2006/323/EC: Commission Decision of  7 December 2005  concerning the exemption from excise duty on mineral oils used as fuel for alumina production in Gardanne, in the Shannon region and in Sardinia respectively implemented by France, Ireland and Italy  (notified under document number C(2005) 4436)   (Text with EEA relevance)
Date: 2005-12-07
Institutions: European Commission
Subjects: France, Ireland, Italy, State aid, control of State aid, environmental tax, excise duty, metallurgical industry, mineral oil

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4.5.2006

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 7 December 2005

concerning the exemption from excise duty on mineral oils used as fuel for alumina production in
Gardanne, in the Shannon region and in Sardinia respectively implemented by France, Ireland and
Italy

(notified under document number C(2005) 4436)

(Only the French, English and Italian versions are authentic)

(Text with EEA relevance)

(2006/323/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,

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 provision(s) cited above (1) and having regard to
their comments,

Whereas:

1. PROCEDURE

Community

legislation concerning harmonisation of

tax

provisions

(1)

Ireland exempted heavy fuel used in the production of
alumina in the Shannon region from the domestic excise
Italy and France granted
taxes from 1983 onwards.
similar exemptions in respect of
fuel used in plants
located on Sardinia and in the Gardanne region from
1993 and 1997 respectively. Article 6 of Council
Directive 92/82/EEC of 19 October 1992 on the approx-
imation of the rates of excise duties on mineral oils (2)
established a minimum rate of excise duty on heavy oil,

which Member States had to apply from 1 January 1993.
However,
the Council authorised Ireland to exempt
alumina production in the
mineral oils used for
Shannon region from the excise duty (hereinafter ‘the
Irish exemption’) by the following decisions:

— Council Decision 92/510/EEC of 19 October 1992
authorizing Member States to continue to apply to
certain mineral oils when used for specific purposes,
existing reduced rates of excise duty or exemptions
in accordance with the proce-
from excise duty,
dure provided for
in Article 8 (4) of Directive
92/81/EEC (3);

— Council Decision 97/425/EC of 30 June 1997
authorizing Member
to
States
continue to apply to certain mineral oils, when
used for specific purposes, existing reduced rates of
in
excise duty or exemptions
from excise duty,
in
accordance with the procedure provided for
Directive 92/81/EEC (4);

apply

and

to

— Council Decision 1999/880/EC of 17 December
1999 authorising Member States to apply and to
continue to apply to certain mineral oils, when
used for specific purposes, existing reduced rates of
in
excise duty or exemptions
from excise duty,
in
accordance with the procedure provided for
Directive 92/81/EEC (5);

(1) OJ C 30, 2.2.2002, p. 17, p. 21 and p. 25.
(2) OJ L 316, 31.10.1992, p. 19.

(3) OJ L 316, 31.10.1992, p. 16.
(4) OJ L 182, 10.7.1997, p. 22.
(5) OJ L 331, 23.12.1999, p. 73.

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— Council Decision 2001/224/EC of 12 March 2001
concerning
and
exemptions from such duty on certain mineral oils
when used for specific purposes (6);

reduced rates of

excise duty

Decisions 97/425/EC, 1999/880/EC and 2001/224/EC,
as Council Decision 93/697/EC of 13
as well
December 1993 authorizing certain Member States to
apply or to continue to apply to certain mineral oils,
when used for specific purposes, reduced rates of excise
duty or exemptions from excise duty, in accordance with
the procedure provided for in Article 8(4) of Directive
92/81/EEC (7), Council Decision 96/273/EC of 22 April
1996 authorizing certain Member States to apply or to
continue to apply to certain mineral oils, when used for
reduced rates of excise duty or
specific purposes,
in accordance with the
exemptions from excise duty,
procedure provided for
in Article 8(4) of Directive
92/81/EEC (8) and Council Decision 1999/255/EC of
30 March 1999 authorising,
in accordance with
Directive 92/81/EEC, certain Member States to apply
and to continue to apply to certain mineral oils,
reduced rates of excise duty or exemptions from excise
duty, and amending Decision 97/425/EC (9), authorised
similar exemptions in respect of mineral oils used as fuel
for alumina production in Sardinia, Italy (hereinafter ‘the
Italian exemption’).

Decisions 97/425/EC, 1999/255/EC, 1999/880/EC and
2001/224/EC also authorised exemptions in respect of
mineral oil used as fuel for alumina production in the
‘the French
Gardanne region of France (hereinafter
exemption’).

in

fifth

recital

preamble

The
to Decision
the
2001/224/EC states that ‘this decision shall be without
prejudice to the outcome of any procedures relating to
distortions of the operation of the single market that
may be undertaken, in particular under Articles 87 and
88 of the Treaty. It does not override the requirement for
Member States to notify instances of potential State aid
the Treaty’.
to the Commission under Article 88 of
Decision 1999/880/EC authorises the exemptions until
31 December 2000. Decision 2001/224/EC authorises
the exemptions until 31 December 2006.

Council Directive 2003/96/EC of 27 October 2003
the
restructuring

the Community

framework

for

(2)

(3)

(4)

(5)

(6) OJ L 84, 23.3.2001, p. 23.
(7) OJ L 321, 23.12.1993, p. 29.
(8) OJ L 102, 25.4.1996, p. 40.
(9) OJ L 99, 14.4.1999, p. 26.

taxation of energy products and electricity (10) repealed
Directive 92/82/EEC as from 31 December 2003. Article
2(4)(b) of Directive 2003/96/EC, states that the Directive
does not apply to a number of uses of energy, notably
dual use of energy products. The second indent of Article
2(4)(b)
for
chemical reduction and in electrolytic and metallurgical
processes is to be regarded as dual use. Hence, as from
31 December 2003, when that Directive became
there has no longer been any minimum
applicable,
excise duty for heavy fuel used in the production of
alumina.

the use of energy products

states

that

Correspondence between the Commission and the Member
States concerned

Ltd

(hereinafter

As early as 1970, when no alumina was yet produced in
Ireland, the Irish Industrial Development Authority and
‘Aughinish’)
Aughinish Alumina
discussed the possibility of recovering duties paid on
raw materials used for the manufacture of goods that
were exported in accordance with the legislation in
force
such an
It was
exemption would become applicable in the event that
Aughinish set up a plant
in Ireland. A significant
from 1975.
change of
Aughinish started making its investment in 1978 and
operations started in 1982. The Irish exemption came
into effect in 1983.

legislation took effect

agreed that

time.

the

as

at

the aid is only now about

Ireland informed the
By letter of 28 January 1983,
the commitment given to Aughinish
Commission of
and of
its planned implementation. By letter of 22
March 1983, the Commission replied, explaining that
‘if
the
Commission could regard the letter of 28.1.1983 as a noti-
fication in the terms of Article 93(3) [now Article 87(3)] of
the Treaty’. Ireland confirmed that this was the case by
letter of 6 May 1983. No decision was adopted further to
that correspondence.

implemented,

to be

By letters of 29 May 1998 (D/52247) and 2 June 1998
(D/52261), the Commission requested information from
Italy and France respectively in order to verify whether
the Italian and French exemptions would fall within the
scope of Articles 92 and 93 (now Articles 87 and 88) of
the Treaty. The Commission reminded Italy of its request
by letter of 16 June 1998 (D/52504). Italy answered by
letter of 20 July 1998 (registered on 23 July 1998 under
A/35747). Having requested an extension of the delay for
reply by letter of 10 July 1998 (registered on 13 July
1998 under A/35402), which was granted by letter of
24 July 1998 (D/53163), France replied by letter of
7 August 1998 (registered on 11 August 1998 under
A/36167).

(6)

(7)

(8)

(10) OJ L 283, 31.10.2003, p. 51.

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(9)

(10)

Ireland provided the estimated amounts of aid granted
under the tax exemption for the period as from 1995 in
the context of its annual reporting to the Commission on
all granting of State aid and these amounts are included
in the corresponding Annual Surveys on State Aid. The
Irish exemption was also mentioned in the European
Union's notifications to the World Trade Organisation
pursuant to Article XVI:1 of the General Agreement on
Tariffs and Trade 1994 and Article 25 of the Agreement
on Subsidies and Countervailing Measures for the years
1997,
and
1998,
2003/2004 (11).

2001/2002

1999,

2000,

(b) From Eurallumina SpA (hereinafter ‘Eurallumina’), the
Italian beneficiary:
letters of 28 February 2002
(registered on 28 February 2002 and 4 March
2002 under A/31559, A/31656 and A/31772
respectively);

(c) From Alcan Inc.

the French
beneficiary: letter of 1 March 2002 (registered on 4
March 2002 under A/31657);

(hereinafter

‘Alcan’),

the Commission requested France,

By letters of 17 July 2000 (D/53854, D/53855 and
D/53856),
Ireland
and Italy respectively to notify the exemptions. France
replied by letter of 4 September 2000 (registered on 5
September 2000 under A/37220). The Commission
reminded Ireland and Italy of
its request and asked
those Member States, as well as France, for further infor-
mation by letters of 27 September 2000 (D/54915,
D/54911 and D/54914). Ireland answered by letter of
18 October 2000 (registered on 20 October 2000
under A/38674). The Commission reminded Italy and
France of its requests by letters of 20 November 2000
(D/55707 and D/55708). Italy answered by letter of 7
December 2000 (registered on 13 December 2000 under
A/40512). France answered by letter of 8 December
2000 (registered
on 11 December 2000 under
A/40419). The cases were registered under NN22/2001
IR, NN 26/2001 IT and NN23/2001 FR respectively.

(d) From the European Aluminium Association (here-
inafter ‘EAA’): letter of 26 February 2002 (registered
on 1 March 2002 under A/31598) referring to an
earlier letter of 24 January 2002;

(12) All third parties, except Alcan, sent their comments in
the framework of all three procedures. The comments
Italy and France by letters
were forwarded to Ireland,
of 26 March 2002 (D/51349) and 9 April 2002
(D/51555 and D/51559).

The procedures pursuant to Article 88(2) of the Treaty

(11)

By decisions C(2001) 3296, C(2001) 3300 and C(2001)
3295 of 30 October 2001 the Commission initiated the
procedure laid down in Article 88(2) of the Treaty with
respect to the exemptions. These decisions were sent to
Ireland, Italy and France by letters of 5 November 2001
(D/291995, D/291999 and D/292000). The decisions
were published in the Official
the European
Communities on 2 February 2002 (12). The Commission
received the following comments from third parties:

Journal of

(a) From Aughinish:

letter of 26 February 2002
(registered on 1 March 2002 under A/31598)
which referred to an earlier letter of 24 January
2002 and letters of 1 March 2002 (registered on
the
same day under A/31617, A/31618 and
A/31625);

(13) Having requested an extension of

the time limit

for
responding by fax of 1 December 2001 (registered on
3 December 2001 under A/39535), which was granted
by letter of 7 December 2001 (D/55104),
Ireland
commented on the Commission's decision by letter of
8 January 2002 (registered on 11 January 2002 under
SG(2002)A/490). The Commission requested further
information by letter of 18 February 2002 (D/50686).
for
Having requested an extension of
responding by
Ireland
answered by letter of 26 April 2002 (registered on 29
April 2002 under A/33141).

fax of 19 March 2002),

the time limit

(14) Having requested an extension of

the time limit

for
responding by letter of 21 November 2001 (registered
on 23 November 2001 under A/39207), which was
granted by letter of 29 November 2001 (D/54945),
France commented on the Commission's decision by
letter of 12 February 2002 (registered on 13 February
2002 under A/31100).

(11) Documents available on www.wto.org The last notification is dated
15 December 2003 with reference number 03-6591 and symbol
G/SCM/N/95/EEC/Add.8.

(12) See footnote 1.

(15)

Italy commented on the Commission's decision by letter
of 6 February 2002 (registered on 12 February 2002
under A/31091).

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2. DETAILED DESCRIPTION OF
CONCERNED

THE MEASURES

(18)

There is only one producer of alumina in each of the
Member States concerned.

(16) Alumina is a white powder principally used in smelters
to produce aluminium. It is produced out of bauxite ore
by a refining process, the last step of which consists in
calcination. More than 90 % of the calcinated alumina is
used in the smelting of aluminium metal. The remainder
is further processed and used in chemical applications. In
several merger decisions (13), the Commission has found
that there are two separate product markets: smelter-
‘SGA’) and chemical-grade
grade alumina (hereinafter
‘CGA’). CGA is a much higher
alumina (hereinafter
value-added product than SGA. While the geographical
market for SGA is worldwide, that for CGA is not wider
than Europe.

(19)

(20)

(17)

the moment

The measures to which this Decision relates consist of
full exemptions from the excise duty on industrial heavy
oil. The national legislation provides for exemptions for
fuel oil used for alumina production throughout
the
territory of the Member States concerned. However, at
least until
that Directive 2003/96/EC
Ireland, France and Italy had to
became applicable,
ensure that
the advantage was granted only in the
regions specified in the Council Decisions referred to in
recitals (1), (2) and (3). Decision 2001/224/EC authorised
the exemptions until
the end of 2006. The Member
States concerned have not indicated whether they wish
to prolong the exemption beyond 2006. Since Directive
2003/96/EC does not apply to heavy fuel used for the
production of alumina, such a prolongation would not
require the authorisation of the Council. In 1999, the
excise tax rates normally applicable in Ireland, France
and Italy amounted to EUR 13.45, EUR 16.78 and
EUR 46.48 per tonne of heavy oil respectively, but the
latter two rates have since been increased.

The beneficiary of the Irish exemption is Aughinish. It is
located in the Shannon region and now belongs to the
Glencore group, a diversified resources group with world-
wide activities in mining, smelting, refining, processing
and trading of minerals and metals, energy products and
agricultural products. Glencore's turnover in the fiscal
year 2003 was USD 54 700 million (14).

turnover

The beneficiary of the Italian exemption is Eurallumina. It
is located in Sardinia. Since late 1997, Eurallumina has
been a cooperative joint venture between Comalco Ltd
(56,2 %) and Glencore (43,8 %). Comalco sells more than
820 000 tonnes of primary aluminium products per
annum and its
in 2002 was USD 256
millions. One of its four aluminium smelters is located
in the Community, namely Anglesey in the United
Kingdom. Comalco is a fully owned subsidiary of the
Rio Tinto group, which has worldwide activities in
finding, mining and processing mineral resources (15).
The plant in Sardinia produces alumina for the account
of the joint venture participants who take the production
in proportion to their shares in the consortium. Part of
the alumina produced (about 25 %) is used in the nearby
Alcoa primary aluminium smelter, for which Eurallumina
is the sole supplier.

(21)

took over Pechiney,

The beneficiary of the French exemption is Alcan, which,
in 2003,
including its alumina
refinery located in the Gardanne region. Alcan is the
world's second largest producer of primary aluminium
with a turnover of USD 25 700 million in 2003 (16).

(22)

For the year 1999,
provided:

the following figures have been

Number of employees

Production of SGA in tonnes

Production of CGA in tonnes

Sales of alumina in EUR millions

Excise duty on heavy oil in EUR per tonne (*)
(VAT which accrues)

Consumption of heavy fuel oil in tonnes

Aid amount in EUR millions

Aughinish

450

1 396 000

54 000

245

13,46
(12,5 %)

336 000

4,5

Eurallumina

450

897 761

75 239

135

46,48
(10 %)

262 114

16,4

Pechiney

500

280 000

280 000

128

16,78 (**)
(19,6 %)

32 047

0,6

By comparison, the minimum rate that was established by Directive 92/82/EEC was EUR 13 per tonne.

(*)
(**) For heavy oil with sulphur content of less than 2 %.

(13) See,

for

instance, Commission Decision 2002/174/EC in Case

COMP/M.1693 — Alcoa/Reynolds (OJ L 58, 28.2.2002, p. 25).

(14) See www.glencore.com
(15) See www.eurallumina.com, www.comalco.com and

www.riotinto.com
(16) See www.alcan.com

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(23) All

for

are

are

three

eligible

regional

companies

located in areas where
investments
in the
Gardanne and Shannon investments are eligible for aid
in
pursuant
the Treaty, whilst
to
Sardinia investments are eligible for aid pursuant
Article 87(3)(a). Until 31 December 1999 investments
in the Shannon region were eligible for aid pursuant to
Article 87(3)(a) of the Treaty.

to Article 87(3)(c) of

aid:

3. REASONS TO INITIATE THE PROCEDURE LAID
DOWN IN ARTICLE 88(2) OF THE TREATY

(24)

In its decisions to initiate the procedure laid down in
Article 88(2) of the Treaty, the Commission expressed
its doubts as regards the compatibility of the aid under
the Community guidelines on national regional aid (17)
and in particular in the light of the rules on operating
aid contained in those guidelines.

(25)

The Commission also raised doubts as regards the aids'
compatibility under the Community guidelines on State
aid for environmental protection of 1994 (18) and those
of 2001 (19).

4. COMMENTS FROM THIRD PARTIES

Aughinish

(26) Aughinish argues

that when the Council

adopted
Decision 2001/224/EC,
took the State aid aspects
fully into account and was properly satisfied that the
exemptions did not give rise to distortions of compe-
the internal
tition or
market.

interfere with the working of

it

(27)

The continuation of
2006 is both justified and critical to its survival.

the exemption to 31 December

(28)

essential
failed
The Commission has
requirements laid down in Council Regulation (EC) No
659/1999 of 22 March 1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (20).

to observe

(29) Aughinish' alumina plant is located in an underdeveloped
rural area. The plant's operations represent a significant
share of the region's production, employment and tax
proceeds. Over half of the tonnage transported through
the Shannon Estuary is directly related to Aughinish. It
contributes approximately 20 % of all property taxes
collected by Limerick County Council. On an annual
basis, the plant spends EUR 70 million in Ireland on

(17) OJ C 74, 10.3.1998, p. 9.
(18) OJ C 72, 10.3.1994, p. 3.
(19) OJ C 37, 3.2.2001, p. 3.
(20) OJ L 83, 27.3.1999, p. 1.

goods and services, 70 % of which is spent
Closure would be catastrophic for the local economy.

locally.

(30) Originally,

the exemption was considered a critical
element
in competitive terms given the absence of
natural energy sources or alternatives to heavy oil such
as natural gas in the region. Aughinish is currently
developing its own on-site combined heat and power
plant
(CHP), which will be fuelled by natural gas.
Primarily because of delay in putting in place the
required infrastructure for transporting gas and elec-
tricity, Aughinish has no alternative energy source to
heavy fuel oil until 2006. Without the exemption, the
plant would be uneconomic and could be forced to close.
Without
the
investment would not have been made in Ireland, nor
indeed within the Community.

assurances

original

Ireland,

the

by

(31)

The exemption was notified as State aid in 1983 and has
become existing aid within the meaning of Article 1(b) of
Regulation (EC) No 659/1999.

(32)

adopted Decision

The Council
2001/224/EC by
unanimity on the basis of a proposal by the Commission,
allowing the exemptions until December 2006.

(33)

The Commission must respect the legitimate expectations
of the beneficiaries.

(34)

(35)

In proposing and adopting Decision 2001/224/EC, the
Commission and the Council have already made an
assessment that the measures are acceptable from the
competition point of view. This
from the
recitals in the preamble to the Decision and the text of
Article 8 of Directive 92/81/EEC on which it is based.

is clear

There is no distortion of competition. Even with the
exemption, Aughinish remains at a competitive disad-
vantage compared to its counterparts in Europe and
the world. As it produces smelter grade
the rest of
there is no a distortion of competition as
alumina,
in Europe producing chemical grade
regards plants
alumina. Furthermore,
the German plant uses natural
gas which also benefits from an exemption from the
excise duty applicable to other industrial consumers of
gas in Germany. More fundamentally, Aughinish never
considered itself to be in direct competition with other
Community alumina producers. Community producers
rather compete against producers elsewhere in the
world,
in particular Australia. Europe does not have
low priced gas, which is available in Australia and
in
other
the
Community because of
to burn low
sulphur oil,
less than 3 %. From 1
January 2003, 1 % sulphur oil has been mandatory,
further inflating fuel oil prices and producers costs.

is more
the requirement

countries. Oil

is to say,

expensive

that

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(36) Aughinish also refers to inconsistency with the Commis-
sion's approval of
the prolongation of a number of
reductions in respect of the tax which would otherwise
be payable under the German Ecotax (21).

(42)

The exemption only partially removes the disadvantages
the Sardinian plant has when confronting the world
market.

Eurallumina

(37)

Eurallumina also invokes legitimate expectations and
explains that
it made a series of commitments and
investments in its alumina plant based on Decision
2001/224/EC.
In particular orders have been placed
and expenses incurred for the installation of a new
alumina charger and a new caustification unit in order
to expand the basin for stocks of the process residue, for
the improvement of the bauxite digestion unit as well as
for other minor works. Various commitments have been
made with the local community.

(43)

(44)

(38) Without

the

exemption,

and would have

the plant would not be
closed down.
economical
Closure would not change or improve trade between
Member States as all other plants in the Community
work on full capacity.

to be

location, Eurallumina has no access

The plant is located in a disadvantaged region where
operating aid can be authorised on the basis of point
4.16 of the Guidelines on national regional aid. Due to
to methane
its
(which is the major component of natural gas) and
therefore is forced to rely on heavy oil.
It does not
have the possibility to cogenerate heat and power,
which would reduce the costs by about EUR 10
legislation,
million per year. The Italian environmental
furthermore,
imposes additional costs amounting to
about EUR 8 million per year.

involvement

The plant was created on the initiative of the Italian
authorities with
the Community.
Initially it benefited from loans and aid, all approved,
developed
but
without significant State aid from either the national
authorities, or from the Community.

subsequently

operations

have

the

of

(39) When it adopted Decision 2001/224/EC,

the Council
took due account of
the economic and competition
aspects. The circumstances have not changed since that
decision was adopted. Lex specialis based on Article 93 of
the Treaty prevails over the procedure lex generalis based
on Articles 87 and 88 of the Treaty.

(40)

is

the functioning of

the measure were to be re-examined,

If
it would be
considered compatible with the Community interest
and the State aid rules. There is no distortion of compe-
the single market
tition, nor
affected. The French and Irish plants benefit
from a
similar exemption, the German plant uses natural gas
that is also exempted from excise duties and the plants
in Spain and Greece do not compete with the Sardinian
plant to a significant extent, as the major part of their
production is used in an adjacent aluminium smelter and
the remaining part consists principally of chemical grade
alumina which is a separate market. The Greek plant uses
locally extracted bauxite and therefore does not have to
bear the cost of transport of raw materials. The Spanish
plant has
recently been sold to Alcoa and it can
reasonably be expected that the purchase price reflected
the applicable excise rates. The UK plant produces only
chemical grade alumina.

(41)

The Italian excise duty is very high, much higher than the
harmonised level and much higher than the excise duties
applicable elsewhere in the Community.

(21) Commission Decision in Case N 449/2001 — Germany —

Ecological Tax Reform (OJ C 137, 8.6.2002, p. 24).

(45)

Recently significant
investments have been made to
ensure compliance with the most restrictive norms and
regional environmental standards.

(46) As the adjacent Alcoa plant only uses the alumina from
Eurallumina, closure of the alumina plant would also
result in the closure of the aluminium plant, causing
the loss of 1 900 jobs altogether.

Alcan

(47) Alcan refers to the global competitive situation and
recalls that the reasoning behind the exemption is essen-
the
tially based on the energy intensive character of
industry.

(48)

The investments have a long term character and are
highly capital
is
and risky. Therefore
necessary to have a stable fiscal and legal context.

intensive

it

(49) Alcan has committed itself

for

and prepare

several years

to a
significant
continuous
investment programme. The
efforts that have been made to modernise the instal-
it
lations
possible to maintain 500 direct jobs in an economically
sensitive region. Decision 2001/224/EC strengthens the
plant's efforts to maintain its competitive position. Revo-
cation of the exemption would weaken the activity in the
view of global competition that is already very present.

future have made

the

for

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(50)

The European Aluminium Association

The EAA strongly opposes any steps which would
adversely
aluminium metal
the Community
affect
market. The alumina plants
in the Community are
working at full capacity. Although they are among the
most energy efficient in the world, the cost of production
is higher than in other western world alumina plants.
The exemptions only partially compensate for the disad-
vantages of the European plants compared to their global
competitors as regards raw materials, transport, energy
and environmental standards. The European alumina
producers currently do not meet
internal European
demand and the revocation of the exemptions would
the
in increased imports from other parts of
result
world. The European aluminium producers would have
no option but
to buy alumina from non-European
sources, which would lead to reduced security of
supply for the primary industry.

5. COMMENTS FROM FRANCE, IRELAND AND ITALY

France

(51)

France claims that the decision to initiate the procedure
laid down in Article 88(2) of the Treaty is superfluous
and has no legal basis. The nature and legal significance
of Council decisions cannot depend on whether they are
based on the third subparagraph of Article 88(2) of the
Treaty or on Directive 92/81/EEC. In any case, France
considers that the exemption does not constitute State
aid within the meaning of Article 87(1) of the Treaty.

(52)

France considers it is significant that no complaint about
distortion of competition has been lodged even though
the exemptions have been granted for 4 years.

(53)

(54)

Ireland

Ireland recalls the history of the exemption and insists
that
it must be considered existing aid. The Council
decisions took due account of the competition aspects,
as did the Commission's proposals for those decisions.
Moreover, until 1999, the Shannon region formed part
of an Objective 1 area. The beneficiaries should be able
to rely on legitimate expectations.

The Irish government requested the derogation from the
minimum rate for excise duty in 1992 on the grounds
that the plant was located in a relatively underdeveloped
area and that, since it used heavy oil as an energy source,
it could not compete with other countries'
industries
having lower tax rates on fuel and possibly also using
natural gas or other energy sources subject
to lower
taxes, or no tax at all.

(55)

Ireland confirmed that a new infrastructural development
in natural gas supply which would cater for the Shannon

region would be in place by October 2002 and that in
order to change its energy source, Aughinish planned to
invest in a CHP plant using this new supply of natural
gas.

(56)

Italy

Italy explains that Eurallumina pays LIT 300 million
(EUR 150 000) annually for the use of the wharf/quays
and reefs where it is located. It also pays some LIT 500
million (EUR 250 000) annually in the form of the waste
tax (LIT 600 per tonne of red sludge). Furthermore, as
from 1974, the regional authorities have prohibited the
disposal of residue in the Mediterranean Sea, a practice
still allowed in France and Greece. This prohibition
resulted in high costs for Eurallumina amounting to
LIT 6 000 million (EUR 3 million). Due to the strict
emission limits (25 % below the national limit for SOx)
the company has had to invest in new de-sulphuring
technology at a cost of LIT 44 000 million (EUR 22
million) which entails an additional operating cost of
including
LIT 6 000 million annually (EUR 3 million),
amortisation. Despite these investments,
the company
will still have to pay 1 100 million LIT (EUR 0.55
million) annually for emission taxes.

6. ASSESSMENT

(57)

Since the Community framework applicable to energy
taxation was substantially modified after the Commis-
to initiate the procedure of Article
sion's decisions
88(2) of
the
present final decision is limited to the period prior to
1 January 2004 when Directive 2003/96/EC became
applicable.

the Treaty, by Directive 2003/96/EC,

6.1. Existence of State aid until 31 December 2003

(58) 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’.

(59)

It is evident that the exemptions are financed through
State resources since the State foregoes a certain amount
of money that it would otherwise collect.

(60)

The exemptions from excise duty reduce the cost of one
important input and thus confer an advantage on the
beneficiaries which are placed in a more favourable
financial
using
mineral oils in other industries or regions.

undertakings

position

other

than

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(61)

at

alumina

the market

situation for

In their comments, the beneficiaries and France expressed
the view that
the exemptions did not create any
distortion of competition nor did they affect the func-
in particular because the
tioning of the single market,
importer of alumina, because
Community was a net
Community producers had to compete at a global level
and were disadvantaged by high energy prices, and
because putting an end to the exemptions would not
improve
the
Community level and would reduce security of supply
of primary resources for aluminium production. They
claim that the absence of any distortion of competition
is confirmed by the fact that no competitors commented
on the Commission's decision to initiate the procedure
this,
laid down in Article 88(2) of
however, does not detract
in
recital 60. To the contrary,
it confirms that the excise
reductions were explicitly intended to strengthen the
competitiveness of the beneficiaries vis-à-vis their compe-
titors by reducing their costs. The Commission notes that
alumina is also produced in Greece, Spain, Germany and
Hungary (although Hungary has only been a Member
State since 1 May 2004).

the Treaty. All
from the assessment

(62) Alumina, both SGA and CGA, is traded between Member
States, as is aluminium, the market of which is closely
related to the alumina market. The aid can therefore be
assumed to affect intra-Community trade and to distort
or threaten to distort competition, even if significant
parts
at
production
aluminium plants located close by.

consumed

alumina

are

of

the State to grant

(63) Measures that do not favour certain undertakings do not
fall within the definition of State aid in Article 87(1), but,
in the absence of selectivity, must be considered as
general measures. According to the jurisprudence of the
Court of Justice of the European Communities general
measures must be effectively open to all firms on an
equal access basis, and they must not de
facto be
reduced in scope through, for example, the discretionary
power of
them, or through other
factors that restrict their practical effect. The Commission
explained the notion of general measures a.o. in a Staff
Working Paper which was discussed in the meeting of
the Council Working Party on 14 November 2002. The
Working Paper continues with an explanation under
which conditions aid in the form of tax measures can
be found compatible with the common market. The
minutes of the Council meeting of 27 October 2003,
when Directive 2003/96/EC was adopted, expressly
refer to the explanations given during the meeting of
the Council Working Party on 14 November 2002. In
the case at hand, however, the exemptions only apply to
companies that produce alumina and in practice, in each

(64)

(65)

Member State there is only one company benefiting from
the exemption at
stake: Aughinish in the Shannon
region, Eurallumina in Sardinia and Alcan in Gardanne.
the
As long as the Council Decisions were binding,
these
exemptions were
Decisions only authorised exemptions in certain regions
and potential investors interested to make investments in
alumina production in other regions could not be sure to
receive similar treatment. The selection of the regions has
no relationship whatsoever with the internal logic of the
national tax systems at stake.

regionally selective, because

2003/96/EC

applicable,
became
Before Directive
Community law required Member States,
in principle,
to impose excise duties on mineral oils, so that specific
exemptions, limited to a given production and to given
regions, could not be considered as being justified by the
nature and general scheme of the system. The arguments
by which Ireland, France and Italy defend the exemption
only for the production of alumina derive from the
circumstances in the markets and from the circumstances
of alumina production in the specific regions concerned.
These arguments do not derive from the nature and logic
of the respective domestic tax systems, given that the
latter were to comply with the requirements laid down
by Community law. Consequently, the measures granted
before Directive 2003/96/EC became applicable, cannot
be found justified by the nature and general scheme of
the system and constitute State aid within the meaning of
Article 87(1).

6.2. New aid, not existing aid

the
1970,

aid was not

Ireland,
In

The aid granted by France and Italy, does not constitute
existing aid in the meaning of Article 1(b) of Regulation
(EC) No 659/1999 and the aid granted by Ireland
constitutes existing aid only to a limited extent. First of
all, the aid measures did not exist prior to the entry into
force of the Treaty in the Member States concerned. This
is perfectly clear in the case of France and Italy. As
granted before
regards
accession.
Industrial Development
the
Authority (IDA) wrote to Alcan that the Irish legislation
import of …
in force at
that
freedom from
operating supplies
domestic tax for raw materials for processing and exports’.
The letter
(underlining added)
‘while I cannot give a formal commitment that there will be
no change in the legislation I am satisfied that, in view of the
vital importance of exports to the Irish economy, there is no
possibility of the legislation being changed, in the foreseeable
the Alcan project’. The IDA
future,
proceeds by stressing the
Irish
Government in this respect. Such wording should not

time provided for ‘(a)
free of duty and (b)

further explained that

to the detriment of

reputation of

the

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that

binding

commitments.

confused with

is to say, after the accession of

Further
be
assurances were given in a letter dated 14 January
1974,
Ireland.
However, the fiscal advantages in force in 1970 were
substantially modified or even abolished after accession
and by 1980 a minimum of IEP 1,53 per hectolitre was
to be paid on heavy oil used for a purpose other than
combustion in the engine of a motor vehicle. The current
exemption from the excise duty payable on fuel oil used
for the manufacture of alumina, which differs substan-
tially in its nature, form and scope from the legislation in
force in 1970, was only established by order of 12 May
1983 and is applicable to oil imported or delivered from
a refinery or bonded warehouse on or after 13 May
it was established well after the date
1983. Therefore,
on which the Treaty became applicable in Ireland.
In
addition,
in its letter of 6 May 1983, Ireland accepted
the arguments of the Commission that the aid was noti-
fiable.

(66)

Secondly, neither the Commission nor the Council ever
authorised the measures pursuant to the State aid rules.

(67)

the

and

Italy

never

France

In its

notified

letter of 6 May 1983,

the aid cannot be deemed to be authorised
Thirdly,
to Article 4(6) of Regulation (EC) No
pursuant
the
659/1999.
measures.
Ireland
confirmed that the aid was only then being implemented
and that its letter to the Commission could be regarded
as a notification for the purposes of Article 93(3) [now
Article 88(3)] of the Treaty. Ireland, however, never sent
any formal prior notice to the Commission of
its
intention to implement the aid measure as provided for
in Article 4(6) of Regulation (EC) No 659/1999. On the
contrary, it put the measure into effect only one week
after
invited the
letter of 6 May 1983 that
Commission to consider the aid as notified. Therefore,
it appears to the Commission that
the aid must be
considered as unlawful aid within the meaning of
Article 1(f) of Regulation (EC) No 659/1999. The
French and Italian aids were also put
into effect
without
awaiting approval by the Commission in
breach of Article 88(3) of the Treaty. Member States
cannot invoke the rules set out in Article 4(6) of Regu-
lation (EC) No 659/1999 in respect of such aid. Even
though Regulation (EC) No 659/1999 only entered into
force in 1999, similar rules already applied before that
date in accordance with the case-law of the Court of
Justice (22).

(68)

Fourthly, the aid can only partially be deemed to be
existing aid pursuant to Article 15 of Regulation (EC)

No 659/1999. That Article makes the powers of the
Commission to recover aid subject
to a limitation
period of 10 years, beginning on the day on which the
unlawful aid is awarded. In the case of Italy and France,
this period has been interrupted by the Commission's
letters of 29 May 1998 and 2 June 1998 (23). In the
case of Ireland, this period has been interrupted by the
Commission's letter of 17 July 2000. This means that
only the Irish exemption in as far as it concerns the
period before 17 July 1990, can be considered to be
existing aid.

(69)

Finally, Article 1(b)(v) of Regulation (EC) No 659/1999
does not apply in this case.

(70) None of the situations provided for in Article 1(b) of
Regulation (EC) No 659/1999 therefore apply to the
French and Italian exemptions and that aid must be
regarded as new aid. The Irish exemption must be
regarded as new aid only as from 17 July 1990. The
Commission consequently has
the obligation and
competence to assess the compatibility of the new aid
with the common market pursuant to Article 88 of the
the Council Decisions referred to in
Treaty. Neither
recitals (1),
(2) and (3), nor Directives 92/81/EEC and
2003/96/EC, which only concern tax harmonisation,
detract
from this obligation and competence. Those
legal acts cannot prejudge the assessment of compat-
ibility on the basis of the criteria set out in Articles
87(2) and (3) of the Treaty.

(71)

6.3. Compatibility of

the new aid granted until

31 December 2003

6.3.1. Compatibility under the rules for environmental aid

The Commission has examined whether the new aid
granted by Ireland, France and Italy qualifies for an
exemption from the prohibition of State aid contained
in Article 87(1),
in particular in the light of the rules
applicable to environmental aid. The aid granted after 3
February 2001 must be assessed under
the 2001
guidelines on State aid for environmental protection in
accordance with point 82(a) of those guidelines. The aid
granted between 10 March 1994 and 3 February 2001
must be assessed under the 1994 guidelines on State aid
for environmental protection. In respect of the period
prior to 10 March 1994, the Commission practice, that
was largely codified in the guidelines, is relevant.

(22) See Case 120/73 Lorenz [1973] ECR 1471 and Case C-99/98

(23) See Judgment of 6 October 2005 in Case C-276/03 P Scott v

Austria v Commission [2001] ECR I-1101.

Commission, not yet reported.

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(75)

(76)

(77)

(72)

if

the 1994 guidelines on State aid for
Section 3.4 of
that operating aid
environmental protection explains
may only be authorised, by way of exception,
it
compensates for extra production costs by comparison
‘temporary relief
with traditional costs. In addition,
from
taxes may be authorised where
new environmental
is
it
losses in competitiveness, particularly at
necessary to offset
international
level. A further factor to be taken into account
is what the firms concerned have to do in return, to reduce their
pollution’. First of all, the measures were not limited to
extra production costs. Secondly, they did not have a
temporary
the
exemptions were not directly conditional upon other
actions by the beneficiaries to reduce their pollution
It is therefore
and,
concluded that
the aid cannot be found compatible
with the common market on the ground of the 1994
guidelines, nor of the Commission's practice before 10
March 1994.

in particular, energy consumption.

nature. Moreover,

degressive

or

(73) As regards the period after 3 February 2001, section
E.3.2, points 47-52, of the 2001 guidelines on State
environmental protection lays down rules
aid for
tax
applicable to all operating aid in the form of
reductions or exemptions. Originally, excise duties on
mineral oils were not designed as an instrument of envir-
onmental policy. However, one likely feature for a levy to
be considered as environmental would be that the taxable
base of the levy has a clear negative effect on the envir-
onment (24). As the use of mineral oils has a clear
negative effect on the environment, excise duties on
mineral oils can be considered as environmental taxes.

(74)

In all three Member States to which this Decision is
addressed,
the excise duties on mineral oils existed
before the introduction of the exemptions in question,
and they must therefore be considered as existing taxes
within the meaning of point 51.2 of the 2001 guidelines
on State aid for environmental protection. The excise
duties, however, have an appreciable positive impact in
terms of environmental protection within the meaning of
point 51.2(a), as they constitute a significant incentive for
producers to reduce their consumption of mineral oils.
The excise taxes concerned may not have had an explicit
and the
environmental purpose
exemptions were decided on many years
in
ago,
particular in the case of Ireland and Italy, and in any
event in all three Member States well before the 2001
environmental
applicable.
guidelines
Therefore, their situation may be considered as if they
had been decided at the time the excise tax was adopted.
the
Consequently,
guidelines, the provisions in point 51.1 may be applied
to the exemptions to be assessed in this decision.

in accordance with point 51.2 of

from the outset

became

aid

In their comments, the beneficiaries submitted that they
had undertaken significant environmental investments in
return for the exemptions. However, there is no evidence
that the beneficiaries concluded any agreements with the
Member States concerned whereby they committed to
achieve environmental protection objectives during the
period for which the exemptions applied. Nor were the
tax exemptions subject to conditions that would ensure
the same effect as such agreements and commitments.
environmental
Furthermore
investments did not go beyond what was necessary to
comply with relevant legislation or beyond what was
from a commercial point of
feasible and economical
view. As a consequence,
the conditions for applying
point 51.1(a) of the 2001 guidelines on State aid for
environmental protection are not fulfilled and only the
provisions of point 51.1(b) are applicable in this case.

appears

that

the

it

first

indent, of

In respect of the period until 31 December 2003, the
exemptions concern a Community tax, namely a tax that
has been harmonised on the basis of Directive 92/82/EC.
the 2001
Therefore, point 51.1(b),
guidelines on State aid for environmental protection is
applicable. According to that provision, a reduction can
be approved if the amount effectively paid by the bene-
ficiaries after the reduction remains higher than the
three exemptions
Community minimum. However, all
were full exemptions. Taking into account the positive
environmental impact of the tax referred to in recital (73)
of this Decision, the measures in question can only be
declared compatible with the common market to the
that beneficiaries are required to pay a rate
extent
higher
than the Community minimum rate set by
Directive 92/82/EC, which for that period amounted to
EUR 13 per 1 000 kg. Therefore, only the exemption
from the tax beyond a rate of EUR 13.01 can be
considered compatible, while the exemption up to the
level of EUR 13.01 constitutes incompatible aid.

to

the German

Ecotax (25), where

Contrary to what Aughinish claims, this assessment is
inconsistent with the Commission's decision in
not
the
relation
Commission applied the same criteria included in the
environmental
2001 guidelines on State
protection as in this case. The arguments put forward
by the Member States, the beneficiaries and the EAA
during
the
procedure,
arguments that there is no distortion of competition,
disregard the existence of exchanges in the alumina and
aluminium sectors and do not undermine this conclusion
under the environmental aid guidelines.

particular

aid for

formal

the

in

(24) Communication on Environmental Taxes and Charges in the single

Market (COM(97) 9 final of 26.3.1997).

(25) See footnote 21.

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6.3.2. Compatibility of

the new aid pursuant

to Article

87(3)(a) of the Treaty

(78) As regards the exemption in Article 87(3)(a) of

for

the Commission notes that

the
Treaty, which refers to promotion of the economic deve-
living is
lopment of areas where the standard of
abnormally low or where there is serious underem-
ployment,
the latter
the period for which the exemptions were
part of
the 1998 Community guidelines on national
granted,
regional aid are applicable. Point 4.15 of those guidelines
specifies that operating aid may exceptionally be granted
in regions eligible under
the derogation in Article
87(3)(a), provided that it is justified in terms of its contri-
bution to regional development and its nature and its
level
to
alleviate. It is for the Member State to demonstrate the
existence of any handicaps and gauge their importance.
In accordance with point 4.17 of
the guidelines,
operating aid must be both limited in time and progres-
sively reduced. Those conditions have not been fulfilled
in this case.

to the handicaps

is proportional

seeks

it

(79) Gardanne is not a region eligible under the derogation in
Article 87(3)(a) and that exception therefore does not
apply to the French exemption. Sardinia is a region
eligible under the derogation in Article 87(3)(a). The
Shannon region was a region eligible under the dero-
gation in Article 87(3)(a) only until the review of the
regional map in 1999. As a transitional measure,
regional operating aid in that region could, exceptionally,
be allowed until the end of 2001.

(80)

In the decisions by which the Commission initiated the
procedure laid down in Article 88(2) of the Treaty (26),
the Commission raised doubts as to whether the aids
could be found compatible with the common market
under Article 87(3)(a) of
the Treaty. The Italian and
Irish authorities did not bring forward any elements in
order to alleviate those doubts. They did not demonstrate
the existence of particular handicaps nor did they gauge
their importance in order to justify the granting of
operating aid. High energy prices and competition from
in particular, do not have a
third-country imports,
regional
the non-availability of
natural gas were to be a particular regional handicap of
the regions concerned, which has not been proven,
Ireland and Italy have not gauged the importance of
any such handicap to justify the level of aid. The
Italian legislation, which according to Eurallumina
results in additional costs, may partly have a regional
character as Sardinia has been declared an area of high
in general, cannot be
risk of environmental crisis but,
considered as a particular handicap for the region.
In
any event,
it appears that the exemptions in question
in this case are not limited in time nor progressively

character. Even if

reduced as the guidelines require. Therefore the aid can
not be found to be compatible with the common market
on the ground that
facilitates the development of
certain regions.

it

that

under

in 1983,

Principles

the Co-ordination

it would ensure that

(81) As regards the period before the Community guidelines
on national regional aid became applicable, the same
holds true. It must be noted, in particular, that Ireland
the limits
wrote,
applicable
of
Regional Aid Systems of 1978 (27) would be adhered to
fully. It is clear that the rules set out in that document
cannot justify the granting of aid continuously until the
1990s and Ireland has not provided any monitoring
reports showing that the aid remained below the aid
intensities applicable at that time. Those rules confirm,
moreover, the Commission's negative position as to the
compatibility of operating aid with the common market.
the
Furthermore, when the Commission adopted
Guidelines on national regional aid in 1998,
it also
to be taken by the
proposed appropriate measures
Member States to bring their measures into conformity
with the new rules and asked Member States to provide a
list of all measures that would continue to be applicable.
None of the measures to which this Decision relates have
been included in such lists.

6.3.3. Compatibility of the new aid under other provisions

(82)

The Commission has assessed whether the exemptions
set out in Article 87(2) and (3) of the Treaty apply to
the new aid.

(83)

character

The exemptions in Article 87(2) of the Treaty could serve
the aid compatible with the
as a basis to consider
common market. However,
the aid does not have a
and is not granted to individual
social
consumers, it does not make good the damages caused
by natural disasters or exceptional occurrences and it is
not required in order to compensate for the economic
disadvantages caused by the division of Germany. Article
87(2) therefore does not apply in this case.

(84)

The exemptions in Article 87(3)(b) and (d) of the Treaty,
which refer to projects of common European interest or
to remedy a serious disturbance of the economy of a
Member State and to the promotion of culture and
conservation, obviously do not apply in this case.
Ireland, Italy and France have not attempted to justify
the aids on any of those grounds.

(26) See footnote 1.

(27) OJ C 31, 3.2.1979.

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(85) As far as the first part of

the exemption in Article
87(3)(c) of
the Treaty is concerned, namely aid to
facilitate the development of certain economic activities,
the aid does not have purposes such as research and
investment by small and medium-sized
development,
enterprises or rescuing or restructuring the beneficiaries,
nor any other purpose that would be relevant for the
application of
that provision and would allow the
Commission to declare the aid compatible. The second
part of Article 87(3)(c), namely aid to facilitate the devel-
opment of certain economic areas, applies to the site of
Gardanne, but does not allow the Member States to grant
operating aid (see point 4.15 of
the guidelines on
national regional aid).

the tax system to exclude from the scope of

Community framework when used as heating fuel or motor
fuel. It can be considered that it is in the nature and the
logic of
the
framework dual uses and non-fuel uses of energy as well as
then take
processes. Member States may
mineralogical
measures to tax or not to tax or to apply total or partial
taxation to each use. Electricity used in similar ways should
be treated on an equal footing. Such exceptions to the general
system or differentiations within that system, which are justified
by the nature or general scheme of the tax system, do not
involve State aids’.

(86) As there are no other grounds for finding the aid to be
compatible with the common market, the only aid that
can be found compatible is the part of the aid that
complies with the
environmental aid guidelines as
specified in recital (76).

6.4. Preliminary assessment of the measures for the
period since 1.1.2004

(87)

(88)

its

scope

fall outside

to tax such uses.

Since Directive 2003/96/EC became applicable on 1
January 2004, dual uses, non-fuel uses of energy and
mineralogical processes
and
Member States have had discretion as to whether or
Indeed, an exemption of such
not
energy uses may constitute a general measure that does
not involve State aid if it falls within the nature and the
the domestic tax system. Recital 22 in the
logic of
‘energy
preamble to Directive 2003/96/EC states that
products
to a Community
framework when used as heating fuel or motor fuel. To that
extent, it is in the nature and the logic of the tax system to
exclude from the scope of the framework dual uses and non-fuel
uses of energy as well as mineralogical processes’.

should essentially be

subject

In addition, when Directive 2003/96/EC was adopted,
the Council and the Commission jointly declared (28)
‘Energy
a

essentially

products

subject

should

be

to

(28) Addendum au projet de process verbal, 14140/03, of 24.11.2003,
http://register.consilium.eu.int/pdf/fr/03/st14/st14140-ad01.fr03.pdf

taxation contains numerous

(89) However, in its Staff Working Paper referred to in recital
(63) the Commission not only explained the notion of
general measures, but also stated that ‘the draft directive on
energy
it
impossible to determine in advance whether or not the way
they will be implemented by Member States will give rise to
State aid within the meaning of Article 87’. Recital (32) in
the preamble
to and Article 26(2) of Directive
2003/96/EC, accordingly, remind Member States of the
obligation laid down in Article 88(3) of the Treaty to
notify State aid.

options, making

(90)

In this specific case, even after Directive 2003/96/EC
entered into force, the Commission has doubts as to
whether
the exemptions in question fall within the
nature and logic of the domestic systems. They appear
to be highly selective and to apply only in respect of the
use of heavy oil for the manufacturing of one single
product, namely alumina. In addition, de facto, each of
them only benefits a specific undertaking in relation to a
plant located in a specific region. In this context, it could
still be considered that the measures at stake constitute
State aid.

(91)

the new legal situation created by
In such a case,
Directive 2003/96/EC is also relevant for the assessment
of the compatibility of such measures with the common
market. Since taxation of mineral oils used for dual uses,
non-fuel uses and mineralogical processes is now outside
the scope of harmonised Community measures,
the
exemptions now concern domestic taxes imposed in
the absence of a Community tax within the meaning
of point 51.1(b), second indent, of the 2001 Guidelines
on State aid for environmental protection. That provision

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to pay a

significant
requires benefiting companies
proportion of the national tax. The reason for that is
to leave them with an incentive to improve their envir-
onmental performance. This follows from the wording of
point 51.1(b), first indent, of the guidelines, which allows
for tax reductions from a harmonised tax if the benefi-
ciaries pay more than the Community minimum rates ‘in
order to provide firms with an incentive to improve environ-
mental protection’. This also applies where the national tax
is significantly higher than comparable taxes in (some)
other Member States, as was the case in Italy. In the
it has become clear that,
practice of the Commission,
in general 20 %, or
the Community minimum that
applies to energy uses that do fall within the scope of
Directive 2003/96/EC (EUR 15 per tonne), which ever is
the
significant
proportion (29). Therefore, at this stage, the Commission
considers that only the exemption beyond a level of
the domestic tax or beyond EUR 15 per
20 % of
tonne, whichever is the lowest, could be considered
compatible; the exemption up to the level of 20 %, or
up to EUR 15 per tonne, would then constitute incom-
patible aid.

regarded

lowest,

can

be

as

a

(92) Given that Member States and interested parties have not
had the opportunity to submit their comments on the
legal situation created by Directive 2003/96/EC,
the
Commission considers
it appropriate to extend the
formal
investigation procedure in respect of the appli-
cation of the measures since 1 January 2004.

7. RECOVERY OF THE AID

(93) Under Article 14(1) of Regulation (EC) No 659/1999,
where negative decisions are taken in cases of unlawful
aid, the Commission must decide that the Member State
concerned is to take all necessary measures to recover the
aid from the beneficiary. The Commission must not
require recovery of the aid if this would be contrary to
a general principle of Community law.

(94)

It should be examined whether, in this case, any general
principle of Community law, such as the principle of
legal certainty, could be
legitimate expectations or of

(29) See e.g. Commission Decision of 30.6.2004 in Case C 42/2003 (OJ
L 165, 25.6.2005, p. 21), decision of 13.2.2002 in Case N449/01
(OJ C 137, 8.6.2002, p. 24), decision of 11.12.2002 in Case
N74/A/2002 (OJ C 104, 30.4.2003, p. 9) and decision of
11.12.2001 in cases NN3A/2001 and NN4A/2001 (OJ C 104,
30.4.2003). These cases are particularly relevant, as they also
concerned exemptions from energy taxes. An indication as to
what the Commission might consider as too low on the other
hand is contained in the Commission Decision on the partial
refund of the waste water tax in Denmark, decision of 3.4.2002
in case NN30/A-C/2001 (OJ C 292, 27.11.2002, p. 6).

applied in order to preclude recovery from the benefi-
ciaries of the unlawful and incompatible aid.

7.1. Recovery of the incompatible aid granted until
2 February 2002

(95) As regards the possibility for the beneficiaries to rely on
legitimate expectations to avoid recovery of illegal and
incompatible aid,
it follows from the case-law of the
‘save in exceptional circumstances, a recipient
Court
that,
cannot have a legitimate expectation that aid was properly
granted unless it has been granted in compliance with the
provisions on prior control of State aid. A prudent economic
operator should usually be able to ascertain that that procedure
was followed’ (30).

(96) All the Council decisions referred to in recitals (1), (2)
and (3) of this Decision were based on a proposal by the
Commission. One would generally not
the
expect
to the Council
Commission to submit proposals
authorising national measures that may be held incom-
the Treaty without
patible with other provisions of
hinting at such a possibility,
in particular when the
proposals concern a very specific issue and a small
number of beneficiaries, as in this case, and when
those provisions are intended to avoid distortions of
competition within the Community. In addition to such
general expectations, one would certainly not expect the
Commission to propose that the Council authorise an
it were to
extension of an existing exemption,
consider that any aid in the existing exemption could
be found incompatible with the common market.

if

Furthermore,

the preamble

(97) With the exception of Decision 2001/224/EC none of
(2) and (3)
the decisions referred to in recitals (1),
mentioned any possible contradiction with the State aid
rules nor did they make any reference to the obligation
to notify.
to Decision
92/510/EEC states that ‘it is accepted by the Commission
these exemptions are well
and by all Member States that
founded in terms of specific policies and do not give rise to
distortions of competition or interfere with the working of the
internal market’. The same wording is used in Decisions
97/425/EC,
93/697/EC and
‘the
99/255/EC and 99/880/EC refer to the fact
that
exemptions and reductions will be regularly reviewed by the
Commission to ensure that
they are compatible with the
operation of the internal market and other objectives of the
Treaty’ (underlining added). From this wording it appears

96/273/EC. Decisions

(30) Case C-5/89 Commission v Germany [1990] ECR I-3437, paragraph
14, and Case C-169/95 Spain v Commission [1997] ECR I-135,
paragraph 51; Case T-55/99 CETM v Commission [2000] ECR
II-3207, paragraph 121.

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Official Journal of the European Union

L 119/25

is missing. The fifth recital

that one of the elements of the definition of State aid in
Article 87 of the Treaty, namely the distortion of compe-
tition,
in the preamble to
Decision 2001/224/EC made it clear for the first time
that, notwithstanding the authorisation given by the
in the context of Council Directive 92/81EEC
Council
the
of 19 October 1992 on the harmonisation of
structures of excise duties on mineral oils (31),
the
national measures at stake were to be notified to the
Commission in accordance with Article 88(3) EC, when
they constituted State aid. Nevertheless,
in view of the
series of previous exemptions, and the fact that Decision
2001/224/EC itself was adopted on the basis of a
proposal
ambiguity
remained for the Member States and beneficiaries in
the absence of further Commission's action relative to
State aid.

from the Commission,

some

96/273/EC, 97/425/EC, 1999/255/EC, 1999/880/EC and
2001/224/EC.

(100)

In conclusion, it would be contrary to general principles
of Community law to recover the aid resulting from the
exemptions granted until 2 February 2002 from the
beneficiaries. Ireland, Italy and France should therefore
not be required to recover such aid.

7.2. Recovery of the incompatible aid granted from
3 February 2002 till 31 December 2003

(98)

In general, the Commission considers that in the case of
legitimate expectations come to an end
individual aid,
when the Commission decides to initiate the procedure
laid down in Article 88(2) of the Treaty. That decision is
notified to the Member State concerned, which informs
the beneficiary thereof. However, the circumstances of
insofar as the Commission
this case were exceptional
created and maintained some ambiguity by submitting
proposals to the Council. In addition, the Commission
cannot establish whether and, if so, when, the individual
beneficiaries were actually informed by the Member
investigation
States of its decision to open the formal
procedure. Under
it cannot be
ruled out
that beneficiaries were entitled to rely on
legitimate expectations until 2 February 2002, when
the
the decisions by the Commission to initiate
procedure laid down Article 88(2) of the Treaty with
exemptions were published in the
respect
that publication
Official
eliminated any uncertainty as
the
in question had to be approved by the
measures
Commission in accordance with Article 88 of
the
Treaty, if they constituted State aid,.

to the
Journal. At

these circumstances,

the very latest,

to the fact

that

(99) Ordering the recovery of the incompatible aid for the
period until 2 February 2002 would also breach the
principle of legal certainty under the exceptional circum-
stances of this specific case. According to the case-law,
that principle is breached when the circumstances of
uncertainty and lack of clarity led to the creation of an
equivocal situation which the Commission should have
clarified before it could take any action to order
recovery (32). The circumstances in this case did lead to
an equivocal situation, not only for the beneficiary, but
also for the Member States, which were entitled to rely
on the wording of Decisions 92/510/EEC, 93/697/EC,

(31) OJ L 316, 31.10.1992, p. 12.
(32) Judgement of 1 July 2004 in Case T-308/00, Salzgitter AG v.

Commission, not yet reported, paragraph 180.

clear

those rules.

2001/224/EC was

in Decision 2001/224/EC is

(101) As explained in recital 97, the Commission considers
the series of previous exemptions, and the fact
that
that Decision 2001/224/EC itself was adopted on the
from the Commission, created
basis of a proposal
the reference to the State
some ambiguity. However,
aid rules
and
their duty to notify
reminded the Member States of
State aid to the Commission, so that the latter could
In addition,
make its assessment under
before Decision
the
Commission had repeatedly invited Ireland, France and
Italy to notify the measures in question. The Commis-
sion's decision to initiate the procedure laid down in
Article 88(2) of the Treaty finally confirmed the Commis-
sion's doubts as regards the existence or compatibility of
the aid. Therefore, any legitimate expectations and any
situation of
the
in question had to be approved by the
measures
Commission in accordance with Article 88,
they
constituted State aid, ceased to exist, at the very latest,
on 2 February 2002, when the Commission's decisions
to initiate the procedure laid down Article 88(2) of the
Treaty with respect to the exemptions were published in
the Official Journal.

legal uncertainty as to the fact

adopted,

that

if

in respect of

(102) The fact that Ireland systematically reported on the Irish
measure from 1995 and that the aid was included in the
Commission's annual surveys on State aid, does not
create any legitimate expectations
the
period as from 3 February 2002. On the contrary, this
confirms that the Irish authorities were aware of the State
aid character of the measure, while they also knew that it
aid rules.
had never been authorised under State
Reporting on a measure
a
for
Member State's obligation to notify State aid pursuant
to Article 88(3) of the Treaty. Moreover, the surveys
report on the amounts of State aid granted irrespective
of whether or not it is compatible with the common
market or not. In addition, the various annual surveys
on State aid discuss aid in the form of tax exemptions in
to the aid for alumina
refer
general, but do not
production specifically. The
Irish
measure in its notifications to the World Trade Organi-
sation does not raise legitimate expectations as these
notifications are made in a different legal context for
different purposes.

substitute

reference

to the

cannot

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Official Journal of the European Union

4.5.2006

(103)

the incompatible aid granted from 3
In conclusion,
February 2002 until 31 December 2003 should be
recovered from its beneficiaries as no general principles
of Community law can be invoked to preclude such
recovery.

they should, within two months of the notification of
this Decision, send the documents proving that recovery
of the unlawful and incompatible aid from the recipients
is under way (for example, circulars, recovery orders
issued, etc.) to the Commission.

8. CONCLUSION

(108)

In light of the foregoing considerations, the Commission
has doubts as to the compatibility with the common
market of the exemptions from excise duty on heavy
fuel oils used in the production of alumina granted by
France, Ireland and Italy since 1 January 2004.

(104)

It is concluded that the exemptions from excise duty on
heavy fuel oils used in the production of alumina granted
Ireland and Italy until 31 December 2003
by France,
constitute State aid within the meaning of Article 87(1)
of the Treaty. The aid granted by Ireland before 17 July
1990 constitutes existing aid. The aid granted between
17 July 1990 and 2 February 2002 is to a large extent
it is
incompatible with the common market. However,
not appropriate to order the recovery of that incom-
patible aid as to do so would be contrary to fundamental
principles of Community law.

(105) For

the period between 3 February 2002 and 31
December 2003, the aid is partially incompatible with
the common market as the beneficiaries did not pay a
rate higher than the Community minimum. This means
that the part of the exemption which exceeds the rate
EUR 13,01 per 1 000 kg for that period constitutes
compatible aid. The remaining aid constitutes incom-
patible aid.

to take

to recover

concerned is

the Commission must decide that

(106) Article 14(1) of Regulation (EC) No 659/1999 provides
that where negative decisions are taken in cases of
unlawful aid,
the
Member State
all necessary
measures
the aid from the beneficiary.
Ireland and Italy should therefore take all
France,
the incompatible aid
to recover
necessary measures
granted from 3 February 2002 onward from the reci-
Ireland and Italy should
pients. To that end, France,
require the respective beneficiaries
to repay the aid
within two months of notification of this decision. The
aid to be recovered should include interest calculated in
accordance with Commission Regulation (EC) No
794/2004 of 21 April 2004 implementing Council
Regulation (EC) No 659/1999 (33).

(107) France, Ireland and Italy should send to the Commission
an appropriate form reporting progress in recovering the
aid, specifying clearly the actual measures taken to effect
immediate and effective recovery of the aid. In addition,

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

(109) Therefore, on the basis of Articles 4(4) and Article 6 of
Regulation (EC) No 659/1999, the Commission decides
to extend the formal
investigation procedure on these
measures in respect of the period after 31 December
2003 and requests the French, Irish and Italian autho-
rities to submit their comments and to provide all infor-
mation that may assist it in the assessment of those
measures within one month of the date of receipt of
can be
notification of
submitted with regard to both the State aid nature of
the measures, within the meaning of Article 87(1) of
the EC Treaty, and its compatibility with the common
market.

decision. Comments

this

(110) The Commission requests the French, Irish and Italian
authorities to forward a copy of this decision to the
beneficiaries of the measures immediately.

(111) The Commission wishes to remind the France, Italy and
Ireland that Article 88(3) of the Treaty has suspensive
effect, and would draw their attention to Article 14 of
Council Regulation (EC) No 659/1999 which provides
that all unlawful aid may be recovered from the recipient.

(112) The Commission warns France, Italy and Ireland that it
will inform interested parties by publishing this decision
in the Official Journal of the European Union. It will also
inform interested parties in the EFTA countries which are
signatories to the EEA Agreement, by publication of a
notice in the EEA Supplement to the Official Journal of the
European Union and will
inform the EFTA Surveillance
Authority by sending a copy of this decision. All such
interested parties will be
their
comments within one month of the date of such publi-
cation,

invited to submit

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L 119/27

HAS ADOPTED THIS DECISION:

Article 1

The exemptions from excise duty granted by France, Ireland and
Italy in respect of heavy fuel oils used in the production of
alumina until 31 December 2003 constitute State aid within
the meaning of Article 87(1) of the Treaty.

Article 2

Aid granted between 17 July 1990 and 2 February 2002, to the
extent that it is incompatible with the common market, shall
not be recovered as this would be contrary to the general
principles of Community law.

Article 3

The aid referred to in Article 1 granted between 3 February
compatible with the
2002 and 31 December 2003 is
common market within the meaning of Article 87(3) of the
Treaty insofar as the beneficiaries pay at least a rate of EUR
13,01 per 1 000 kg of heavy fuel oils.

Article 4

The aid referred to in Article 1 granted between 3 February
2002 and 31 December 2003 is
incompatible with the
common market within the meaning of Article 87(3) of the
Treaty insofar as the beneficiaries did not pay a rate of EUR
13,01 per 1 000 kg of heavy fuel oils.

Article 5

1.
France, Ireland and Italy shall take all necessary measures
to recover from the beneficiaries the incompatible aid referred
to in Article 4.

Recovery

and in
2.
accordance with the procedures of national law, provided that

effected without delay

shall be

they allow the immediate and effective execution of
Decision.

this

3.
The aid to be recovered shall bear interest throughout the
period running from the date on which they were put at the
disposal of the beneficiaries until their actual recovery.

4.
The interest shall be calculated in conformity with the
provisions laid down 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.

5.
France, Ireland and Italy shall order, within two months of
the date of notification of this Decision, the beneficiaries of the
incompatible aid referred to in Article 4 to repay,
the aid
unlawfully granted plus interest.

Article 6

France,

Ireland and Italy shall

1.
inform the Commission,
within two months following notification of this Decision, of
the measures planned and already taken to comply with it.

They shall provide information on the recovery using the

2.
questionnaire set out in Annex.

Article 7

This Decision is addressed to the French Republic, the Republic
of Ireland and the Italian Republic.

Done at Brussels, 7 December 2005.

For the Commission

Neelie KROES
Member of the Commission

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Official Journal of the European Union

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ANNEX

INFORMATION REGARDING THE IMPLEMENTATION OF THE COMMISSION DECISION C(2005) 4436

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

beneficiary:

Date(s) of payment (°)

Amount of aid (*)

Currency

Identity of beneficiary

(°) Date(s) on which (individual instalments of) the aid has been put at the disposal of the beneficiary (in so far as a measure consists

of several instalments and reimbursements use separate rows).

(*) Amount of aid put at the disposal of the beneficiary (in gross aid equivalents).

Comments:

1.2. Please explain in detail how the interests to be paid on the amount of aid to be recovered will be calculated?

2. Measures planned and already taken to recover the aid

2.1. Please describe in detail what measures have already been taken and what measures are planned to effect an
immediate and effective recovery of the aid. Please also explain what alternative measures are available under
national law to effect recovery? Please also indicate where relevant 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 on the amounts of aid that have been recovered from the beneficiary:

Date(s) (°)

Amount of aid
repaid

Currency

Identify of beneficiary

(°) Date(s) on which the aid has been repaid.

3.2. Please attach information documenting the repayment of the aid amounts specified in the table under point 3.1

above.