2007/199/EC: Commission Decision of 6 December 2006 on the aid scheme for research and development in the aircraft industry implemented by Belgium (notified under document number C(2006) 5792) (Text with EEA relevance )
Date: 2006-12-06
Institutions: European Commission
Subjects: Belgium, State aid, aeronautical industry, aid system, civil aviation, control of State aid, research and development

30.3.2007

EN

Official Journal of the European Union

L 90/73

COMMISSION

COMMISSION DECISION

of 6 December 2006

on the aid scheme for research and development in the aircraft industry implemented by Belgium

(notified under document number C(2006) 5792)

(Only the French and Dutch versions are authentic)

(Text with EEA relevance)

(2007/199/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

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 regard to Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the application of
the EC Treaty (1), and in particular Article 7
Article 93 of
thereof,

Having regard to the Commission Decision of 22 June 2006 (2)
initiating the procedure laid down in Article 88(2) of the EC
Treaty in respect of aid C 27/2006 (ex NN 22/2004),

Having called on interested parties to submit their comments
pursuant to that Article,

(3)

(4)

(5)

By letter of 22 June 2006, the Commission informed
Belgium that it had decided to initiate the procedure
laid down in Article 88(2) of the EC Treaty in respect
of this aid.

By letter of 11 September 2006, registered as received on
the same date, Belgium submitted its comments to the
Commission.

the Commission asked
By letter of 2 October 2006,
Belgium for additional information which was provided
by letters of 23 and 24 November 2006, registered as
received on the same dates.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (3).
The Commission invited interested parties to submit their
comments.

Whereas:

(6)

The Commission received no comments from interested
parties.

1. PROCEDURE

(1)

By letter of 13 February 2004, registered as received by
the Commission on 18 February, Belgium notified the
Commission of an aid scheme for research and devel-
in the aircraft industry. By letters of
opment (R & D)
23 December 2004 and 1 July 2005,
registered as
received by the Commission on 3 January and 5 July
it provided the Commission with
2005 respectively,
further information.

(1) OJ L 83, 27.3.1999, p. 1. Regulation as last amended by Regulation

(EC) No 1791/2006 (OJ L 363, 20.12.2006, p. 1).

(2) OJ C 196, 19.8.2006, p. 7.

2. DESCRIPTION OF THE AID

2.1. Objective, legal basis, duration and budget

(7)

The aim of the scheme is to boost the technological
capabilities of Belgian enterprises taking part in a civil
aircraft development programme and to safeguard and
industry. The Belgian authorities
create jobs in this
believe that
the scheme may lead to the creation of
between 2 500 and 3 000 new jobs over the next 20
years.

(3) See footnote 2.

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Official Journal of the European Union

30.3.2007

(8)

(9)

(10)

On 1 December 2000 the Belgian Cabinet decided to
grant financing for an aid scheme for research and devel-
opment in the aircraft industry. The aid is granted by the
Federal Government under an agreement concluded by it
with the regional authorities on 20 November 2001 on
the basis of budget law (Law of 27 July 2001 on the first
adjustment of
the 2001 general expenditure budget,
published in the Belgian Official Gazette on 14 May
2002).

enterprises

Under this scheme, the State can pay advances to the
beneficiary
between 2002 and 2006.
According to the Belgian Cabinet’s decision of 1
of
December
follows:
EUR 195 038 000 has been distributed as
EUR 112 457 000 for
airframe manufacturers,
the
EUR 41 307 000 for the component manufacturers and
EUR 41 274 000 for the engine manufacturers.

budget

overall

2000,

the

(13)

(14)

2.2. Beneficiaries, research activities and
eligible costs

(15)

The scheme is open to enterprises established in Belgium
which are partners or subcontractors of suppliers of
engines or components for a civil aircraft development
programme. These enterprises must have a technology
that
to the
constructor’s partners for the type of aircraft concerned.

constructor or

to the

interest

is of

2.3. Aid instrument, intensity and cumulation of aid

The aid is granted in the form of repayable advances by
way of payments to the Government that are linked to
sales of the products or technologies concerned, up to a
maximum of 75 % of the IR costs (a basic 60 % plus any
applicable bonuses, but never more than 75 %) plus a
maximum of 50 % of the PCD costs (a basic 40 % plus
any applicable bonuses, but never more than 50 %).

in the form of a
The advance is repayable in full
proportion of
the turnover generated by the project.
The standard model agreement between the Belgian
Government and the beneficiary enterprise stipulates
the company will not under any circumstances
that
have
advanced.
Repayments cease when the advance principal has been
reimbursed.

interest on the

to pay

amount

The Belgian authorities undertake to comply with the
rules on cumulation with other schemes and to limit
the aid intensity to the maximums specified in the
R & D framework. No state aid other than that granted
by the Federal Government will be granted for the same
project.

(11)

The aid granted by the Belgian Government is to be used
towards the costs of
industrial research (IR) and pre-
competitive development (PCD) within the meaning of
Annex I to the Community framework for State aid for
research and development (4) (R & D framework).

(12)

to obtain contracts, provided that

The eligible R & D costs are those directly associated with
the project, with the exception of all the commercial
and/or marketing costs that have to be incurred in
these costs
order
were incurred after 1 December 2000,
they are
substantiated by the enterprise and controlled and
accepted by the Federal Government and that they are
necessary to carry out R & D work as defined above.
These costs must be eligible costs as defined in Annex
II
to the R & D framework. Certification costs are
excluded.

that

(4) OJ C 45, 17.2.1996, p. 5.

2.4. Incentive effect of the aid and commitments

(16) Aid granted under the scheme must be necessary and
must have an incentive effect. To be eligible, projects
must involve a degree of technical and/or financial risk
that prevents the enterprise from financing the project in
full. The enterprise must submit a complete technical and
financial dossier before the aid is granted. All dossiers
must be individually analysed by the ministry responsible
for the economy and scientific policy. The Belgian auth-
orities also undertake to assess the incentive effect of the
the beneficiary firms and to
aid through surveys of
provide evidence of this effect in annual reports to the
Commission.

(17) Under point 4.7 of the R & D framework, the authorities
must notify the Commission of individual grants of aid
to major projects. They have notified the Commission of
the aid granted to the company Techspace Aero for the
low-pressure part of the GP7000 engine (Aid C 28/2006
— ex NN 23/2004).

30.3.2007

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Official Journal of the European Union

L 90/75

(18)

(19)

(20)

(21)

(22)

2.5. Grounds for initiating the procedure

In its decision of 22 June 2006 the Commission
examined the aid in the light of the R & D framework
and raised doubts regarding its compatibility with this
framework.

The Commission noted that the aid was granted in the
form of an advance repayable on the basis of sales of the
product resulting from the research activity. Advances of
this kind, repayable in the event of a successful outcome
of research activities, are very common in the aircraft
industry.

(25)

the R & D framework makes

Point 5.6 of
specific
provision for this type of advance. It indicates that the
allowable level of aid intensity for such aid instruments
(25 % for PCD and 50 % for IR) may be increased based
on a
repayment
assessment
conditions.

case-by-case

the

of

in point 5.10 of

maximum levels of 40 % and 60 % (plus the possible
bonuses provided for
the R & D
framework), whereas the arrangements for repayment
the advance do not envisage payment of any
of
the
interest, even in the event of
programme.

the success of

the

any

than

interest,

from it

benefiting

repaying of

the arrangements

the aid in
for
Thus,
question are considerably more favourable for the enter-
prises
traditional
arrangements for aid beneficiaries in the cases hitherto
examined by the Commission. Since they do not have to
are
pay
the
guaranteed to benefit
outcome of
traditional
repayment arrangements the aid may not be granted at
all in the event of a successful outcome (and may even
be negative in cases of highly successful projects where
the enterprise may enable the State to earn money
including in real terms).

from the
the project, whereas under

companies
aid whatever

beneficiary

the

Since the entry into force of the R & D framework, the
Commission has received notification of numerous cases
of aid in the form of advances repayable in the event of a
successful outcome. It has developed a body of practice
for interpreting point 5.6 of the framework (5).

(26)

in the event of

In the cases analysed by the Commission to date, the
beneficiary has,
the success of a
programme, been required to repay, in addition to the
advance principal,
interest based on the reference and
discount rate set by the Commission for the Member
State concerned at the time the aid was granted. For
particularly successful programmes, the repayment rates
have been even higher.

3. COMMENTS FROM BELGIUM

3.1. Budget for the measure

Following the decision of 22 June 2006, the Belgian
authorities have stated that the aid scheme in question
is not intended to finance airframe manufacturers. The
Belgian Cabinet’s decision of 1 December 2000 drew a
distinction between the budget for aid to airframe manu-
facturers and that
for aid to component and engine
manufacturers. The procedures for granting aid to the
airframe manufacturers are completely distinct
from
those for aid granted to the component and engine
manufacturers. The State aid introduced by the Belgian
Cabinet’s decision of 1 December 2000 concerns only
the component and engine manufacturers.

(23) Under the circumstances, the Commission’s practice has
been to limit the advance to a maximum of 40 % of
eligible costs for PCD activities and 60 % for IR activities.
extra
These basic
percentage points (bonuses) provided for in point 5.10
of the R & D framework.

exceeded by the

rates may be

(24)

In the aid scheme in question, however, the Commission
the Belgian authorities have applied these
notes that

3.2. Adaptation of

the State aid granted to the

component and engine manufacturers

(27)

The Belgian authorities have submitted two alternatives
for modifying the aid granted to the component and
engine manufacturers so as to bring it into line with
the model contracts submitted to the Commission on
23 November 2006. Only one alternative has been
adopted for each of the projects for which aid is granted.

(28)

The first alternative is to recover part of the aid granted in order to bring its intensity level down to
that stipulated by the R & D framework (50 % maximum for IR activities and 25 % maximum. for
PCD activities, plus any applicable bonuses). The Belgian authorities will recover the surplus amount
of the aid by 31 March 2007 and will charge interest on this amount at the Commission’s reference
and discount rate in force at the time the aid was granted. As provided for in the grant agreement, in
the event of the success of the project the Belgian authorities will, in addition to this initial recovery,
require repayment, free of interest, of the part of the aid kept by the enterprise.

(5) See the cases cited in footnote 5 of the Commission decision of

22 June 2006 (OJ C 196, 19.8.2006, p. 7).

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Official Journal of the European Union

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Table 1

Advances reduced to aid intensity levels

Final intensity

IR

PCD

Advance paid
(EUR thousand)

Recovery with
interest
(EUR thousand)

60 %

35 %

5 454

50 %

25 %

1 473

50 %

25 %

2 434

912

407

988

Rate

3,95 %

3,95 %

3,95 %

50 %

25 %

3 308

1 180

3,70 %

50 %

25 %

3 264

50 %

25 %

0

50 %

25 %

2 120

50 %

25 %

60 %

35 %

904

23

782

0

575

189

8

4,43 %

—

3,95 %

4,08 %

4,43 %

Beneficiaries

Eligible costs
(EUR thousand)

IR

Septentrio

[…] (*)

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

ASCO

ASCO

ASCO

LMS

BARCO

BARCO

BARCO

Advanced
products

(*) Business secret.

PCD

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(29)

The second alternative is to maintain the repayable advance only in the event of the success of the
project and to bring repayment of the advance into line with Commission practice. The Belgian
authorities have adopted progressive repayment arrangements enabling recovery, once the project has
become successful, of the principal and of interest based on the Commission’s reference and discount
rate in force at the time the aid was granted.

Table 2

Repayment of advances in line with Community practice

Beneficiaries

Eligible costs
(EUR thousand)

Europlasma

Europlasma

Europlasma

Electronic
Apparatus

Samtech

XenICS/FOS & S

IR

[…]

[…]

[…]

[…]

[…]

[…]

PCD

[…]

[…]

[…]

[…]

[…]

[…]

(1) Recovered as the advance is repaid.

Intensity

IR

PCD

Advance
(EUR
thousand)

Interest
(EUR
thousand) (1)

Rate

Success
(shipsets
sold)

75 %

50 %

1 262

525

4,80 %

75 %

50 %

719

290

4,80 %

75 %

50 %

1 202

362

4,80 %

70 %

50 %

8 131

3 062

4,08 %

70 %

50 %

1 075

305

4,36 %

70 %

50 %

8 214

3 482

4,08 %

[…]

[…]

[…]

[…]

[…]

[…]

30.3.2007

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Official Journal of the European Union

L 90/77

(30)

(31)

The commercial success of the projects is measured in
terms of sales projections at the time the aid is granted.
Total sales are taken into account when calculating
repayment of the advance.

3.3. Commitments

(37)

The Belgian authorities undertake:

Electronic Apparatus et XenICS/FOS & S make fixed
repayments linked to each sale. This fixed payment
enables both repayment of the principal and payment
of the interest.

— to amend the initial contracts by 31 December 2006
to bring them into line with the model contracts
submitted
the
23 November
repayment conditions laid down in paragraphs 28
to 36 of this Decision,

2006

and

on

(32) However, Europlasma

variable
repayments linked to each sale, broken down as follows:

and Samtech make

— to submit the amended and signed contracts by 31

December 2006,

— a fixed amount corresponding to the principal of the
amount advanced spread over the number of sales
defining the success of the project, and

— to comply with Commission practice as

regards
repayment
are
if
granted before 31 December 2006 with higher inten-
sities that those specified in the R & D framework,

conditions

advances

further

— a variable amount based on sales made, which covers
the interest on the outstanding principal of
the
amount advanced.

— to take the appropriate measures if new aid were to
be granted under this scheme after the entry into
force of
the Community framework on State aid
for research, development and innovation.

(33)

Europlasma makes straight-line repayments.

4. ASSESSMENT

4.1. Existence of State aid

(34)

Electronic Apparatus makes repayments in stages (five
stages of […] shipsets each). If the programme is inter-
rupted in the middle of a stage before a successful
outcome is achieved,
the enterprise makes a final
repayment in proportion to the sales made since the
last stage reached.

(38)

(35)

Lastly, Samtech and XenICS/FOS & S make ‘exponential’
repayments in three phases:

— a first phase corresponding to the first third of sales,

— a second phase corresponding to the second third of
sales, with repayments twice as high as in the first
phase,

is
It

financed by
confers

the Belgian Federal
scheme
The
Government.
an advantage on certain
component and engine manufacturers in the aircraft
industry. The advances are repaid only in the event of
the commercial success of the product being researched,
and in some cases repayments are free of interest. This
makes the advances more advantageous than loans at
market rates. Lastly, given that component and engine
manufacturers from other Member States operate in this
industry, the scheme may distort competition and affect
trade between Member States.
therefore meets the
cumulative criteria for determining the existence of
State aid as defined in Article 87(1) of the EC Treaty.

It

(39)

The total volume of State aid granted under the scheme
in question amounts to EUR 82 581 000, broken down
into EUR 41 307 000 for component manufacturers and
EUR 41 274 000 for engine manufacturers.

— a third phase corresponding to the last third of sales,
with repayments three times as high as in the first
phase.

(40)

(36)

Since the aid was granted recently, the Belgian authorities
have set 31 December 2018 as the final date for
repayment for all the contracts listed in Table 2, with
the exception of the contract with Samtech, for which
the final date is 31 December 2021.

4.2. Unlawfulness of the State aid

the scheme was
The individual aid provided under
granted under agreements between the State and the
beneficiary enterprises. The model agreement submitted
by the Belgian authorities does not have a suspension
clause whereby payment of the advances is subject to
analysis of the scheme by the Commission in accordance
with Community State aid rules. Since the scheme has
already been implemented, it must be considered to be
unlawful within the meaning of Article 1(b) and (f) of
Regulation (EC) No 659/1999.

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4.3. Compatibility of the State aid

HAS ADOPTED THIS DECISION:

(41) Modification of the aid scheme in accordance with the
first alternative described in recital 28 takes away the
advantage initially conferred on the beneficiaries by
reducing the aid intensity to the level stipulated in the
R & D framework (50 % for IR activities and 25 % for
PCD activities, plus any applicable bonuses). In addition
to recovery, with interest, of the surplus aid, repayment
of the remaining aid goes beyond the requirements of the
R & D framework. The aid thus modified is therefore
compatible with that framework.

(42) Modification of the aid in accordance with the second
alternative, which is described in recitals 29 to 36, brings
the arrangements for repayment of the advances into line
with Commission practice: repayment is progressive and,
in the event of success, is increased to the amount of the
principal of the advance plus the accrued interest. The aid
thus modified is therefore in line with Commission
practice.

(43)

the

scheme
to take

the Belgian authorities undertake

Tables 1 and 2 list the enterprises that have benefited
so far. The Belgian authorities
from the
undertake
advantage
additional
away
temporarily granted to these enterprises relative to the
beneficiaries of aid in the form of repayable advances
in the cases hitherto examined by the Commission.
to
Furthermore,
comply with
regards
arrangements for repayment if, prior to 31 December
2006, further advances are granted with higher inten-
sities than those specified in the R & D framework for
grants. They also undertake to take the appropriate
measures if new aid is granted under this scheme after
the entry into force of the Community guidelines on
State aid for research, development and innovation.

Commission

practice

as

Article 1

The aid implemented by Belgium for component and engine
manufacturers under the aid scheme for research and devel-
opment
compatible with the
common market subject to the conditions spelt out in Article 2.

in the aircraft

industry is

Article 2

Belgium shall require the beneficiaries of the scheme referred to
in Article 1 to repay the advances in accordance with one of the
two methods described in recitals 28 to 36.

To this end, Belgium shall amend, by 31 December 2006, its
contracts with the beneficiaries of the aid scheme referred to in
Article 1 so as to bring them into line with the model contracts
submitted to the Commission by the Belgian authorities on 23
the new repayment
November 2006, which incorporate
arrangements described in recitals 28 to 36.

The amended and signed contracts shall be submitted to the
Commission by 31 December 2006.

Article 3

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

5. CONCLUSION

This Decision is addressed to the Kingdom of Belgium.

Article 4

(44)

The Commission notes that Belgium has unlawfully
implemented the R & D aid scheme for
the aircraft
industry, under which it has granted aid for component
and engine manufacturers in breach of Article 88(3) of
the EC Treaty. However, Belgium undertakes to adapt this
State aid by 31 December 2006 so as to bring it into
line with the Community framework on State aid for
research and
and with Commission
practice,

development

Done at Brussels, 6 December 2006.

For the Commission

Neelie KROES
Member of the Commission