EFTA Surveillance Authority Decision No 298/05/COL of 22 November 2005 on the proposal for regionally differentiated rates of social security contributions for certain economic sectors (Norway)
Date: 2005-11-22
Institutions: EFTA Surveillance Authority
Subjects: EFTA, Norway, control of State aid, economic sector, social security, social-security contribution

8.5.2008

EN

Official Journal of the European Union

L 122/11

IV

(Other acts)

EUROPEAN ECONOMIC AREA

EFTA SURVEILLANCE AUTHORITY

EFTA SURVEILLANCE AUTHORITY DECISION

No 298/05/COL

of 22 November 2005

on the proposal for regionally differentiated rates of social security contributions for certain
economic sectors (Norway)

THE EFTA SURVEILLANCE AUTHORITY (1),

HAVING REGARD TO the Authority’s Decision of 14 July 2004
on the implementing provisions referred to under Article 27 in
Part II of Protocol 3 to the Surveillance and Court Agreement,

HAVING REGARD TO the Agreement on the European Economic
Area (2),
in particular to Articles 61 to 63 and Protocol 26
thereof,

HAVING REGARD TO the EFTA Court’s Judgment in Case E-6/98
the Government of Norway versus
the EFTA Surveillance
Authority (5),

HAVING REGARD TO the Agreement between the EFTA States
on the establishment of a Surveillance Authority and a Court of
Justice (3), in particular to Article 24 thereof,

HAVING REGARD TO Article 1(2) in Part I and Articles 4(4), 6
and 7(5) in Part II in Protocol 3 to the Agreement between the
EFTA States on the establishment of a Surveillance Authority
and a Court of Justice,

HAVING REGARD TO the Authority’s Decision No 172/02/COL
of 25 September 2002 proposing appropriate measures with
regard to the
regionally differentiated social
security contributions (6) and to the letter from the Norwegian
authorities dated 29 October 2002 accepting the appropriate
measures,

scheme of

HAVING REGARD TO the Authority’s Decision No 218/03/COL
of 12 November 2003 with regard to State aid in the form of
regionally differentiated social security contributions (7),

HAVING REGARD TO the Authority’s Guidelines (4) on the appli-
cation and interpretation of Articles 61 and 62 of the EEA
Agreement,

HAVING CALLED ON interested parties to submit their comments
pursuant to the provisions cited above (8),

(1) Hereinafter referred to as the Authority.
(2) Hereinafter referred to as the EEA Agreement.
(3) Hereinafter referred to as the Surveillance and Court Agreement.
(4) Guidelines on the application and interpretation of Articles 61 and
62 of
the EEA Agreement and Article 1 of Protocol 3 to the
Surveillance and Court Agreement, adopted and issued by the
EFTA Surveillance Authority on 19 January 1994, published in
OJ L 231, 3.9.1994, EEA Supplements No 32. The Guidelines
were last amended on 17.6.2005. Hereinafter referred to as the
State Aid Guidelines.

(5) Case E-6/98 The Government of Norway v EFTA Surveillance Authority

[1999] Report of the EFTA Court, p. 76.

(6) EFTA Surveillance Authority Decision No 172/02/COL. All EFTA
Surveillance Authority’s State Aid Decisions mentioned hereinafter
the Authority’s website: http://www.eftasurv.int/
can be found at
fieldsofwork/fieldstateaid/stateaidregistry/

(7) EFTA Surveillance Authority Decision No 218/03/COL, published in

OJ L 145, 9.6.2005, p. 25-41.

(8) EFTA Surveillance Authority Decision No 245/04/COL, published in

OJ C 60, 10.3.2005, p. 9-25.

L 122/12

EN

Official Journal of the European Union

8.5.2008

WHEREAS:

I. FACTS

1. Procedure

to Article 1(3)

intention to apply reduced rates of

Pursuant
I of Protocol 3 to the
in Part
Surveillance and Court Agreement, the Norwegian authorities
notified their
social
security contributions to undertakings located in designated
geographical Zones 2, 3 and 4 in Norway and active in
certain economic sectors. The notification was sent by letter
dated 26 April 2004 from the Norwegian Mission to the
European Union,
forwarding a letter from the Ministry of
Trade and Industry together with a letter from the Ministry of
Finance both dated 23 April 2004, received and registered by
the Authority on 27 April 2004 (Event No 278992).

After various exchanges of correspondence and meetings
between the Authority and the Norwegian authorities (1),
given the serious difficulties the Authority had to declare the
notified measure compatible with Article 61 of
the EEA
the Authority decided to initiate the procedure
Agreement,
laid down in Article 1(2)
I of Protocol 3 to the
Surveillance and Court Agreement.

in Part

The Authority’s Decision No 245/04/COL of 6 October 2004
to initiate the formal investigation procedure was published in
the Official
the European Union and the EEA
Journal of
thereto (2). The Authority called on interested
Supplement
parties to submit their comments.

By letter from the Norwegian Mission to the European Union
dated 12 November 2004, the Norwegian authorities submitted
their comments to the opening decision (Event No 299087).
The Authority received no comments from interested parties.

residence of

the
differentiated according to the place of
employees. For this purpose, Norway is divided into five geo-
graphical zones. Zone 1 (3) comprises the most central parts of
the southern part of the country and covers 76,6 % of the total
population in Norway. Zone 2 (4) comprises less central parts of
Southern Norway and covers 9,4 % of the total population in
Norway. Zone 3 (5) covers mostly certain mountain regions in
Southern Norway with a coverage of 2,6 % of the total popu-
lation of Norway. Zone 4 (6) is made up of the most northern
part of South Norway as well as North Norway south of Zone
5. Zone 4 covers 9,4 % of the total population. Zone 5 (7)
covers the very northernmost part of the country.

The Authority opened the formal investigation procedure with
respect to the regionally differentiated social security contri-
bution rates in Norway on 19 November 1997 (8). On 2 July
1998, the Authority adopted a decision (9) in which it found
that the system provided, through the State budget, a benefit to
certain undertakings, which could not be justified on the basis
of the general nature and character of the system and which
distorted or
threatened to distort competition within the
European Economic Area (10). The system had to be brought
in line with the rules of the EEA Agreement.

(3) This Zone includes all municipalities not mentioned below under

Zones 2-5.

in Hordaland county,

(4) This Zone includes: in Nord-Trøndelag county, the municipalities of
Meråker, Frosta, Leksvik, Mosvik, Verran; in Sør-Trøndelag county,
the municipalities of Ørland, Agdenes, Rissa, Bjugn, Rennebu,
the municipalities of Etne, Ølen,
Meldal,
Jondal, Odda, Ullensvang, Eidfjord, Ulvik,
Tysnes, Kvinnherad,
in Møre og Romsdal
Granvin, Kvam, MoMidtre Gauldal, Selbu;
county,
the municipalities of Vanylven, Sande, Herøy, Norddal,
Stranda, Stordal, Rauma, Nesset, Midsund, Sandøy, Gjemnes,
Tingvoll, Sunndal, Haram, Aukra, Eide;
in Sogn og Fjordane
county, all municipalities; in Hordaland county, the municipalities
Jondal, Odda, Ullensvang,
of Etne, Ølen, Tysnes, Kvinnherad,
Fedje, Masfjorden,
Eidfjord, Ulvik, Granvin, Kvam, Modalen,
the municipalities of Hjelmeland,
Bømlo;
Suldal, Sauda, Kvitsøy, Utsira, Vindafjord, Finnøy;
in Vest-Agder
the municipalities of Åseral, Audnedal, Hægebostad,
county,
Sirdal;
the municipalities of Gjerstad,
Vegårshei, Åmli, Iveland, Evje og Hornnes, Bygland, Valle, Bykle;
in Telemark county, the municipalities of Drangedal, Tinn, Hjartdal,
Seljord, Kviteseid, Nissedal, Fyresdal, Tokke, Vinje, Nome;
in
Buskerud county, the municipalities of Flå, Nes, Gol, Hemsedal,
Ål, Hol, Sigdal, Rollag, Nore and Uvdal;
in Oppland county, the
municipalities of Nord-Fron, Sør-Fron, Ringebu, Gausdal, Søndre
the municipalities of
in Hedmark county,
Land, Nordre Land;
Nord-Odal, Eidskog, Grue, Åsnes, Våler, Trysil, Åmot.

in Aust-Agder county,

in Rogaland county,

2. Description of the proposed measure

(a) Background

in Sør-Trøndelag county,

(5) This Zone includes: in Nord-Trøndelag county, the municipality of
Snåsa;
the municipalities of Hemne,
Snillfjord, Oppdal, Røros, Holtålen, Tydal; in Oppland county, the
municipalities of Dovre, Lesja, Skjåk, Lom, Vågå, Sel, Sør-Aurdal,
Etnedal, Nord-Aurdal, Vestre Slidre, Øystre Slidre, Vang;
in
Hedmark county,
the municipalities of Stor-Elvdal, Rendalen,
Engerdal, Tolga, Tynset, Alvdal, Folldal, Os.

the Norwegian Social Security Act of
On the basis of
in
28 February 1997 (Lov om folketrygd), all
to the
Norway are
national
are
calculated in relation to the gross salaries of employees and

to compulsory contributions

scheme. These

contributions

employers

security

subject

social

in Nord-Trøndelag county,

(6) This Zone includes: in Troms county, municipalities not included
among those listed below under Zone 5; in Nordland county, all
the municipalities of
municipalities;
Lierne, Røyrvik, Namsskogan, Grong,
Namsos, Namdalseid,
Høylandet, Overhalla, Fosnes, Flatanger, Vikna, Nærøy, Leka;
in
Sør-Trøndelag county, the municipalities of Hitra, Frøya, Åfjord,
Roan, Osen;
the municipality of
Smøla.

in Møre og Romsdal county,

(1) For more detailed information on the various correspondence
between the Authority and the Norwegian authorities, reference is
made to the Authority’s Decision to open the formal investigation
procedure, Decision No 245/04/COL, published in OJ C 60,
10.3.2005, p. 9-25.

(2) Published in OJ C 60, 10.3.2005, p. 9-25.

(7) This Zone includes in Finnmark county, all municipalities; in Troms
county, the municipalities of Karlsøy, Lyngen, Storfjord, Kåfjord,
Skjervøy, Nordreisa and Kvænangen.

(8) Decision No 246/97/COL.
(9) Decision No 165/98/COL.
(10) Hereinafter referred to as the EEA.

8.5.2008

EN

Official Journal of the European Union

L 122/13

On 2 September 1998, the Norwegian authorities brought an
action under Article 36(1) of
the Surveillance and Court
Agreement before the EFTA Court requesting the annulment
of the Decision of 2 July 1998.

for the progressive adjustment of

the Norwegian authorities notified the
In March 2003,
from 2004 to
Authority of a three-year transitional period,
2007,
the rates of social
security contributions applicable in Zones 3 and 4 (Doc. No:
03-1846 A). According to the notification, the rates of social
security contributions would be as follows (5):

The Court dismissed the application for annulment on 20 May
1999 (1) and upheld the Authority’s decision. The Court
the system of differentiated social security
confirmed that
contributions constituted State aid within the meaning of
Article 61(1) of the EEA Agreement.

With a view to complying with the Authority’s decision of
2 July 1998, the Norwegian authorities proposed new regu-
lations on regionally differentiated social security contributions.
On 22 September 1999, the Authority approved the new regu-
time, not going beyond
lations
31 December 2003 (2).

for a limited period of

On 21 December 2000,
the European Commission took a
negative decision concerning a reduced social security contri-
butions aid scheme notified by Sweden (3). In the decision, the
Commission pointed out that Norway, by letter dated 27 July
2000, not only submitted comments to the decision to initiate
the procedure regarding the Swedish case but also confirmed
that it operated a similar scheme.

at

between

discussed

several meetings

In light of the Swedish decision, the Norwegian system was
thereafter
the
Norwegian authorities and the Authority, as well as between
the Authority and the European Commission. In view of the
similarities between the Norwegian and the Swedish schemes
and in order to assure a level playing field within the EEA, the
Authority considered it necessary to examine the compatibility
of the Norwegian scheme and initiated a formal review of the
Norwegian system by letter to the Norwegian authorities dated
4 June 2002 (Doc. No: 02-4189 D).

the regionally differentiated social

In its Decision of 25 September 2002 (4),
the Authority
security
concluded that
contributions
the derogation
scheme did not qualify for
provided for under Article 61(3)(c) of the EEA Agreement and
proposed the adoption of appropriate measures requesting the
elimination of any incompatible aid involved in the system or
to render it compatible with effect from 1 January 2004.

By letter from the Mission of Norway to the European Union
dated 29 October 2002,
received and registered by the
Authority on 31 October 2002 (Doc. No: 02-7855 A), the
Norwegian authorities accepted the appropriate measures.

(1) Case E-6/98 The Government of Norway v EFTA Surveillance Authority

[1999] Report of the EFTA Court, p. 76.

(2) Decision No 228/99/COL.
(3) Published in OJ L 244, 14.9.2001, p. 32.
(4) Decision No 172/02/COL.

Table 1

Rates 2003 Rates 2004 Rates 2005 Rates 2006 Rates 2007

Zone 1

Zone 2

Zone 3

Zone 4

14,1

10,6

6,4

5,1

14,1

14,1

8,3

7,3

14,1

14,1

10,2

9,5

14,1

14,1

12,1

11,7

14,1

14,1

14,1

14,1

the
By letter dated 15 April 2003 (Doc. No: 03-2467 A),
Norwegian authorities had also notified a continuation of
regionally differentiated social security contributions in Nord-
Troms and Finnmark (Zone 5). This notification was withdrawn,
however, by letter from the Norwegian Ambassador to the
European Union dated 4 July 2003 (Doc. No: 03-4403 A) as
the EFTA States, by common accord in the Standing Committee
of the EFTA States on 1 July 2003 (No 2/2003/SC), and by
I of Protocol 3 to the
reference to Article 1(2)
in Part
the
Surveillance and Court Agreement, had decided that
present scheme in Zone 5 was compatible with the EEA
Agreement due to the exceptional circumstances in this zone.

After opening the formal investigation procedure by a decision
dated 16 July 2003 (6) and in line with the EFTA Court’s
judgment in Case E-6/98 (7), the Authority concluded that the
reduced rates of social security contributions in Zones 2, 3 and
4 amounted to disbursement of aid. However, the Authority
authorised the notified three-year transitional period for the
regionally differentiated social security contributions in Zones
3 and 4 by Decision No 218/03/COL of 12 November 2003. In
this decision, the Authority noted that without a transitional
period,
the increase in the social security payments would
lead to adverse employment effects. The Authority observed
that a gradual phasing out of the differentiated tax rates over
the annual cost
a period of
three years would mean that
the
the undertakings would be spread over
increase for
period. On the contrary, an immediate abolishment of
the
current system would have implied a cost shock to the under-
takings concerned. An appropriate transition period seemed
advisable in order to mitigate the shock effects and give under-
takings time to adjust to the new economic environment.

(5) Undertakings in certain economic sectors would pay the full rate of
14,1 % as they already did according to the scheme approved by the
Authority’s decision of 22 September 1999. The Norwegian auth-
orities also informed the Authority about their intention to continue
applying the rates for 2003 to the extent that that would be in
compliance with the de minimis rule.

(6) Decision No 141/03/COL.
(7) Case E-6/98 The Government of Norway v EFTA Surveillance Authority

[1999] Report of the EFTA Court, p. 76.

L 122/14

EN

Official Journal of the European Union

8.5.2008

(b) Description of the currently notified measure for regionally differ-
entiated rates of social security contributions for certain economic
sectors

1. D e s c r i p t i o n o f

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

t h e

m e a s u r e

In April 2004, the Norwegian authorities notified the Authority
of their intention to apply, for certain economic sectors, from
1 January 2005 onwards and for an indefinite period of time,
the regionally differentiated rates of social security contributions
that existed until the end of 2003 in Zones 1, 2, 3 and 4. These
rates are shown in Table 1 above for the year 2003. Zone 5
was kept outside the notification as the rate applicable there is
zero following the Decision of the Standing Committee of the
EFTA States No 2/2003/SC of 1 July 2003.

The notified measure will only be applicable to certain
economic sectors which, according to the Norwegian auth-

orities, are not exposed to competition from undertakings in
other EEA States. The Norwegian authorities alleged that there
was no trade effect in the economic sectors benefiting from the
intended application of reduced social security rates. Therefore,
the Norwegian authorities considered that the notified measure
did not constitute state aid within the meaning of Article 61(1)
of the EEA Agreement.

The Norwegian authorities assessed the exposure to competition
on the basis of an economic report prepared by the inde-
consultancy firm ECON in cooperation with a
pendent
Norwegian law firm (hereinafter
the ECON report). The
following list of sectors supposedly not affected by competition
from undertakings in other EEA States and accordingly covered
the
by the notified measure was drafted on the basis of
assessment presented in the ECON report:

Table 2

NACE Code (*)

Zone 2

Zone 3

Zone 4

01.300 Growing of crops combined with farming of animals (mixed
farming)

n.a. (**)

22.120 Publishing of newspapers

22.210 Printing of newspapers

35.111 Building and repairing of ships and hulls more than 100 g.r.tons

35.113 Building and repairing of ships less than 100 g.r.tons

40.120 Transmission of electricity

45.110 Demolition and wrecking of buildings; earth moving

45.212 General construction of civil engineering works

45.221 Tinsmith work

45.229 Other erection of roof covering and frames

45.230 Construction of motorways, roads, airfields and sport facilities

45.240 Construction of water projects

45.250 Other construction work involving special trades

45.310 Installation of electrical wiring and fittings

45.320 Insulation work activities

45.330 Plumbing

45.340 Other building installation

45.442 Glazing

45.450 Other building completion

45.500 Renting of construction or demolition equipment with operator

50.200 Maintenance and repair of motor vehicles

50.301 Commission- and wholesale of motor vehicle, motor vehicle
parts and accessories

50.302 Retail sale of motor vehicle parts and accessories

0/2

0/2

0/2

0/2

0

0

0

n.a.

n.a.

0

0

0

0

n.a.

0

0

n.a.

0

n.a.

0

0

0

n.a.

0/2

0/2

0/2

0/2

0

0

0

n.a.

n.a.

0

n.a.

0

0

n.a.

0

n.a.

n.a.

n.a.

0

0

n.a.

0

0

0/2

0/2

0/2

0/2

0

0

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

8.5.2008

EN

Official Journal of the European Union

L 122/15

NACE Code (*)

Zone 2

Zone 3

Zone 4

50.500 Retail sale of automotive fuel

51.170 Agents involved in the sale of food, beverages and tobacco

51.180 Agents specialising in the sale of particular products or ranges of
products n.e.c.

51.210 Wholesale of grain, seeds and animal feeds

51.220 Wholesale of flowers and plants

51.389 Wholesale of molluscs n.e.c.

51.390 Non-specialised wholesale of food, beverages and tobacco

51.421 Wholesale of clothing

51.434 Wholesale of gramophone records, tapes, CD, DVDs and videos

51.460 Wholesale of pharmaceutical goods

51.477 Wholesale of sport goods, games and toys

51.479 Wholesale of household goods and personal goods n.e.c.

51.520 Wholesale of metals and metal ores

51.532 Wholesale of lumber

51.533 Wholesale of paints and varnish

51.539 Wholesale of construction materials n.e.c.

51.561 Wholesale of paper and paperboard

51.840 Wholesale of computers, computer peripheral equipment and
software

51.850 Wholesale of other office machinery and equipment

51.872 Wholesale of shipping equipment and fishing tackle

51.900 Other wholesale

52.110 Retail sale in non-specialised stores with food, beverages or
tobacco predominating

52.120 Other retail sale in non-specialised stores

52.220 Retail sale of meat and meat products

52.230 Retail sale of fish, crustaceans and molluscs

52.241 Retail sale of bread, cakes and flour confectionery

52.271 Retail sale of health food

52.279 Retail sale of food, beverages and tobacco in specialised stores
n.e.c.

52.310 Dispensing chemists

52.330 Retail sale of cosmetic and toilet articles

0

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

0

0

0

n.a.

n.a.

0

0/2

0/2

0

n.a.

0

n.a.

n.a.

0

n.a.

0

n.a.

n.a.

0

n.a.

n.a.

0

0

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

0

0/2

0/2

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

0

0/2

0

0

0

0

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0/2

0/2

n.a.

0

0

0

0

0

0

L 122/16

EN

Official Journal of the European Union

8.5.2008

NACE Code (*)

Zone 2

Zone 3

Zone 4

52.410 Retail sale of textiles

52.420 Retail sale of clothing

52.431 Retail sale of footwear

52.441 Retail sale of lighting equipment

52.442 Retail sale of china and glassware

52.443 Retail sale of furniture

52.449 Retail sale of non-electrical household articles n.e.c.

52.451 Retail sale of electrical household appliances, and radio and
television goods

52.453 Retail sale of musical instruments and musical notes

52.461 Retail sale of variety of hardware, paints and glass

52.463 Retail sale of paints and varnish

52.464 Retail sale of wood

52.469 Retail sale of hardware, paints and glass n.e.c.

52.481 Retail sale of watches, photographic and optical goods

52.482 Retail sale of gold and silver ware

52.483 Retail sale of sport goods, games and toys

52.484 Retail sale of flowers and plants

52.485 Retail
equipment

sale of

computers, office

and telecommunication

52.489 Retail sale in specialised stores n.e.c.

52.612 Retail sale of textiles, clothes, footwear, travel accessories and
leather goods via mail order houses

52.619 Other retail sale of specialised assortment of goods via mail
order houses

52.630 Other non-store retail sale

52.720 Repair of electrical household goods

55.301 Operation of restaurants and cafés

55.302 Operation of snack bars, salad bars and hot dog bars

55.401 Pubs

55.510 Canteens

55.520 Catering

60.220 Taxi operation

63.110 Cargo handling

63.120 Storage and warehousing

0

0/2

0

n.a.

n.a.

0/2

n.a.

0

n.a.

0/2

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

0

n.a.

n.a.

0

n.a.

0

0

0

n.a.

0

n.a.

0

0/2

0

n.a.

n.a.

0/2

0

0

n.a.

0/2

0

n.a.

0

0

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

n.a.

0

0

0

n.a.

n.a.

0

n.a.

n.a.

0

0/2

0

0

0

0/2

0

0

0

0/2

n.a.

0/2

0

0

0

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

8.5.2008

EN

Official Journal of the European Union

L 122/17

NACE Code (*)

Zone 2

Zone 3

Zone 4

63.211 Central agencies for goods and transportation procurement

63.212 Parking places and parking houses

63.213 Toll bar stations

63.219 Other services allied to land transport

63.221 Operation of harbours

63.229 Other supporting water transport activities

63.230 Other supporting air transport activities

63.302 Tourist offices

63.401 Freight forwarding services

63.409 Other forwarding services

64.110 National post activities

64.120 Courier activities other than national post activities

64.210 Fixed telecommunications carriers

64.220 Mobile telecommunications carriers

64.230 Internet service providers

64.240 Other telecommunication activities

65.120 Other monetary intermediation

65.220 Other credit granting

65.239 Other security management

66.010 Life insurance

66.030 Non-life insurance

67.130 Activities auxiliary to financial intermediation

67.200 Activities auxiliary to insurance and pension funding

70.111 House building cooperatives

70.112 Other development and sale of real estate

70.120 Buying and selling of own real estate

70.202 Other letting of own property

70.310 Real estate agencies

70.321 Management of real estate on a fee or contract basis

70.322 Caretaker services

71.110 Renting of automobiles

71.320 Renting of construction and civil engineering machinery and
equipment

0

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

0

n.a.

0

n.a.

0

0

n.a.

n.a.

0

0

n.a.

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0

n.a.

0

0

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

n.a.

0

n.a.

n.a.

0

0

n.a.

0

n.a.

n.a.

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

L 122/18

EN

Official Journal of the European Union

8.5.2008

NACE Code (*)

Zone 2

Zone 3

Zone 4

71.340 Renting of other machinery and equipment n.e.c.

71.400 Renting of personal and household goods n.e.c.

72.500 Maintenance and repair of office, accounting and computing
machinery

74.110 Legal activities

74.121 Accounting, bookkeeping

74.122 Auditing

74.130 Market research and public opinion polling

74.140 Business and management consultancy activities

74.203 Geological surveying

74.300 Technical testing and analysis

74.400 Advertising

74.501 Labour recruitment of personnel

74.600 Investigation and security activities

74.700 Industrial cleaning

74.810 Photographic activities

74.820 Packaging activities

74.851 Secretarial activities

74.852 Translation activities

74.871 Bill collecting, credit granting activities

74.877 Activities of fairs, exhibitions and congress organisers

74.879 Other business activities n.e.c.

75.110 General (overall) public service activities

75.120 Regulation of the activities of agencies that provide health care,
education, cultural services and other social services, excluding social
security

75.130 Regulation of and contribution to more efficient operation of
business

75.140 Supporting service activities for the government as a whole

75.220 Defence activities

75.230 Justice and judicial activities

75.240 Public security, law and order activities

75.250 Fire service activities

75.300 Compulsory social security activities

80.102 Primary and lower secondary education

n.a.

0

n.a.

n.a.

0

0

n.a.

0

n.a.

0

0

0

0

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

0

0

0

0

0

0

0

0

0

0

n.a.

n.a.

n.a.

n.a.

0

0

n.a.

n.a.

n.a.

0

n.a.

0

0

0

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

8.5.2008

EN

Official Journal of the European Union

L 122/19

NACE Code (*)

Zone 2

Zone 3

Zone 4

80.103 Specialised education for handicap

80.210 General secondary education

80.309 Education at other colleges

80.410 Driving school activities

80.421 Folk high school education

80.423 Activities of adult education associations

80.424 Activities of municipal music schools

80.429 Other education

85.114 Rehabilitation institutions

85.116 Mental health hospitals for adults

85.118 Nursing homes

85.121 General practitioners

85.122 Physicians, specialist other than psychiatrist

85.130 Dental practice activities

85.142 Physiotherapy services

85.143 School health services, maternal and child health care

85.144 Other preventive health care

85.147 Ambulance services

85.149 Other health activities

85.200 Veterinary activities

85.311 Child welfare institutions

85.312 Institutions for alcoholic and drug addicts

85.319 Other social care institutions

85.321 Home help services

85.322 Dwellings with accommodation for elderly and disabled

85.323 Child welfare services

85.324 Social welfare services without accommodation for alcoholic and
drug addicts

85.325 Family counselling services

85.326 Municipal social service offices activities

85.327 Early childhood education and care institutions

85.331 School-age childcare

85.333 Day care activities for elderly and disabled

0

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0

0

n.a.

n.a.

0

n.a.

0

n.a.

0

0

0

0

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

0

0

n.a.

n.a.

0

0

0

0

0

0

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0

0

n.a.

0

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0/2

0

0

0

0

0

0

n.a.

0

0

0

0

0

n.a.

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

L 122/20

EN

Official Journal of the European Union

8.5.2008

NACE Code (*)

Zone 2

Zone 3

Zone 4

85.334 Training for work activities for ordinary labour market

85.335 Permanent sheltered work activities

85.336 Social welfare organisations activities

85.337 Reception centres for asylum seekers

85.338 Employment/ training for work activities under the municipal
health and social departments

85.339 Other social work activities without accommodation

90.010 Collection and treatment of sewage

90.020 Collection and treatment of other waste

91.110 Activities of business and employers organisations

91.200 Activities of trade unions

91.310 Activities of religious organisations

91.330 Activities of other membership organisations n.e.c.

92.110 Motion picture and video production

92.130 Motion picture projection

92.200 Radio and television activities

92.320 Operation of arts facilities

92.330 Fair and amusement park activities

92.400 News agency activities

92.510 Library and archives activities

92.521 Museum activities

92.522 Preservation of historical sites and buildings

92.610 Operation of sports arenas and stadiums

92.621 Sport clubs and associations

92.629 Other sporting activities n.e.c.

92.721 Activities and adventure companies

92.729 Other recreational services n.e.c.

93.010 Washing and dry-cleaning of textile and fur products

93.020 Hairdressing and other beauty treatment

93.030 Funeral and related activities

93.040 Physical well-being activities

0

0

n.a.

0

0

n.a.

0

0

n.a.

n.a.

0

0

n.a.

n.a.

0

0

n.a.

n.a.

0

0

n.a.

0/2

0

n.a.

n.a.

0

0

n.a.

n.a.

0

0

0

n.a.

0

n.a.

0

n.a.

0

0

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

0

0

0

n.a.

0

0

0

0

n.a.

0

0

0

0

0

n.a.

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

n.a.

0

0

0

0

0

(*) NACE list of sectors according to the classification of the Norwegian Statistical Office.
(**) In the table, the cipher 0 indicates that according to the Norwegian authorities there is no effect on trade in the relevant sector; the

cipher 0/2 indicates that some undertakings of the given sectors within the actual zone are exposed to competition.
The reference ‘n.a.’ means ‘not applicable’.
undertakings active in the given sector that would exceed the de minimis threshold within the relevant zone.

It indicates that following the research made by the ECON report, there were no

8.5.2008

EN

Official Journal of the European Union

L 122/21

On the basis of the ECON report, the Norwegian authorities
have established the following criteria to differentiate between
undertakings not subject
to competition from undertakings
located in other EEA States and those undertakings which are
regarding the economic
affected by EEA-wide competition,
sectors marked with the ciphers 0/2:

— NACE 22.120 and 22.210: publishing

and

printing of

newspapers

Due to language, culture and distance, the publishing and
printing of local newspapers is considered to operate only in
local markets. A newspaper is considered local as long as it
is not nationwide.

— NACE 35.111 and 35.113: building and repairing of ships and

hulls over 100 tons and under 100 tons

— NACE 52.120, 52.420 and 52.443: other retail sale in non-
retail sale of clothing and retail sale of

specialised stores,
furniture

Although the distance to competitors on the other side of
the border is of significance,
the Norwegian authorities
acknowledge that it is difficult to determine an absolute
and decisive limit between undertakings affected by intra-
EEA trade and those which are not affected. Whereas under-
takings located approximately 200 km from a relatively
large shopping centre on the other side of the border are
exposed to competition, according to the findings of the
ECON report, undertakings located closer to the border,
but without having any large shopping centre on the
other side, are not exposed to competition. Nevertheless,
following the same assessment as for NACE 52.110, the
Norwegian authorities have explained in the notification
that a distance of 200 km seems an appropriate objective
criterion to determine the effect on trade for this sector.

As long as the repair concerns ships operating in Norwegian
waters or
the given shipyards are
considered to operate locally and thus not subject to compe-
tition from other EEA States.

in acute difficulties,

— NACE 52.461 and 52.464: retail sale of a variety of hardware,

paints and glass and retail sale of wood

— NACE 51.170: agents involved in the sale of food, beverages and

tobacco

The Norwegian authorities have not provided any further
explanation on the eligibility criteria applicable to under-
takings of this sector. According to the ECON report,
it
was not possible to separate undertakings subject to compe-
tition from those which are not on the basis of the infor-
mation available.

The Norwegian authorities have explained that undertakings
located at ‘a very long distance to the national border’ are not
exposed to competition from undertakings of other EEA
‘a very
States. On the basis of the information provided,
long distance to the national border’ means that it would not
be worth travelling back and forth in one day, whereby the
the road standard and traffic
distance depends on i.a.
conditions. Undertakings
counties
Rogaland, Hordaland, Sogn og Fjordane and Møre og
from reduced social security rates
Romsdal can benefit
since they are not exposed to competition from other
EEA States. Undertakings in other counties are excluded.

situated

the

in

— NACE 52.110: retail sale in non-specialised stores with food,

beverages or tobacco predominating

— NACE 80.309: education at other colleges

side of

situated on the other

Undertakings that are located at a distance of more than
150 kilometres from competitors on the other side of the
national border are considered not to be exposed to compe-
tition from other EEA States. According to the information
submitted by the Norwegian authorities, the use of a critical
distance of 150 km was established by identifying the
nearest competitors
the
border to undertakings with the standard industrial classifi-
cation 52.110, non-specialised retail sales. The competition
to undertakings
conditions were considered with respect
located at varying distances from the nearest competitor
on the other side of
the
conclusions of the ECON report, the Norwegian authorities
stated that the probability that undertakings situated more
than 150 km from a competitor are exposed to competition
from undertakings
low. The
Norwegian authorities acknowledge that whether there is
actual competition depends on the assortment of goods
offered.

the border. On the basis of

in other EEA States

is

The notification only covers adult education courses which
are accordingly considered not to be affected by trade. As
far as education at college or university level is concerned,
the Norwegian authorities have indicated the cipher 2
meaning that the concerned activity is exposed to compe-
tition.

— NACE 92.610: operation of sports arenas and stadiums

An athletic club is considered to be local when it does not
participate in the highest division in its branch of athletics.
Other sports installations are considered to be local when
they are mainly used by local clubs, the local population in
the municipality and daytrip visitors, having no competitive
offers in other EEA States.

L 122/22

EN

Official Journal of the European Union

8.5.2008

u s e d

o f
2. T h e m e t h o d
u n d e r t a k i n g s
n o t i f i e d
m e a s u r e o f r e g i o n a l l y d i f f e r e n t i a t e d r a t e s
o f s o c i a l s e c u r i t y c o n t r i b u t i o n s

s e l e c t i o n
t h e

f o r
c o v e r e d

t h e
b y

The notified measure covers a number of economic sectors
identified in the ECON report as listed above. The ECON
report was based on the assessment of
the competition
interfaces (konkurranseflater) between undertakings located in
Zones 2, 3 and 4 in Norway and those in other EEA States.
It contained a list of sectors supposedly not affected by compe-
tition from other EEA States.

For the manufacturing sector, the list of economic sectors not
affected by competition from other EEA States was drafted on
the basis of regional data on export and import figures to the
relevant zones provided by Statistics Norway. As the Norwegian
authorities have explained in the letter dated 12 November
2004, the occurrence of direct trade in nearly all manufacturing
sectors (NACE 15 to NACE 37) led ECON to conclude that
these sectors may be affected by competition
practically all
from undertakings in other EEA States. The Norwegian auth-
orities have
some very few sectors
(publishing and printing of newspapers, building of ships)
were nonetheless considered to operate in local markets only
based on the nature and the characteristics of these sub-sectors
and not on an import/export analysis.

also explained that

As regards undertakings in the services sector (NACE 50 to
NACE 99), the exposure to competition was mainly examined
on the basis of the knowledge of the market situation in the
different business sectors and on interviews with a selection of
enterprises in Zones 2, 3 and 4 in Norway.

There is neither an explicit reference to the method followed to
determine the exposure of competition in the electricity, gas and
water supply (NACE 40) nor in the construction sector (NACE
45), although a great number of the construction sub-sectors
have been included in the notification.

According to the ECON report, purely local activities were not
affected by intra-EEA trade. To be classified as a purely local
activity in terms of the ECON report, two cumulative conditions
had to be fulfilled by the relevant economic sector in the given
area: The undertakings in the given sector do not participate
themselves in cross-border activities and the specific activity
located in the actual
region is not capable of attracting
customers from another location.

The report states that the identification of competition interfaces
could be used to draft a proposal for rules that continue, as far
as possible, the old scheme of reduced rates of social security

in intra
contributions for economic sectors which are not
EEA-competition (1). The ECON report nevertheless does
neither contain any proposal for rules as would normally be
the case for an aid scheme nor is such a proposal made in the
notification.

In the introduction to the report, ECON stated that there was
not enough time or resources to conduct a thorough analysis of
the competition relations within all
the economic sectors
covered by the report, and that this could lead to both under-
estimations and overestimations of the competition with under-
takings in other EEA States (2). ECON was nonetheless of the
opinion that a reasonable picture of competition between
undertakings within the EEA could be drawn from the
outcome of the report.

3. Concerns in the opening decision

On 6 October 2004, the Authority decided to open the formal
investigation procedure on the proposal for regionally differen-
tiated rates of social security contributions for certain economic
sectors. The Authority considered that the proposed application
of reduced social security rates in Zones 2, 3 and 4 covered a
very broad range of economic sectors and undertakings. The
notified measure replicated to a very large extent the former
scheme of regionally differentiated and reduced rates of social
security contributions, which was declared incompatible aid by
the Authority (3).

The main difference between the formerly assessed scheme and
the measure currently notified is a reduction in the number of
economic sectors that could benefit from reduced rates. The
ECON report had prepared a list of
sectors which were
allegedly not affected by intra-EEA trade on the basis of the
assessment of the competition interfaces.

The Authority expressed doubts in the opening decision with
regard to the method followed in the ECON report
for
collecting data, which did not seem systematic. The Authority
was concerned that
the ECON report produced only an
incomplete picture of the status quo and that there was no
thorough analysis of the future situation.

(1) Summary to the report: ‘Kartleggingen skal kunne brukes til å utarbeide
et forslag til regelverk som så langt som mulig viderefører ordningen med
gradert arbeidsgiveravgift for bransjer eller vesentlige deler av bransjer som
ikke er i konkurranse med virksomheter i andre EØS-land, og som dermed
ikke påvirker samhandelen.’.
(2) Point 1.2 of the report:

‘Det har verken vært tid eller ressurser til å
gjennomføre en dyptgående analyse av konkurranseforholdene innen alle de
bransjer som omfattes av rapporten. I de fleste tilfellene har vi måttet bygge
på faglige vurderinger støttet av intervjuer med utvalgte bedrifter. Skjevheter
i informasjonen kan derfor forekomme i våre vurderinger av enkeltbransjer.
Imidlertid kan dette slå ut både i retning av å overvurdere konkurransen
med andre EØS-land og å undervurdere den’.

(3) For further information, reference is made to Section I.2.a of this
Decision, with special reference to the Authority’s Decisions No
172/02/COL and No 218/03/COL.

8.5.2008

EN

Official Journal of the European Union

L 122/23

The Authority stressed its doubts as to whether the approach
followed to determine whether there was intra-EEA trade effect
in a given sector would comply with the requirements laid
down in established case law regarding the understanding of
criterion ‘effect on trade’ within the meaning of
the
Article 61(1) of the EEA Agreement. Referring to case law,
the Authority recalled in particular
that, contrary to the
approach followed by the ECON report, the fact that aid is
granted in respect of purely local activities or to undertakings
level does not by itself preclude the
operating at solely local
possibility of an effect on trade.

Moreover,
the notified
the Authority had doubts whether
measure provided the necessary mechanisms to guarantee the
instances since it did not
absence of effect on trade in all
contain any general safeguard to ensure the necessary legal
and economic certainty in its application concerning the effect
on trade. The Authority was concerned about the indefinite
character of the measure which is unlimited in time and does
not provide for a review clause of the criteria and conditions of
application.

The Authority decided to open the
investigation
procedure, amongst others, to facilitate the task for Norway
of clarifying and better substantiating whether the application
of the notified measure would not have any effect on trade.
Reference is made to the following section for the comments
submitted by the Norwegian authorities.

formal

4. Comments by the Norwegian authorities

By letter dated 12 November 2004, the Norwegian authorities
submitted their comments to the Authority’s decision to open
the formal investigation procedure. As far as the content of the
the Norwegian authorities clarified
notification is concerned,
that regarding the standard industrial classifications 52.120
(other retail
in non-specialised stores), 52.420 (retail sale of
clothing) and 52.443 (retail sale of furniture), the notification
covered undertakings located in all three zones included in the
measure. Due to an inaccuracy, this was only indicated for
undertakings in Zone 4.

exceeding of the de minimis threshold, these undertakings will
be considered in the same way as undertakings falling under the
relevant sector notified in other zones.’

formal

reflected a

investigation procedure

the Norwegian authorities found that

Thirdly,
the line of
arguments followed by the Authority in the decision to open
the
somewhat
simplified understanding of
the method of data collection
used and the assessment done by ECON. In this respect, the
Norwegian authorities stated that for undertakings in the manu-
facturing sector, the exposure to competition was examined on
the basis of
regional data on exports and imports. The
Norwegian authorities clarified that the ECON report did not
presuppose that the analysis of these figures may be sufficient to
identify economic sectors not affected by competition from
undertakings in other EEA States but sufficient
to confirm
that aid to a certain sector may actually affect trade.

service

regards

in the

sectors,

the undertakings

situation in the different business

As
the
Norwegian authorities argued that the exposure to competition
was examined mainly on the basis of the knowledge of the
market
sectors and on
interviews with a sample of enterprises. To be classified as a
purely local activity, one condition was that undertakings in the
relevant service sector itself did not participate in cross-border
this was not applied as a sufficient
activities. However,
condition. The ECON report also evaluated whether
the
specific service activity located in a given region was capable
of attracting customers from another location or EEA State. As
regards a possible future situation, the interviewed firms were
asked what
they considered would be the effect on their
customers’ trade patterns if the price of the service rendered
locally were to be increased by a specified percentage or if
the price for the same service offered by firms located in the
neighbouring Nordic countries were to be increased.

Fourthly, the Norwegian authorities considered that it was for
the Authority to assess whether any of the sectors or ben-
eficiaries covered by the notified measure may be granted aid
that does not affect trade between the Contracting Parties to the
EEA Agreement.

the Norwegian authorities explained that

‘some
Secondly,
economic sectors in one zone were notified as not exposed
to competition whereas the same sectors in other zones were
not included in the list. […] The reason for this was that the
ECON report found that for some economic sectors there were
no undertakings that would exceed the de minimis threshold
within the relevant zone. […] However, for future purposes, if
should lead to an
such undertakings
the wage costs of

II. APPRECIATION

1. Procedural requirements

The notified measure has not been put into effect. Hence, the
Norwegian authorities have respected their obligations pursuant
to Article 1(3) in Part I of Protocol 3 to the Surveillance and
Court Agreement.

L 122/24

EN

Official Journal of the European Union

8.5.2008

2. The notified measure

such as, for instance, NACE Code 75.220 defence activities.

The Norwegian authorities have notified their ‘intention to
continue as from 1 January 2005 the scheme of differentiated
social security contributions applicable before 1 January 2004
for sectors not exposed to competition from undertakings in
other EEA States.’ No concrete draft proposal for regulations
or laws governing the application of the measure has been
notified. The Norwegian authorities have notified a report on
the basis of which they intend to reintroduce the old scheme of
regionally differentiated and reduced rates of social security
contributions in favour of certain sectors. Although it states
that the identification of competition interfaces could be used
to draft a proposal for rules, the ECON report does neither
contain any proposal for rules as would normally be the case
for an aid scheme nor
is such a proposal made in the
notification.

investigation procedure,

Based on the complementory information submitted by the
in the notification and during the
Norwegian authorities
formal
it seems that the Norwegian
authorities want to continue (or reintroduce) the old system
of regionally differentiated and reduced rates of social security
contributions, but to limit its application to the sectors listed in
the ECON report. It needs to be recalled that the old system of
reduced rates of social security contributions was classified as an
aid scheme (1). The Authority sees no reason why the notified
measure should not be classified as a scheme, although its scope
of application has been narrowed down.

Following the definition laid down in Article 1(d) in Part II of
Protocol 3 to the Surveillance and Court Agreement, an aid
scheme is any act on the basis of which, without further im-
plementing measures being required, individual aid awards may
be made to undertakings defined within the act in a general and
abstract manner. It also encompasses any act on the basis of
which aid which is not linked to a specific project may be
awarded to one or
for an indefinite
period of time and/or for an indefinite amount.

several undertakings

The notified measure refers to the application of regionally
differentiated rates of social security contributions to any under-
taking active in a number of sectors (more than 200 sectors are
covered by the proposal) with respect to its employees residing
in Zones 2, 3 and 4 in Norway. The application of reduced
rates of social security contributions is not an individual award
of aid to a single undertaking but a reoccurring event on a
regular basis during an indefinite period of time in favour of
an undefined number of beneficiaries. Hence,
the notified
measure has to be qualified as a scheme.

3. The scope of the present Decision

The following assessment only applies to the activities which
are covered by the EEA Agreement. The Authority cannot assess
any activities which fall outside the scope of the Agreement

(1) Reference is made to the Authority’s Decision No 218/03/COL in
which the Authority accepted a three-year transitional period for the
abolition of
security
regionally differentiated rates of
contributions.

social

Furthermore, the Authority has no competence to scrutinise aid
to undertakings exclusively carrying out activities related to
products not covered by the EEA Agreement such as agri-
cultural or fisheries products (2). Amongst other examples, this
is the case of NACE Code 01.300, growing of crops combined
with farming of animals (mixed farming). Activities in sectors
which fall outside the competence of the Authority to assess the
existence of state aid are not subject to this decision (3).

4. The presence of State aid within the meaning of
Article 61(1) of the EEA Agreement

Article 61(1) of the EEA Agreement reads as follows:

‘Save as otherwise provided in this Agreement, any aid
granted by EC Member States, EFTA States or through state
resources in any form whatsoever which distorts or threatens
to distort competition by favouring certain undertakings or
the production of certain goods shall,
insofar as it affects
trade between Contracting Parties, be incompatible with the
functioning of this Agreement.’

According to settled caselaw, the classification as aid requires
that all the four conditions set out in Article 61(1) of the EEA
Agreement are fulfilled (4): (1) there must be an intervention by
it must confer a
the State or through state resources;
this intervention
selective advantage on the recipients;
must distort or threaten to distort competition and (4)
in
order to be caught by the prohibition of Article 61(1) of the
EEA Agreement, the aid measure must affect trade between the
Contracting Parties.

(2)
(3)

The Norwegian scheme of reduced rates of social security
contributions has been subject to several decisions taken by
the Authority (5). The EFTA Court also assessed the scheme (6)
and came to the conclusion that such a scheme constituted
State aid.

the current proposal

As mentioned above,
intends to re-
introduce the former scheme, the only difference being that
the proposed scheme is narrowed down to certain sectors. It
is the Authority’s view that the Authority’s conclusions and
EFTA Court’s findings with regard to the classification of the
former scheme under Article 61(1) of the EEA Agreement apply
equally to the present notified scheme with regard to three of
the four cumulative criteria.

(2) See, inter alia, Articles 8(3), 17 to 20 and Protocols 3 and 9 of the
EEA Agreement as well as Article 24 of the Surveillance and Court
Agreement.

(3) See also Section 4 below.
(4) Case C-345/02 Pearle BV, Hans Prijs Optiek Franchise BV, Rinck
Opticiëns BV and Hoofdbedrijfschap Ambachten [2004] ECR I-7139,
paragraph 33, Case C-142/87 Belgium v Commission (Tubemeuse)
[1990] ECR I-959, paragraph 25;
Joined Cases C-278/92 to
C-280/92 Spain v Commission [1994] ECR I-4103, paragraph 20;
Case C-482/99 France v Commission [2002] ECR I-4397, paragraph
68, and Case C-280/00 Altmark Trans and Regierungspräsidium
Magdeburg [2003] ECR I-7747, paragraph 74.

(5) See Section I.2.a) of this Decision.
(6) Case E-6/98 The Government of Norway v EFTA Surveillance Authority

[1999] Report of the EFTA Court, p. 76.

8.5.2008

EN

Official Journal of the European Union

L 122/25

the notified scheme involves a consumption of state
Thus,
resources by way of income foregone by the State with the
application of reduced rates of social security contributions.
Further, the scheme confers a direct competitive advantage on
undertakings in the favoured sectors and regions compared to
undertakings located elsewhere or not covered by the notified
sectors. In this context, the Authority would like to underline
that a measure can only constitute state aid in as far as it
concerns an undertaking which carries out an economic
activity, that is, an activity consisting of offering goods and
services in competition on a given market (1). The case law
defines undertaking as
engaged in an economic
activity, regardless of the legal status of the entity and the way in
which it is financed’ (2). Therefore, no State aid can be involved in
non-economic activities such as purely state administrative
activities, justice and judicial activities or in compulsory social
security activities, amongst other examples. Thus this decision
does not cover such activities.

‘every

entity

The remaining question is therefore whether aid granted under
the notified scheme, which is applicable to a certain number of
sectors allegedly not exposed to competition from undertakings
in other EEA States, has an effect on trade between the
Contracting Parties.

(a) Does the aid affect trade within the meaning of Article 61(1) of

the EEA Agreement?

In order to be caught by the prohibition of Article 61(1) of the
EEA Agreement, the aid measure must be liable to affect trade
between the Contracting Parties to the EEA Agreement. This
provision does not distinguish between causes or objectives
but defines state aid in relation to the effects (3).

the Authority will assess whether

In the following,
the
limitations of the notified scheme to certain sectors hinders
the aid from being capable of affecting trade between the
Contracting Parties and hence brings it outside the scope of
Article 61(1) of the EEA Agreement.

1. T h e l e g a l s t a n d a r d

According to the jurisprudence (4), whenever state financial aid
strengthens the position of an undertaking compared with other
undertakings competing in intra-EEA trade, the latter must be
regarded as affected by that aid.

(1) Joined Cases C-180/98 to C-184/98 Pavlow and others [2000] ECR

I-6451, paragraph 75.

(2) Case C-41/90 Höfner and Elser [1991] ECRI-1979, paragraph 21.
(3) Case C-56/93
paragraph 79.

Belgium v

Commission

[1996]

ECR I-723,

(4) Case E 6/98 The Government of Norway v EFTA Surveillance Authority
[1999] Report of the EFTA Court p. 76, paragraph 59; Case 730/79
Philip Morris v Commission [1980] ECR 2671, paragraph 11.

There is no threshold or percentage below which it may be
considered that trade between the Contracting Parties is not
affected (5). According to settled caselaw, the relatively small
amount of aid or the relatively small size of the undertaking
which receives it does not, as such, exclude the possibility that
intra-EEA trade might be affected (6). Where a sector has a large
number of small companies, aid potentially available to all or a
very large number of undertakings in that sector can, even if
individual amounts are small, have an impact on trade between
the Contracting Parties to the EEA Agreement (7). Aid may also
affect trade within the EEA even if the recipient undertaking
does not itself participate in cross-border activities (8).

The character of the aid does not depend on the local or
regional character of the services supplied or on the scale of
the field of activity concerned (9). The local character of the
activities of the beneficiaries of a measure constitutes one of
the features to be taken into account in the assessment of
whether there is an effect on trade but it is not sufficient to
prevent the aid from having an effect on trade (10). This is
because the granting of state support to an undertaking may
lead to the internal supply being maintained or increased, with
the consequence that the opportunities for other undertakings
to penetrate the market of
the EEA States concerned are
reduced (11).

In the assessment of the effect on trade, the Authority is not
required to determine the actual effect of an aid scheme but to
examine whether it is liable to affect trade within the EEA (12).
Thus, the criterion of the effect on trade has been traditionally
interpreted in a non restrictive way to the effect that, in general
terms, a measure is considered to be state aid if it is capable of
affecting trade between the EEA States (13).

(5) Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg
[2003] ECR I-7747, paragraph 81, Case C-172/03 Wolfgang
Heiser v Finanzamt Innsbruck [2005], not yet reported, paragraph 32.
(6) Case C-71/04 Administración del Estado v Xunta de Galicia [2005] not
yet reported, paragraph 41; Case C-280/00 Altmark Trans and
Regierungspräsidium Magdeburg [2003] ECR I-7747, paragraph 81;
Joined Cases C-34/01 to C-38/01 Enirisorse [2003] ECR I-14243,
paragraph 28; Case C-142/87 Belgium v Commission (Tubemeuse)
[1990] ECR I-959, paragraph 43;
Joined Cases C-278/92 to
C-280/92 Spain v Commission [1994] ECR I-4103, paragraph 42.
(7) Case C-71/04 Administración del Estado v Xunta de Galicia [2005] not
yet reported, paragraph 43; Case C-351/98 Spain v Commission
[2002] ECR I-8031, paragraph 64; and Case C-372/97 Italy v
Commission [2004] ECR I-3679, paragraph 57.

(8) Case T-55/99 CETM v Commission

[2000]

ECR II-3207,

paragraph 86.

(9) Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg
[2003] ECR I-7747, paragraph 77; Case C-172/03 Wolfgang
Heiser v Finanzamt
Innsbruck [2005] not yet reported, paragraph
33; Case C-71/04 Administración del Estado v Xunta de Galicia
[2005] not yet reported, paragraph 40.

(10) Joined Cases T-298/97-T-312/97 e.a. Alzetta a.o. v Commission

[2000] ECR II-2319, paragraph 91.

(11) Case E-6/98 The Government of Norway v EFTA Surveillance Authority
[1999] Report of the EFTA Court, p. 76, paragraph 59; Case C-
303/88 Italy v Commission [1991] ECR I-1433, paragraph 27;
Joined cases C-278/92 to C-280/92 Spain v Commission [1994]
ECR I-4103, paragraph 40, Case C-280/00 Altmark Trans and
Regierungspräsidium Magdeburg [2003] ECR I-7747, paragraph 78.
(12) Case C-298/00 P Italy v Commission [2004] ECR I-4087, paragraph
49, and Case C-372/97 Italy v Commission [2004] ECR I-3679,
paragraph 44.

(13) Joined Cases T-298/97-T-312/97 e.a. Alzetta a.o. v Commission

[2000] ECR II-2319, paragraphs 76-78.

L 122/26

EN

Official Journal of the European Union

8.5.2008

2. A s s e s s m e n t o f

t h e n o t i f i e d s c h e m e

According to the Norwegian authorities, the notified scheme
covers approximately 75 % of the service sectors examined in
the ECON report and a small part of the manufacturing sectors
plus several sectors in the area of construction. According to the
notification,
these more than 200 economic sectors, with
certain qualifications for 13 of them, are not exposed to any
intra-EEA trade. For
the
reason,
Norwegian authorities, the notified scheme does not qualify as
state aid within the meaning of Article 61(1) of
the EEA
Agreement.

in the opinion of

this

— The ECON report and the method used to chose the economic

sectors covered by the scheme

The notified scheme for regionally differentiated rates of social
security contributions builds on the ECON report, attached to
the notification. However, according to the report, the purpose
of the report is not to assess whether the scheme of regionally
in
differentiated rates of
compliance with the EEA Agreement, but to assess the compe-
tition interfaces (1).

security contributions

social

is

have

authorities

neither made

The Norwegian
further
assessments in the notification nor have they presented any
more precise definitions of conditions of competition in
relation to other Contracting Parties. They have merely stated
that the original rates of differentiated social security contri-
butions shall be applied to undertakings in sectors deemed in
the ECON report not to have any competition interfaces. They
have not presented a legal text with provisions governing the
application of the reduced rates of social security contributions.

The Norwegian authorities accept that potential misalignments
in the information in the ECON report may occur in the
individual economic sectors which can ‘most
evaluation of
likely be equalised on an aggregate level’ (2). However,
the
Authority cannot endorse this approach. An aid scheme must
be precise enough to ensure that the application of its rules to
any potential
individual aid beneficiary does not infringe the
rules of the EEA Agreement.

In the Authority’s opinion, the method for choosing economic
sectors supposedly not affected by inter-state trade does not
ensure that aid would not be granted to undertakings engaged
in activities that would affect trade within the EEA.

(1) Point 1.1 of the report:

‘Det inngår imidlertid ikke i formålet til den
foreliggende rapport å foreta en vurdering av om den differensierte arbeids-
giveravgiften er
strid med EØS-avtalens bestemmelser. Raporten er
avgrenset til å kartlegge de relevante konkurranseflater.’

i

(2) See page 2 of the letter of the Norwegian authorities dated 23 April

2004 (Event No 279843).

the reliability of

the information
The Authority questions
collected for the ECON report, which,
in particular for the
service sectors, was mainly based on the own knowledge of
the market situation and on phone interviews with a selection
of undertakings. The information gathered is not based on
empiric
character.
a
Furthermore, according to the information available to the
Authority, the information collected does not seem to have
been verified.

evidence but has

subjective

rather

On the basis of the ECON report, an activity is considered to be
purely local and not affected by intra-EEA trade if
two
conditions are fulfilled: undertakings in the relevant economic
sector do not participate themselves in cross-border activities
and the specific activity is not capable of attracting customers
from another location.

the ECON report does not assess whether

the
However,
criterion ‘effect on trade’
in the meaning of Article 61(1) of
the EEA Agreement would be fulfilled or not if aid is granted
to undertakings in the different sectors listed. What is assessed
is whether there is any direct competition in the sector and
region concerned. As stated above, that the recipient of aid
operates in a local market does not exclude that EEA trade is
affected. Hence,
there are no competition interfaces
according to the report does not mean that aid to undertakings
active in these economic sectors would not affect trade between
the Contracting Parties.

that

Thus, the method followed by the ECON report to identify
economic sectors, which constitutes the basis for the notifi-
cation of the current scheme of regionally differentiated rates
of social security contributions, does not follow the parameters
for the interpretation of the criterion ‘effect on trade’ established
by settled case law of
the EFTA Court and the ECJ, as
mentioned above.

— The scheme itself

The notified scheme covers a very broad and varied spectrum of
undertakings (3) active inter alia in the following economic
sectors:
roads,
facilities, wholesale and retail trade, post
airfields and sport
and telecommunications, financial services, car rental, auditing,
film production and radio and television activities.

construction of motorways,

shipbuilding,

(3) According to the explanation of the Norwegian authorities in the
notification, most, but not all, sectors in the manufacturing industry
are supposed to be exposed to foreign competition and consequently
not supposed to benefit from the currently notified reduced social
security rates. However, undertakings in 75 % of all service sectors
and in many sectors of construction are alleged not to be exposed to
competition and trade within the EEA.

8.5.2008

EN

Official Journal of the European Union

L 122/27

In areas where secondary legislation has been adopted to open
and regulate the establishment of the internal market, such as
financial services (NACE 65), telecommunications (NACE 64),
etc. or in areas which are subject to specific State aid rules, such
as shipbuilding (NACE 35) (1), the Authority generally considers
that the respective activity is not sheltered from intra-EEA trade.

Internet
Mobile telecommunication carriers (NACE 64.220),
service providers (NACE 64.230) and courier activities other
then national post
are prime
examples of trans-border activities. Most of these activities are
carried out by companies which operate internationally (2).

(NACE 64.120)

activities

As far as the construction sector (NACE 45)
is concerned,
such as construction of motorways or of water
activities
projects must be carried out by highly specialised large under-
takings which compete with other companies within the
EEA (3).

In particular in some of the notified economic sectors, which
are characterised by deregulation and liberalisation, a financial
intervention of the State will often have an effect on trade.

As shown in the examples above, undertakings in many of the
sectors covered by this scheme are not only subject to but face
competition from undertakings in other EEA States. Aid granted
to undertakings active in these sectors will therefore have an
effect on trade. Hence, the scheme involves state aid within the
meaning of Article 61(1) of the EEA Agreement. In this respect,
it should be emphasised that the Norwegian authorities have
notified one single scheme for regionally differentiated rates of
social security contributions which covers more than 200
sectors and not over 200 individual notifications, one per
each sector.

In the letter of the Norwegian authorities dated 12 November
it is briefly stated that ‘it is for the Authority […] to
2004,
assess whether any of the notified economic sectors or ben-
trade
eficiaries may be granted aid that does not affect
between the Contracting Parties to the EEA Agreement’ (6).
However, when examining a scheme,
the Authority must
assess the general features of the scheme as such to ascertain
whether
aid within the meaning of
Article 61(1) of the EEA Agreement. Settled case law of the
ECJ has established that ‘in the case of an aid scheme, the
Commission may confine itself to examining the general charac-
teristics of the scheme in question without being required to
examine each particular case in which it applies.’ (7). The EFTA
Court has also endorsed this interpretation (8).

involves

State

it

‘[…]

Other economic sectors covered by the scheme have already
been the object of State aid decisions clearly stating the
existence of an effect on trade. This is, amongst others, the
case of publishing of newspapers (NACE 22), a sector in
which the Commission adopted a decision last year stating
in the
that
publishing products concerned by the aid measures under
review. Thus,
the aid measures under review could distort
competition between firms inasmuch as, for instance, publishing
firms can pursue their activity in different Member States,
producing publications in different languages and compete for
publishing rights and advertising.’ (4).

trade between Member States

there is

Another example of a sector where State aid decisions have
already been adopted establishing the existence of a trade
‘the volume of
effect is the wholesale sector (NACE 51) (5):
trade in pharmaceutical and other related products […]
in
1991 […] with the four EEA countries (Austria, Finland,
Sweden, Norway) in these products exceed 2.7 billion ecus.’

Hence, the Authority must assess the scheme as such. If the
scheme as such provides for State aid within the meaning of
Article 61(1) of
is caught by this
provision. The Authority is therefore not obliged to prove posi-
tively in each individual case falling under the scheme that the
conditions of Article 61(1) of the EEA Agreement are fulfilled.

the EEA Agreement,

it

it

furthermore,

the purpose of

For
is not
this Decision,
feasible (9) to establish whether the scheme is liable to affect
trade regarding each of the more than 200 sectors it covers.
According to settled case law, it must be ensured that trade will
not be affected for single undertakings which may benefit from
the scheme (10). The Authority considers that it is impossible to
ensure that all potential beneficiaries within each of the more
than 200 notified NACE sectors are not — and will not be —
exposed to trade within the meaning of Article 61(1) of the EEA
Agreement.

(1) Case C-71/04 Administración del Estado v Xunta de Galicia [2005] not

(6) See page 3 of

the letter of

the Norwegian authorities dated

yet reported, paragraph 47.

(2) Joined Cases E-5/04, E-6/04 and E-7/04 Fesil a.o. v EFTA Surveillance

Authority [2005], not yet reported, paragraph 95.

(3) Furthermore, there is no explicit reference in the notification to the
method followed to determine the exposure to competition in this
sector, although a great number of the construction sub-sectors have
been included in the notification.

(4) Commission Decision of 30.6.2004 on the measures notified by

Italy in favour of the publishing industry.

(5) Commission Decision on the Greek scheme of aids in the pharma-
ceutical sector, financed by means of levies on pharmaceutical and
other related products, State aid No C1A/92.

12 November 2004 (Event No 299087).

(7) Case T-171/02 Regione autonoma della Sardegna v Commission [2005]
not yet
reported, paragraph 102; Case 248/84 Germany v
Commission [1987] ECR 4013, paragraph 18; Case C-75/97
Belgium v Commission [1999] ECR I-3671, paragraph 48 and Case
C-278/00 Greece v Commission [2004] ECR I-3997, paragraph 24.
(8) Case E-6/98 The Government of Norway v EFTA Surveillance Authority

[1999] Report of the EFTA Court, p. 76, paragraph 57.

(9) See in this context, Opinion of Advocate General Geelhoed in Case
C-278/00 Greece v Commission [2004] ECR I-3997, paragraph 40.
(10) Case T-171/02 Regione autonoma della Sardegna v Commission [2005]

not yet reported, paragraph 104.

L 122/28

EN

Official Journal of the European Union

8.5.2008

There are other economic sectors which comprise activities
often carried out at a local
level. Regarding these sectors it
can nonetheless not be excluded a priori that trade may be
affected. By way of example,
local service providers such as
training centres or retail shops like supermarkets often belong
to bigger chains that are in competition EEA-wide. Moreover,
the ECJ has recently determined the existence of trade effect in
the sector of dental practice activities (NACE 85) (1), a service
which is typically delivered locally.

Although the existence of trade effect has usually been estab-
lished, there are also some concrete examples in the Authority’s
and the Commission’s decision practice where concrete aid
to
awards in particular circumstances were considered not
have any effect on trade. This was the case, for example,
in
the Commission’s Decisions on the Brighton Pier and the
Dorsten swimming pool (2). The existence of trade effect has
also been denied in the Authority’s Decision on the estab-
lishment of private day-care facilities on public sites with
subsidised real estate leasehold fees in Oslo (3). The common
characteristic of these cases is that either they concern an indi-
vidual aid award or a scheme ring-fenced with such clear,
concise and tight
in the application and the
potential beneficiaries that it could be ensured that no indi-
vidual aid could be awarded which would have an effect on
trade.

limitations

The ECON report, on the basis of which this scheme has been
drafted, has mainly analysed the current situation of a number
of economic sectors in Norway. However, the economy evolves
and trade patterns may change. Thus, how the future situation
will be and whether the results of the ECON report, on the basis
of which the Norwegian authorities justify the absence of effect
on trade, will be valid in the future remains unknown. Failing a
review mechanism to adapt the granting of aid to new circum-
stances, it cannot be ensured that aid will not be granted in the
future to a number of undertakings active in some of the listed
economic sectors with an effect on trade. It must be noted in
this context that the proposal for differentiated rates for social
security contributions is unlimited in time.

The material coverage of the scheme is not sufficiently precise.
The Norwegian authorities have most recently clarified the
scope of the notification in their letter dated 12 November
2004, submitting comments on the initiation of the formal
investigation procedure. Some sectors were notified as not
exposed to competition in one zone since there are currently
no undertakings in those sectors in the given zones which
exceed the de minimis threshold. The Norwegian authorities
have nevertheless explained that they will consider these under-
takings in the same way as those falling under the relevant
sector notified in other zones if, in the future, the wage costs
of these undertakings exceed the de minimis threshold. These

(1) Case C-172/03 Wolfgang Heiser v Finanzamt Innsbruck [2005] not yet

reported, paragraphs 29 and 32.

(2) Commission Decision on State Aid N 560/01 and NN 17/02 and
Commission Decision on State Aid No N 258/2000, respectively.
(3) Authority’s Decision No 291/03/COL OF 18 December 2003
regarding the establishment of private day-care facilities on public
sites with subsidised real estate leasehold fees in Oslo.

sectors were nevertheless not included in the notification as it
was submitted to the Authority.

Moreover, there are no further specific criteria to select the
eligible undertakings within the economic sectors included in
the list identified in the ECON report since the notification only
refers to sectors. The two cumulative criteria of geographic
location and sectoral activity required to apply the reduced
rates of social security contributions in a given sector are, in
the opinion of the Authority, of too broad a nature. In line with
the positive decisions mentioned above, a scheme must contain
precise and clear criteria (4) to ensure that no aid is granted to
any undertaking that would affect trade within the EEA.

On the basis of the information provided by the Norwegian
authorities, the Authority therefore considers that the proposal
for regionally differentiated rates of social security contributions
is liable to affect trade between the Contracting Parties.

(b) Conclusion

For the above mentioned reasons, the Authority concludes that
the notified scheme of regionally differentiated rates of social
security
in certain
economic sectors constitutes State aid within the meaning of
Article 61(1) of the EEA Agreement.

for undertakings

contributions

active

5. Compatibility of the aid

investigation procedure given the

The Norwegian authorities argued in the notification that the
for regionally differentiated rates of social security
proposal
contributions did not constitute State aid. After a preliminary
assessment of the scheme, the Authority decided to open the
formal
serious doubts
concerning not only the state-aid character of the regionally
differentiated rates of social security contributions but also
their compatibility with the State aid rules of
the EEA
Agreement. Notwithstanding the doubts expressed by the
investigation
Authority in the decision to open the formal
forward
procedure,
any arguments concerning compatibility of the scheme.

the Norwegian authorities have not put

The Authority is of the opinion that none of the derogations
mentioned in Article 61(2) of
the EEA Agreement can be
applied to the case at hand.

Furthermore,
the system of reduced rates of social security
contributions cannot be considered compatible on the basis
of Article 61(3) of the EEA Agreement. A reduction in the
running costs of an undertaking such as the social security
contributions constitutes operating aid. Such aid, given to
undertakings in certain regions, is in principle prohibited.

(4) Opinion of Advocate General Geelhoed in Case C-278/00 Greece v

Commission [2004] ECR I-3997, paragraph 45-46.

8.5.2008

EN

Official Journal of the European Union

L 122/29

The application of reduced rates of social security contributions
cannot be considered within the framework of Article 61(3)(a)
of the EEA Agreement since none of the Norwegian regions
qualify for this provision which requires an abnormally low
standard of living or serious underemployment.

According to the information available to the Authority, the
notified scheme of
social
security contributions for certain economic sectors has not
been implemented yet,
i.e. no aid has been paid out to any
of the potential beneficiaries of the scheme,

regionally differentiated rates of

The reduced rates of social security contributions do not
promote the execution of an important project of common
remedy a serious disturbance in the
European interest or
economy of a State, as it is requested for compatibility on
the basis of Article 61(3)(b) of the EEA Agreement.

the EEA Agreement,

in its
Concerning Article 61(3)(c) of
Decision No 218/03/COL of 12 November 2003, with regard
to State aid in the form of regionally differentiated social
security contributions, the Authority considered that a conti-
nuation of
the Norwegian scheme would be incompatible
with Article 61(3)(c) of the EEA Agreement and the State Aid
Guidelines. For undertakings located in Zones 2, 3 and 4 which
are active in the economic sectors listed in the notification, the
notified measure implies a return to the rules which were
declared incompatible aid by the Authority in 2002 for not
qualifying for a derogation under Article 61(3)(c) of the EEA
Agreement. The fundamental features of the notified scheme are
the same as the ones of the scheme subject to the prior decision
of the Authority. The only difference is the more restricted
scope of application of the currently notified scheme which is
limited to undertakings active in a list of over 200 prede-
termined sectors.
the Authority
confirms its prior assessment that the application of regionally
differentiated rates of
is not
compatible with the state aid rules of the EEA Agreement.

In line with this Decision,

security contributions

social

HAS ADOPTED THIS DECISION:

Article 1

contributions

The notified proposal for regionally differentiated rates of social
in certain
security
economic
are
aid within the
planning to implement
meaning of Article 61(1) of the EEA Agreement. The notified
proposal is incompatible with Article 61 of the EEA Agreement.

for undertakings
sectors which the Norwegian authorities
constitutes State

active

Article 2

The notified proposal for regionally differentiated rates of social
security
in certain
economic sectors shall not be implemented.

for undertakings

contributions

active

Article 3

This Decision is addressed to the Kingdom of Norway.

Article 4

This Decision is authentic in the English language.

6. Conclusion

Done at Brussels, 22 November 2005.

the foregoing assessment,

the Authority
On the basis of
considers that the notified scheme of regionally differentiated
rates of social security contributions for certain economic
sectors constitutes State aid incompatible with the rules of the
EEA Agreement.

For the EFTA Surveillance Authority

Einar M. BULL
President

Kurt JÄGER
College Member