. In contrast,
the concession agreement obliged AVR Nuts to accept
any C2 and RDF waste offered to it, whether or not
supplied together with high-calorific hazardous waste.
In this
insufficient
evidence that there was prima facie abuse of a dominant
position by AVR Nuts and that the concession agreement
certainly does not provide a basis for such abuse.

taken sufficient additional measures

the Commission finds

respect,

(100) Compensation in the event of closure: The provisions in
the concession agreement that concern – in the event of
the agreement not being extended - the compensation for
the remaining book value of the as yet undepreciated
that AVR had made during the period
investments
covered by this agreement with the consent of
the
State must similarly be considered to be proportionate.
Without such a guarantee, AVR’s agreement could not
reasonably be
to the
guarantee by the State to cover a maximum of 30 % of
the costs of removal and decontamination in the event of
the installations being liquidated. Appropriate removal
in the public
and decontamination are obviously
interest. Given its 30 % share in AVR Chemie,
is
acceptable that the State should assume responsibility
for its part,
leaving the remainder for the other share-
holder, AVR Holding.

expected. The

applies

same

it

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(101) Maintaining two RDFs at the outset: The Commission
examined whether the Netherlands should have granted
aid for maintaining only one RDF. The question is
whether
the
objectives pursued by the Netherlands by maintaining
the second RDF offsets the aid required and the unfa-
vourable effects on competition resulting from this.

the contribution to the realisation of

(102) The Commission here acknowledges that the Netherlands
could legitimately aim to have
sufficient domestic
capacity for the treatment of RDF waste in order to
avoid a capacity shortfall which would oblige the State
to allow the exportation of such waste. Some flexibility
in the assessment is unavoidable as the flows of C2 and
RDF waste that would result could not be predicted with
certainty and because of the risks attaching to the avail-
ability of the installations. Such risks indeed materialised
when, following a number of incidents, one of the RDFs
was closed for some time in 2002. The available capacity
in 2002 and 2003 was only 73 % and 75 % respectively
of the permitted capacity of 100 000 tonnes and, for this
reason, the Dutch authorities had to allow RDF waste to
be exported, contrary to their policy aim.

supply of RDF waste for export varies from year to year
and depends on the situation on the international
market. The situation varies as well for different cate-
gories of waste. Moreover, in early 2002 there was still
a substantial stock of RDF waste, with the result that
supply at the beginning of the period was guaranteed.
Furthermore, had the Dutch authorities in 2002 based
the estimated flow of RDF waste on the assumption that
the definition of ‘waste for recovery’ would have been
correctly applied, the estimate might have been lower,
but it seems unlikely that, on the basis of the infor-
mation available at the time, such an estimate would
they could have confidently
have been so low that
decided that only one RDF would suffice. This
is
confirmed by the fact that in 2003, when the Court
already had clarified the proper definition of ‘waste for
recovery’, AVR's capacity problems still forced the Neth-
erlands to allow actual exports of RDF waste. The actual
decline in the flow of RDF waste to AVR is explained to
a significant extent by factors other than the increase in
exports. With respect
to other capacity in the Neth-
erlands, the Commission notes that a significant part of
that capacity became available only in late 2003, after
the required permits had been issued to the main
competing pyrolysis installation. The interested parties
have failed to demonstrate that the Dutch authorities
should have taken into account back in 2002 sufficient
alternative domestic capacity for treating all types of RDF
waste produced in the Netherlands and delivered for
disposal.

least

(103) When comparing expected quantities of RDF waste and
the capacity of the two RDFs, the following must be
noted. When the concession agreement was prepared
in the period from end-2001 to mid-2002,
the
expected supply of RDF waste was put at around
38 500 tonnes per year. This estimate was based on
past experience. Treatment requires at
the same
volume of high-calorific waste. One RDF would clearly
not have been sufficient for the proper treatment of this
volume of waste. This
figure is, however, open to
criticism in three respects. First, part of the expected
supply of RDF waste to AVR Nuts may have been the
consequence of the restrictive application of the defi-
nition of ‘waste for recovery’ by the Netherlands up to
the beginning of 2003. Second,
interested parties have
pointed to alternative domestic capacity for dealing with
take into
RDF waste. Third,
account
the
waste in its grate incinerators for municipal waste (21).
On the other hand, the estimate explicitly took account
of ongoing developments at the time. In addition, the

the possibility for AVR to treat part of

the estimate would not

(104) The decision to keep in operation two RDFs instead of
one increased the level of aid, in particular because of the
investments which appeared to be necessary and in
respect of which compensation had subsequently to be
paid because of the closure. Some of these investments
had not, however, been foreseen at
the time the
concession agreement was signed. The effects on the
predetermined operating deficits were relatively limited
because of the relatively high proportion of fixed costs.
The Commission expects the effects on competitors to
remain relatively limited as well: there is no indication
that keeping two RDFs in operation has resulted in larger
quantities of RDF and other hazardous waste being incin-
erated. Using RDF capacity for other types of waste, for
which no evidence has been provided, is relatively inef-
ficient and cannot be reckoned to have had a strong
negative effect on competitors.

(21) The three joint competitors pointed out in particular that Figure 3.2
on theoretical and actual availability and the supply of hazardous
waste in the study ‘Toekomst verbranden specifiek gevaarlijk afval’
(annexed to their comments and also to the letter from the Neth-
erlands) suggests an unduly high estimate for the supply of RDF
waste because it would not take into account the possibility for
AVR to treat part of the waste in its grate incinerators for municipal
waste. AVR’s practice is, however, explicitly described in paragraph
3.1.2 of that study.

(105) Accordingly,

it appears to the Commission that

the
original decision to keep two RDFs in operation can be
considered to be proportionate and that the decisions to
close the RDFs were not unreasonably overdue.

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(106)

Involvement of AVR IW: AVR IW was responsible for
much of AVR Nuts’ administration and, at the same time,
was a competitor for other suppliers of hazardous waste.
In this way,
it obtained information on intended and
actual supplies of waste. As no single supplier was
under an obligation to supply to AVR Nuts the quantities
originally indicated and as the actual fees and discounts
were ultimately based solely on actual volumes of waste
supplied, it is difficult to see how AVR IW could have
obtained a financial or strategic advantage by virtue of its
central position. The Netherlands explained that AVR IW
was unable to abuse this position and the Commission,
on the basis of the comments from interested parties
among other things, cannot come to this conclusion
either. It may be true that AVR IW, on its own behalf,
offered to treat waste at fees below those charged by
AVR Nuts, but
this cannot be attributed to the aid
measures and could fall within the realm of competitive
behaviour; any competitor was free to act in a similar
manner. Similarly, even if AVR IW rerouted part of the
RDF waste to its municipal waste incinerators, which has
not been proved, this does not seem to have resulted in a
disproportionate distortion since
any supplier with
the waste could have earned similar
knowledge of
margins by simply supplying such waste directly to
other municipal waste incinerators operated by AVR or
others. Moreover, as the aid was determined on the basis
of a predetermined budget, the Commission expects AVR
to have opted for efficient solutions, and not to have
rerouted waste if this would have led to underutilisation
of the installations and hence higher actual losses. In fact,
such rerouting may well be regarded as efficient waste
management in line with the Community principles.

instruments exist

(107) Technological development: The Commission does not
expect
the measures to have a pronounced adverse
effect on the development of alternative disposal and
recovery technologies. As explained by the Netherlands,
other
for encouraging such devel-
opments. In 2003, for example, a permit was granted
for
fees
charged by AVR were significantly higher than the fees
charged by the operator of that installation and so the
distortive effect of the aid must be considered to be
limited in this respect.

an innovative pyrolysis

installation. The

accepted for this reason. In contrast, the compensation
granted to AVR IW in respect of the acquisition of waste
distorts competition in a disproportionate way as AVR
IW is the sole recipient. Its competitors do not receive
similar compensation for acquisition costs incurred by
them. As regards high-calorific hazardous waste, had
there been persistent shortages, the solution could have
consisted in lowering the gate fees in a non-discrimi-
natory fashion. As regards RDF waste, the compensation
for acquisition costs must be considered as dispropor-
tionate too.
It confers on AVR IW a discriminatory
advantage for a specific activity that is in direct compe-
tition with other waste management companies. Such
acquisition is not directly in the public interest
that
justifies the aid, and this is certainly the case with RDF
waste acquired abroad. But, even in the case of RDF
waste from Dutch sources, acquisition may encourage
disposal
in the Netherlands at the expense of recovery
in the Netherlands or elsewhere. Under specific circum-
stances,
this may be contrary to the principle of
treatment near the source. Consequently, the amount of
€2,4 million intended for acquisition, included in the aid
to AVR Nuts, which was based on the predetermined
budget, and transferred to AVR IW cannot be justified
on the basis of Article 86(2) of the Treaty. The compat-
ibility of this part of the measure with Article 87(2) and
(3) is assessed in Section 6.3 below.

6.3 Assessment on the basis of Article 87 of the
compensation for acquisition costs

(109) The Commission has examined whether the exemptions
in Article 87(2) and (3) of
the Treaty apply to the
compensation for acquisition costs granted to AVR IW.
The exemptions in Article 87(2) could serve as a basis for
considering aid to be compatible with the common
market. However,
the aid (a) does not have a social
character and is not granted to individual consumers,
(b) does not make good the damage caused by natural
is not
disasters or exceptional occurrences and (c)
required in order to compensate for the economic disad-
vantages caused by the division of Germany.

(108) Aid for the acquisition of waste: In contrast to the above
aspects,
the measures cannot be regarded as propor-
tionate as regards the acquisition of waste as carried
out by AVR IW and for which AVR Nuts pays compen-
sation out of the aid it receives from the State. The
Commission accepts that minimising the costs of the
system requires maximising the volume of waste to be
treated, especially the volume of RDF waste, for which
the gate fees are highest. As indicated in point 99, the
system of non-discriminatory staggered rebates can be

(110) Similarly, the exemptions in Article 87(3)(a), (b) and (d),
which refer to aid to promote the economic development
of areas where the standard of living is abnormally low
or where there is serious underemployment, aid to
promote projects of common European interest or to
remedy a serious disturbance of
the economy of a
Member State, and aid to promote culture and heritage
conservation, do not apply in the present case. The Neth-
erlands has not attempted to justify the aid on any of
these grounds.

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(111) As regards the first part of the exemption in Article
87(3)(c), namely aid to facilitate the development of
certain economic activities, the Commission notes that
the aid does not
involve research and development,
investment by small and medium-sized enterprises or
the rescue or restructuring of AVR IW. Nor does the
aid serve regional development purposes, and AVR IW
is not located in an area where start-up investments are
eligible for regional aid. Therefore, the aid cannot be
declared compatible with the common market on the
ground that
it would facilitate the development of
certain regions.

(112) The Commission has examined whether the aid measure
qualifies for exemption under Article 87(3)(c) on any
in particular, whether the environ-
other grounds and,
mental aid guidelines apply to this case. Since the aid
constitutes operating aid, the Commission has assessed it
in the light of Section E.3.1 of those guidelines. The aid
is, however, not shown to be absolutely necessary, nor is
it strictly limited to compensating for extra production
costs by comparison with market prices of the relevant
products or services.

(113) As none of the exemptions is applicable, the Commission
concludes that this aid is incompatible with the common
market and, in accordance with Article 14 of Regulation
should be recovered from the
(EC) No 659/1999,
recipient, AVR IW,
in conformity with the provisions
set out in Chapter V of Commission Regulation (EC)
No 794/2004 of 21 April 2004 implementing Council
Regulation (EC) No 659/1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (22).

7. CONCLUSION

(114)

to the extent

the budget deficits

In conclusion, the Commission finds that the following
measures constitute state aid for AVR Nuts: 1.
the
compensation for
in 2002 and
2003; 2. the compensation for the budget deficits in
the
2004 and in the remaining period 2005-06; 3.
compensation for closure costs, which consists in (a)
compensation for closure costs related to the agreed
investments
they have not yet been
written off and (b) compensation for closure costs due
to the early termination of the treatment of RDF waste;
and 4. the aid contained in the guarantee. The aid, except
for the part of it designed to compensate for the costs of
acquiring waste, can be found compatible with the
common market as it constitutes compensation for the
costs of an SGEI within the meaning of Article 86(2) of
the Treaty, on condition that the aid does not exceed the
incurred during that period and that
actual

losses

(22) OJ L 140, 30.4.2004, p. 1.

allowance is made for no more than a reasonable
profit margin. To this end,
the Commission requests
the Netherlands to submit annual reports on the actual
use of the aid and the profitability of the activities during
the year concerned. The Netherlands should also verify
the compensation for closure costs and,
in so doing,
address the issues enumerated in Annex II. An interim
report on this verification must be submitted to the
Commission by the spring of 2006 and the final
report by the spring of 2007. The Netherlands should
notify any aid granted to AVR Nuts that would allow the
company to attain a profitability level higher than the
rate of
return on Dutch government bonds plus 2
percentage points. This aid may not be paid out before
the Commission has approved it pursuant to Article 4 or
7 of Council Regulation (EC) No 659/1999.

the

SGEI.

compensation

included in the budget of

(115) However, the compensation of €2 396 000 granted to
AVR IW for the costs of acquiring waste cannot be
found compatible since it cannot be regarded as propor-
it
for
tionate
compensates AVR IW for costs that should normally
be
treatment
company. None of the exemptions from the prohibition
on state aid in Article 87(1) of the Treaty is applicable.
Consequently, this part of the aid must be recovered
directly from AVR IW. To this end, the Commission
requests the Netherlands to enjoin AVR IW to repay
the aid with interest in line with the conditions laid
down in this decision.

a waste

Instead,

to this decision,
and

(116) The Commission asks the Netherlands to provide the
information requested using the questionnaire attached
indicating clearly the
in Annex III
measures
obtain
to
immediate and effective recovery of the aid. It calls on
the Netherlands to submit within two months of the
notification of the decision all documents showing that
recovery proceedings have been initiated against AVR IW
(such as recovery orders),

planned

already

taken

HAS ADOPTED THIS DECISION:

Article 1

The compensation for operating deficits, the compensation for
the costs of closing down the rotating drum furnaces and the
the costs of removal and
state guarantee covering 30 % of
decontamination, which
concession
agreement between the Netherlands and AVR Nuts and which
have been partially implemented by the Netherlands, constitute
state aid within the meaning of Article 87(1) of the Treaty.

follow from the

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Article 2

Subject to the conditions set out in Article 3 of this decision,
the state aid referred to in Article 1, with the exception of the
is
aid referred to in Article 4 and granted to AVR IW,
compatible with the common market as it compensates the
recipient
the costs of a service of general economic
interest within the meaning of Article 86(2) of the Treaty.

for

Article 3

1.
The aid for AVR Nuts shall not exceed the sum of the
predetermined deficits, the actual additional losses incurred by
AVR Nuts and a reasonable profit margin during the period
covered by the concession agreement.
the
the period during which aid is granted
profit
proves
return on Dutch
government bonds plus 2 percentage points, the Netherlands
shall retroactively adjust the aid level.

level over
to be higher

than the rate of

in practice,

If,

2.
The Netherlands shall submit a report on the application
of the measures in 2004 and annual reports on the implemen-
tation of the guarantee for the costs of removal and deconta-
mination and on the application of the measures for the C2
depot for the remaining duration. It shall submit an interim
report on the verification of
the compensation for closure
costs by the spring of 2006 and a final report by the spring
of 2007. These reports shall
justify the compensation, taking
due account of the issues raised in Annex II.

Recovery

shall be

and in
2.
accordance with the procedures of national law, provided that
they allow the immediate and effective execution of
the
decision.

effected without delay

The aid to be recovered shall

3.
include interest from the
date on which it was at the disposal of the recipient until the
date of its recovery.

Interest

shall be

4.
calculated in accordance with the
provisions of Chapter V of Commission Regulation (EC) No
794/2004 of 21 April 2004 implementing Council Regulation
(EC) No 659/1999 laying down detailed rules for the appli-
cation of Article 93 of the EC Treaty.

Article 6

1
The Netherlands shall inform the Commission, within two
months of notification of this decision, of the measures already
taken and planned to recover the aid referred to in Article 4. It
shall provide this information using the questionnaire attached
in Annex III to this decision.

2.
The Netherlands shall also submit within two months of
notification of this decision documents showing that recovery
proceedings have been initiated against AVR IW.

Article 4

Article 7

The aid for AVR IW consisting in the compensation for acqui-
sition costs amounting to €2 396 000 is incompatible with the
common market.

Article 5

The Netherlands shall

1.
take all necessary measures to
recover from the recipient, AVR IW, the aid referred to in
Article 4.

This decision is addressed to Kingdom of the Netherlands.

Done at Brussels, 22 June 2005.

For the Commission

Neelie KROES
Member of the Commission

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ANNEX I

METHODOLOGY USED FOR DETERMINING THE OPERATING BUDGET DEFICITS

The methodology to determine the budget deficits in advance was developed by an independent consultant at the request
of the Ministry for Housing, Spatial Planning and the Environment. It is dated 16 April 2002.

The methodology is based on a detailed assessment of the budgets for 2002 and subsequently makes extrapolations for
2003, taking into account all known factors that can be expected to affect the actual outcome for 2003. For later years,
the same procedure would be followed, on each occasion for a two-year period. Owing to unexpected developments and
the potential closure of the second RDF, AVR and the Dutch authorities agreed to have only a one-year budget for 2004.

The 2002 budget is based on estimated revenues, historical ratios for variable costs and estimates for other costs. The
investment budget for 2002-16 and the specific investments planned for 2002 are also taken into account.

On basis of this budget, a forecasting model was built,
statements. The most important assumptions underlying the forecasting model are as follows:

including income statements, balance sheets and cash flow

— The scenario chosen assumes that approximately 85 000 tonnes can be processed annually (with some downtime due

to recurring exceptional events being taken into account), resulting in estimated revenues of €30,5 million.

— Exceptional events are not accounted for separately in the model, it being assumed that they form part of the assumed

recurring exceptional events.

— For depreciation and cost allocation, the estimates for 2003 differ from those for 2002. As of 2003, revenues and

costs will rise by 3,5 %. An increase in efficiency is also taken into account.

— The old tangible fixed assets are valued at zero since they are not economically viable without the aid. They are not,
therefore, included in the rental charged by AVR Chemie to AVR Nuts; this rental charge will include all AVR's other
costs, excluding additions to the C2 provision (as this relates to the past) and including a 5 % mark-up for tax
purposes.

— AVR Holding will provide AVR Chemie and AVR Nuts with substantial finance for which interest will be charged at a

rate of 4,891 % (in 2002 and 2003).

— Cost allocations by AVR Holding are included; they total €4,3 million for 2002. For 2002 and 2003, these allocations

include €400 000 for commercial costs which will not recur after 2003.

— A service contract lays down the conditions for the supply of services between AVR's various subsidiaries. Transfer
prices are based mostly on cost prices calculated according to the activity-based costing method and also on market
prices.

— No provisions are made for demolition costs since their payment is guaranteed by AVR (70 %) and the State (30 %).

— No provisions are made for personnel layoffs since the business continues and the financial exposures for any future
layoffs remain at operator level. The State cannot be liable for any future layoff costs in the event of the activities of
AVR Nuts being terminated. The State will never be held liable for severance payments that may be payable in the
event of future layoffs resulting from the cessation of activities and/or the discontinuation of the agreement with AVR.

— AVR Holding is liable for negative results and for the effects of not meeting certain quality, safety and environmental
requirements, account being taken of changing environmental requirements (one defined exception was made and this
can be discussed with the State).

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— There were special provisions for possible upward adjustment of the aid for three specific situations concerning: 1. the
permissible temperature in the afterburning chamber; 2. potential economies from the use of secondary fuels for
which an experiment was to be carried out; and 3. the legal question whether or not excise duty was to be paid on
oil-containing waste.

Profit and loss

2002
predetermined

2003
predetermined

Revenue from RDF waste

Revenue from C2 waste

Revenue from steam

Total revenue

Materials and energy

Deposit of remaining materials

Processing/storage

Transport costs

Total variable costs

Personnel costs

Third-party personnel

Maintenance

Layoff provision

Operational provisions

General expenses

Total direct fixed costs

Costs charged by AVR Holding

Other indirect costs

Total indirect fixed costs

Rental charged by AVR Chemie

Depreciation

Interest costs

Operating deficit

29,3

0,5

0,6

30,5

3,8

2,0

2,0

0,2

8,0

3,8

0,3

7,8
–

–

0,6

30,4

0,5

0,7

31,6

3,9

2,1

2,1

0,2

8,2

4,0

0,3

8,1
–

–

0,6

2003
actual

22,8

1,2

0,7

24,7

3,0

1,2

1,8

0,3

6,4

4,2

0,7

7,0

0,7
–

2,4

2004
predetermined

15,9

1,2

0,4

17,5

2,4

1,0

0,5

0,2

4,1

3,6

0,4

6,0

0,2
–

0,8

12,5

12,9

15,0

11,0

4,3

5,4

9,8

2,0

0,1

0,2

1,6

4,0

5,6

9,6

3,5

0,2

0,0

2,9

2,8

3,9

6,7

3,7

0,2

0,6

7,8

3,6

3,8

7,4

3,1

0,5

0,3

8,9

Costs incurred by AVR Holding and partially included in the budget include costs for security, canteen, administration,
common facilities, management and ICT. The costs charged by AVR Holding are based on detailed estimates.

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POINTS TO BE INCLUDED IN THE EX POST VERIFICATION OF THE ABSENCE OF OVERCOMPENSATION

ANNEX II

Operating budget 2004, 2005 and 2006
— Actual revenue and actual costs

Compensation for agreed investments not yet written off
— Verification of direct link to the SGEI for each of the investments

— Any proceeds from sales of the assets concerned and any benefits from continued use for other purposes

Compensation for costs due to earlier closure
— Actual cost of early dismissal: indication of the full or part-time employment of the person concerned in relation to
the SGEI, actual payments for the employees concerned, actual duration of the payments for redeployment within or
outside AVR

— Recurrent fixed costs: general RDF costs: verification whether failed coverage (gemiste dekkingen) is appropriate and has
not been met by other means; verification of actual accounting, legal and banking cost; verification of actual costs for
other elements

— Recurrent fixed costs: security, canteen, purchasing, administrative facilities at Professor Gerbrandyweg: actual costs of
transporting electricity based on the actual date on which the facility with Eneco was ended or bought back; costs
forgone of rent for offices, etc., taking account of any proceeds from actual re-use; verification whether failed coverage
for purchasing function for restaurant, warehouse and security is appropriate and has not been met by other means

— Recurrent fixed costs: ICT infrastructure: verification whether missed coverage for ICT infrastructure has not been met

by other means

— Recurrent fixed costs: personnel costs: actual costs of central telephone function and leased lines

— Recurrent fixed cost: rent/lease of equipment: actual missed coverage of specialised trucks and forklift trucks and

actual proceeds from sales or alternative use within AVR

— Recurrent fixed cost: other overheads: actual costs and actual reduction in costs of maintenance and cleaning contracts

— Recurrent fixed costs

Guarantee
— Verification of actual removal and decontamination costs for the installations directly used for the SGEI

The verification includes a calculation showing that the aid does not lead to a higher rate of return than the return on
Dutch government bonds plus 2 percentage points.

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ANNEX III

Information regarding the implementation of the Commission decision in Case C 43 2003 - Netherlands,
operating aid in favour of AVR for dealing with hazardous waste

1. Calculation of the amount to be recovered

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

recipient:

Date(s) of payment (°)

Amount of aid (*)

Currency

Identity of recipient

AVR IW

(°) Date(s) on which the aid or individual instalments of aid were put at the disposal of the recipient; if the measure consists of

several instalments and reimbursements, use separate rows.

(*) Amount of aid put at the disposal of the recipient (in gross grant equivalent)

Comments:

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

2. Recovery measures planned and already taken

2.1 Please describe in detail what measures have been taken and what measures are planned to bring about an
immediate and effective recovery of the aid. Please explain what alternative measures are available under national
law to effect recovery. Where relevant, please indicate the legal basis for the measures taken/planned.

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:

Date(s) (°)

Amount of aid
repaid

Currency

Identify of recipient

AVR IW

(°) Date(s) on which the aid was repaid.

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