Community guidelines for State aid in the agriculture and forestry sector 2007 to 2013
Date: 2006-12-27
Institutions: European Commission
Subjects: State aid, agricultural product, agro-industry, aid system, aid to agriculture, marketing, silviculture

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I

(Information)

COMMISSION

COMMUNITY GUIDELINES FOR STATE AID IN THE AGRICULTURE AND FORESTRY SECTOR
2007 TO 2013

(2006/C 319/01)

I.

INTRODUCTION

(1) Article 33 of

special methods

the Treaty defines the objectives of

the
common agricultural policy. In working out the common
agricultural policy and the
its
for
application, account has to be taken of
the particular
nature of agricultural activity, which results from the special
structure of agriculture and from structural and natural
disparities between the various agricultural regions, the
need to effect the appropriate adjustments by degrees and
the fact that agriculture constitutes a sector closely linked
with the economy as a whole. Recourse to State aid can
only be justified if it respects the objectives of this policy.

for

schemes

for direct

(2) Council Regulation (EC) No 1782/2003 of 29 September
support
2003 establishing common rules
the common agricultural policy and
schemes under
farmers (1)
establishing certain support
enshrines a fundamental change in the way Community
support to farmers is be granted. Council Regulation (EC)
No 1698/2005 of 20 September 2005 on support for rural
development by the European Agricultural Fund for Rural
Development (EAFRD) (2) establishes the framework for
rural development policy for the years 2007 to 2013,
confirming the role of rural development as the second
pillar of the common agricultural policy. Articles 88 and 89
of Regulation (EC) No 1698/2005 contain specific
provisions in respect of State aid. Article 5 provides that
rural development measures must be in
support
conformity with the Treaty and any acts adopted under it.

for

(1) OJ L 270, 21.10.2003, p. 1. Regulation as last amended by
Regulation (EC) No 1405/2006 (OJ L 265, 26.9.2006, p. 1).
(2) OJ L 277 21.10.2005, p. 1. Regulation as amended by Regulation

(EC) No 1463/2006 (OJ L 277, 9.10.2006, p. 1).

(3) Because the economic effects of an aid do not change
depending on whether
is partly financed by the
it
Community, or whether it is financed by a Member State
alone,
there should in
principle be consistency and coherence between its policy
in respect of the control of State aid, and the support which
is granted under the Community's own common agricul-
tural and rural development policy.

the Commission considers that

(4) By letter of 30 May 2005, Member States were invited to
present proposals for the simplification of State aid rules in
the agriculture sector. The Working Group on conditions of
competition in agriculture was consulted on these guide-
its meetings of 22 and 23 June 2006 and
lines at
25 October 2006.

II.

SCOPE AND DEFINITIONS

(5) These guidelines apply to all State aid, granted in
connection with activities
related to the production,
processing and marketing of agricultural products falling
within the scope of Annex I of the Treaty. They apply to any
aid measure,
including aid measures
financed by parafiscal
taxes, which falls within the
definition of State aid laid down in Article 87(1) of the
Treaty. These guidelines do not apply to State aids in the
fisheries and aquaculture sector (3). Chapter VII contains
rules for aids for the forestry sector, including aids for the
afforestation of agricultural land.

in whatever form,

(3) State aids in the fisheries and aquaculture sector are examined within
the framework of the Guidelines for the examination of State aids to
fisheries and aquaculture (OJ C 229, 14.9.2004, p. 5) and Council
Regulation (EC) No 2369/2002 of 20 December 2002 amending
Regulation (EC) No 2792/1999 laying down the detailed rules and
arrangements regarding Community structural assistance in the
fisheries (OJ L 358, 31.12.2002, p. 49).

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(6)

(7)

(8)

‘agricultural product’
For the purpose of these guidelines,
means the products listed in Annex I of the Treaty, products
falling under CN codes 4502, 4503 and 4504 (cork
products) and products intended to imitate or substitute
milk and milk products (4), excluding those products
covered by Council Regulation (EC) No 104/2000 of
17 December 1999 on the common organisation of the
market in fishery and aquaculture products (5).

these guidelines,

For the purpose of
‘processing of an
agricultural product’ means any operation on an agricul-
tural product resulting in a product which is also an
agricultural product, except on-farm activities necessary for
preparing an animal or plant product for the first sale. The
processing of agricultural products falling within the scope
of Annex I of
the Treaty into non-Annex I products
therefore falls outside the scope of these guidelines.

these guidelines,

For the purpose of
‘marketing of an
agricultural product’ means holding or displaying with a
view to sale, offering for sale, delivery or any other manner
of placing on the market, except the first sale by a primary
producer
to resellers or processors and any activity
preparing a product for such first sale; a sale by a primary
shall be considered as
producer
marketing if it takes place in separate premises reserved
for
that purpose. Aid for advertising of agricultural
products is covered by the scope of the present guidelines
whereas aid for advertising of Non Annex I products are
covered by horizontal rules on State aid (6).

to final consumers

(9)

For the purpose of these guidelines,
‘small and medium-
sized enterprises (SMEs)’ means small and medium-sized
enterprises as defined in Annex I to Commission Regula-
tion (EC) No 70/2001 on the application of Articles 87
and 88 of the EC Treaty to State aid to small and medium-
sized enterprises (7).

III.

GENERAL PRINCIPLES

(10) Article 36 of

the Treaty establishing the European
Communities provides that the Treaty rules on competition
are to apply to production and trade in agricultural
products only to the extent determined by the Council. In
contrast
the Commission's
authority to control and supervise State aids in the
agricultural sector does not derive directly from the Treaty,

to other sectors,

therefore,

(4) For the purpose of these provisions, products to imitate or substitute
for milk and/or milk products means products which could be
confused with milk and/or milk products but whose composition
differs from such products in that they contain fat and/or protein of
non-milk origin with o without protein derived from milk (‘Products
other than milk products’ as referred to in Article 3(2) of Council
Regulation (EEC) No 1898/87 on the protection of designations used
in the marketing of milk and milk products (OJ L 182, 3.7.1987,
p. 36.)).

(5) OJ L 17, 21.1.2000, p. 22. Regulation as amended by the 2003 Act

of Accession.

(6) Guidelines on national regional aid for 2007-2013 (OJ C 54,
4.3.2006, p. 13), Commission Regulation (EC) No 70/2001 of
12 January 2001 on the application of Articles 87 and 88 of the EC
Treaty to State aid to small and medium-sized enterprises (OJ L 10,
13.1.2001, p 33), Commission Regulation (EC) No 69/2001 of
12 January 2001 on the application of Articles 87 and 88 of the EC
Treaty to de minimis (OJ L 10, 13.1.2001, p. 30). Regulation as last
amended by Regulation (EC) No 1040/2006 (OJ L 187, 8.7.2006,
p. 8).

from legislation adopted by the Council under
but
Article 37 of the Treaty and is subject to any restrictions
which may have been laid down by the Council. In practice
however, all
the regulations establishing the common
organisations of the market provide for the application of
the State aid rules of Articles 87, 88 and 89 of the Treaty to
the products concerned. Furthermore, Article 88 of
Regulation (EC) No 1698/2005 expressly provides that
Articles 87, 88 and 89 of the Treaty are to apply to aid
granted by Member States to support rural development. It
limitations or
follows
derogations which may have been laid down in the
regulations concerned, the provisions of the Treaty are
fully applicable to State aid granted in the agricultural
those aids which are
sector, with the exception of
specifically aimed at the limited number of products which
are not covered by common organisations of the market
(see paragraph 21).

to any specific

subject

that,

(11) Although Articles 87, 88 and 89 are fully applicable to the
sectors covered by the common organisations of
the
market, their application nevertheless remains subordinate
to the provisions established by the regulations concerned.
In other words recourse by a Member State to the
provisions of Articles 87, 88 and 89 cannot receive priority
over the provisions of the regulation on the organisation of
that sector of the market (8).
It follows that under no
circumstances can the Commission approve an aid which is
incompatible with the provisions governing a common
organisation of the market or which would interfere with
the proper functioning of the common organisation.

(12) The Commission will not authorise aid to export-related
activities, namely aid directly linked to the quantities
exported, and aid contingent upon the use of domestic over
imported goods, or for the establishment and operation of
a distribution network or to other current expenditure
linked to the export activity in other Member States. Aid
towards the cost of participating in trade fairs, or of studies
or consultancy services needed for the launch of a new or
existing product on a new market does not normally
constitute export aid.

(13)

In view of the specific rules applicable to food aid given to
third countries,
the Commission will normally not
authorise State aid towards the purchase of agricultural

(7) OJ L 10, 13.1.2001, p. 33. Regulation as last amended by Regulation

(8)

(EC) No 1857/2006 (OJ L 358, 16.12.2006, p. 3)

Judgement of the European Court of Justice in Case 177/78 Pigs and
Bacon Commission v. McCarren [1979] ECR 2161.

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products within the Community to be granted as food aid
in third countries.

(14) These guidelines apply subject to any specific derogations
which may be set out in the Treaties or in Community
legislation.

(15)

In order to be considered compatible with the common
market, any aid measure must contain some incentive
element or require some counterpart on the part of the
beneficiary. Unless exceptions are expressly provided for in
Community legislation or in these guidelines, unilateral
State aid measures which are simply intended to improve
the financial situation of producers but which in no way
contribute to the development of
the sector, and in
particular aids which are granted solely on the basis of
price, quantity, unit of production or unit of the means of
production are considered to constitute operating aids
which are
common market.
Furthermore, by their very nature, such aids are also likely
to interfere with the mechanisms of
common
organisations of the market.

incompatible with the

the

(16) For the same reason, aid which is granted retrospectively in
respect of activities which have already been undertaken by
the beneficiary cannot be considered to contain the
necessary incentive element, and must be considered to
constitute operating aid which is simply intended to relieve
the beneficiary of a financial burden. In order to maximise
the incentive effect of aid, and to facilitate the demonstra-
tion thereof in case of a notification, eligibility rules set up
by Member States
foresee the following steps
preceding the granting of aid:

shall

Aid under an aid scheme shall only be granted in respect of
activities undertaken or services received after the aid
scheme has been set up and declared compatible with the
Treaty by the Commission.

If the aid scheme creates an automatic right to receive the
aid, requiring no further administrative action at adminis-
trative level, the aid itself may only be granted for activities
undertaken or services received after the aid scheme has
been set up and declared compatible with the Treaty by the
Commission.

If the aid scheme requires an application to be submitted to
the competent authority concerned, the aid itself may only
be granted for activities undertaken or services received
after the following conditions have been fulfilled:

(a) the aid scheme must have been set up and declared

compatible with the Treaty by the Commission;

(c) the application must have been accepted by the
competent authority concerned in a manner which
obliges that authority to grant the aid, clearly indicating
the amount of aid to be granted or how this amount
will be calculated; such acceptance by the competent
authority may only be made if the budget available for
the aid or aid scheme is not exhausted

Individual aid outside any aid scheme shall only be granted
in respect of activities undertaken or services received after
the criteria in points (b) and (c) above have been satisfied.

These requirements shall not apply in the case of aid
schemes which are compensatory in nature.

(17) Because of the similarities between agricultural processing
and marketing companies and non-agricultural companies,
e.g. in the food processing sector, State aid rules applying to
agricultural processing and marketing companies should be
harmonised with those
applying to non-agricultural
companies. This policy should be applied to State aid
granted for whatever purpose, for example aid towards the
costs of investment, environmental protection or technical
support.
the Commission has already
included agricultural processing and marketing in :

In this context,

(a) the draft Regulation on de minimis aid which is to
replace Commission Regulation (EC) No 69/2001 on
the application of Articles 87 and 88 of the EC Treaty
to de minimis aid (9);

(b) Regulation (EC) No 70/2001 as modified by Regulation

(EC) No 1857/2006;

(c) Commission Regulation (EC) No 1628/2006 of
24 October 2006 on the application of Articles 87
and 88 of the treaty to national regional investment
aid (10).

(18) As a consequence of such harmonisation with the rules for
non-agricultural companies,
large enterprises may no
longer be eligible for certain types of support, notably as
far as technical support such as consultancy is concerned.
Support to large companies in this respect will,
in the
future, be limited to de minimis support.

(19) Unless specifically provided for in these guidelines by
reference to the agriculture sector as opposed to either
primary production (farmers) or processing and marketing,
aid in favour of agricultural processing and marketing shall
only be declared compatible with Article 87(2) or (3) of the
Treaty if such aid would also be declared compatible if
granted in favour of non-agricultural enterprises outside
specific sectors such as transport or fishery.

(b) an application for aid must have been properly
submitted to the competent authority concerned;

(9) OJ L 10, 13.1.2001, p. 30.
(10) OJ L 302, 1.11.2006, p. 29.

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(20) Because the very specific conditions of agricultural primary
production must be taken into account during the
assessment of aid which is intended to favour the less
favoured regions within the meaning of Article 36 of
Regulation (EC) No 1698/2005, the Commission's guide-
lines on national regional aid for 2007 to 2013 (11) do not
apply to primary production. They shall however apply to
the processing and marketing of agricultural products to
the extent set out in these guidelines.

the market,

to a common organisation of

(21) As noted above, certain types of agricultural products
falling within the scope of Annex I of the Treaty are not yet
subject
in
particular potatoes other than starch potatoes, horsemeat,
coffee and vinegars derived from alcohol and cork. In the
absence of a common organisation of the market, the
provisions of Article 3 of Council Regulation (EC) No 1184/
2006 of 24 July 2006 applying certain rules of competition
to production of, and trade in, agricultural products (12) are
applicable to State aids which are specifically targeted at
these products. Article 3 provides that only the provisions
of Article 88(1) and the first sentence of Article 88(3) apply
to these aids. Therefore, the Member States are required to
inform the Commission in sufficient time to enable it to
submit its comments on any plans to grant or alter aid. For
its part, the Commission cannot oppose the granting of
such aids by means of a final negative decision. In assessing
such aids the Commission will
the
absence of common organisations of the market at the
that Regulation (EC)
Community level and the fact
No 1782/2003 has established the principle that Commu-
nity support should normally be granted in the form of
decoupled aid that is not linked to specific products or
ongoing production. It must also be noted that certain
market organisations do not provide for any domestic
Community support. Provided that
the national aid
schemes follow that principle, the Commission will not
formulate comments, even if
the measures concerned
consist of operating aids which would normally be
prohibited. When formulating its comments, the Commis-
sion will also take into account the risk of support being
granted for a product not subject to a common market
organisation benefiting the production of a product subject
to such an organisation. This is notably the case in the
potato sector.
follow the
Commission's comments and recommendations, the Com-
mission reserves the right to revert to Article 226 of the
Treaty.

If a Member State does not

take into account

notifications, even in cases where the aid schemes are not
specifically concerned with environmental
issues. For
example,
in the case of an aid scheme for investments
which are intended to increase production, and which
involve an increased use of scarce resources or an increase
in pollution, it will be necessary to show that the scheme
will not result in an infringement of Community environ-
mental protection legislation, or otherwise cause environ-
mental damage. All State aid notifications should in future
contain an assessment of
the expected environmental
impact of the activity aided. In many cases, this will involve
no more than a confirmation that there is no expected
environmental impact. The Commission reserves the right
to require additional information, undertakings and condi-
tions it deems necessary for ensuring adequate environ-
mental protection.

(23) The Commission will assess any aid measures which are not
covered by these guidelines on a case by case basis, taking
into account the principles set out in Articles 87, 88 and 89
of the Treaty and the Community's common agricultural
and rural development policies. Member States proposing
support for the agriculture sector not covered by these
guidelines will have to provide an economic assessment of
the positive impact of the measure for the development of
the agriculture sector, and of the risks of distortions of
competition posed by the measure in question. The
Commission will only approve such measures if
the
positive contribution to the development of the sector
clearly outweighs the risks of distortions of competition.

(24) Unless otherwise indicated, all aid rates in these guidelines
are expressed in terms of the total amount of support
expressed as a percentage of the volume of eligible expenses
(gross subsidy equivalents).

IV.

RURAL DEVELOPMENT MEASURES

(25) Regulation (EC) No 1698/2005 sets out a series of support
measures for
the
guidelines sets out the rules for State aid in favour of such
measures and some other measures closely linked to rural
development.

rural development. This chapter of

(22) Article 6 of

‘environmental
the Treaty provides that
protection requirements must be integrated into the
definition and implementation of the Community policies
and activities referred to in Article 3, in particular with a
view to promoting sustainable development.’ The activities
referred to in Article 3 cover both agricultural and
competition policy. Particular attention therefore needs to
issues in future State aid
be given to environmental

(11) OJ C 54, 4.3.2006, p. 13.
(12) OJ L 214, 4.8.2006, p. 7.

(26) In order to ensure coherence between rural development
measures proposed for co-financing in the framework of
the rural development programmes put in place by Member
States and rural development measures financed through
State aids, every notification concerning aids for invest-
ments (Chapters IV A and B), environmental and animal
welfare aid (Chapter IV C), aid to compensate for handicaps
in certain areas (Chapter IV D), aid for meeting standards
(Chapter IV E) and aid for the setting up of young farmers
(Chapter IV F) must be accompanied by documentation
demonstrating how the State aid measure fits into and is
coherent with the relevant Rural Development pro-
grammes. State aid that is not coherent with the relevant

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Rural Development programme and notably State aid
leading to increases in capacity for which no normal market
outlets can be found will not be authorised.

IV.A.

Aids for Investment in Agricultural Holdings

(27) This sub-chapter applies to investment

linked to the
primary production of products falling within the scope
of Annex I of the Treaty. It does not apply to investment
made on a farm in favour of processing and marketing of
such products.

IV.A.1. Analysis

(28) In order to determine its future policy, the Commission has
in particular taken into account the following considera-
tions:

(a)

In order to restructure and develop physical potential and
promote innovation, Article 26(1) of Regulation (EC)
No 1698/2005 foresees
and/or
intangible investments which improve the overall perfor-
mance of the agricultural holding;

tangible

support

for

(b) In line with Article 26(1) of Regulation (EC) No 1698/2005,
where investments are made in order
to comply with
Community standards, support may be granted only to those
which are made in order to comply with newly introduced
Community standards. In that case, a period of grace, not
exceeding 36 months from the date on which the standard
becomes mandatory for the agricultural holding, may be
provided to meet that standard. In the case of young farmers
receiving support for setting up, support may be granted for
investments to comply with existing Community standards,
when identified in the business plan referred to in Article 22
(1)(c) of Regulation (EC) No 1698/2005. The period of grace
within which the standard needs to be met may not exceed
36 months from the date of setting up;

(c) Article 88(2) of Regulation (EC) No 1698/2005 prohibits
State aid for the modernisation of agricultural holdings
which exceeds the percentages set out in the Annex to the
Regulation, which are:

(i) 60 % of the amount of eligible investment by young
farmers in the areas referred to in Article 36(a) (i), (ii) and
(iii) of Regulation (EC) No 1698/2005,

(ii) 50 % of the amount of eligible investment by other
farmers in the areas referred to in Article 36(a) (i), (ii) and
(iii) of Regulation (EC) No 1698/2005,

(iii) 50 % of the amount of eligible investment by young

farmers in other areas,

(iv) 40 % of the amount of eligible investment by other

farmers in other areas,

(v) 75 % of

in the
the amount of eligible investment
outermost regions and the smaller Aegean Islands within
the meaning of Council Regulation (EEC) No 2019/93 of
19 July 1993 introducing specific measures for
the
smaller Aegean islands concerning certain agricultural
products (13),

(vi) 75 % of the amount of eligible investment in the Member
States which acceded to the Community on 1 May 2004
and 1 January 2007, for the implementation of Council
Directive 91/676/EEC of 12 December 1991 concerning
the protection of waters against pollution caused by
nitrates from agricultural sources (14) within a maximum
period of four years from the date of Accession pursuant
to Articles 3(2) and 5(1) of that Directive;

(d) The prohibition of Article 88(2) of Regulation (EC) No 1698/
2005 does not apply to aid relating to investments
undertaken predominantly in the public interest and related
to the conservation of
landscapes shaped by
traditional
agricultural and forestry activities or to the relocation of farm
buildings, the protection and improvement of the environ-
ment, improvement of the hygiene conditions of livestock
undertakings and animal welfare and occupational safety at
the workplace;

(e) Where the need to relocate results from an expropriation
in accordance with the legislation of the Member
which,
State concerned gives rise to a right to compensation, the
payment of
such compensation will not normally be
considered as State aid within the meaning of Article 87(1)
of the Treaty;

(f) Member States which delay the implementation of compul-
sory Community standards beyond the date foreseen in
Community legislation may through such delays provide an
advantage to farmers in comparison to farmers in Member
States which comply with such new standards in line with
the implementation dates foreseen in Community legislation.
This risk of distortions of competition should not be
increased by the granting of high amounts of State aid to
farmers who bear the cost of new standards later than
foreseen in Community legislation. However, when setting
up the appropriate aid intensity for investment linked to
compliance with newly introduced standards, account should
also be taken of the fact that such standards often only entail
costs for the farmer without increasing the earning potential.
The highest aid intensity for investments related to newly
introduced standards should therefore be reserved for those
made within the time table foreseen in Community
legislation. Investments made later on should only benefit
from a lower aid intensity. Such intensity shall reflect the
delay incurred and should be reduced to zero at some point
in time;

(13) OJ L 184, 27.7.1993, p. 1. Regulation as last amended by Regulation

(EC) No 1782/2003 (OJ L 270, 21.10.2003, p. 1).

(14) OJ L 375, 31.12.1991, p. 1. Directive as amended by Regulation (EC)
No 1882/2003 of the European Parliament and of the Council (OJ
L 284, 31.10.2003, p. 1).

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(g) As

far as

implementation of Directive 91/676/EEC is
concerned, account should be taken of the specific problems
and needs of
the Member States which acceded to the
Community on 1 May 2004 and 1 January 2007.

investment should have been made in line with the
deadlines foreseen by Community legislation;

(h) State aid for the purchase of second-hand equipment should
be accepted in favour of small and medium-sized enterprises,
where the lower cost of such equipment may be a useful first
step towards modernisation notably for farms that start from
a very low technical standard and which have little capital.
Large companies should only receive investment aid for the
purchase of new equipment.

(b) the maximum aid intensities of 50 % and 40 % referred
to in point (a) shall be reduced to 25 % and respectively
20 % for expenditure incurred in year four beyond the
date by which the investment should have been made in
line with the deadlines
foreseen by Community
legislation, and to 12,5 % and 10 % in year five. No
aid shall be authorised for expenditure incurred beyond
year five.

IV.A.2. Policy on investment aid in agricultural holdings

(29) Aid for investment in agricultural holdings shall be declared
compatible with Article 87(3)(c) of the Treaty if it fulfils all
the conditions of Article 4 of Regulation (EC) No 1857/
2006. Without prejudice of Article 4(7)(c) of Regulation
(EC) No 1857/2006, aid may also be granted up to the same
rate and at the same conditions as those established in the
said Article 4 to specific agricultural products and in
respect of drainage works or irrigation equipment and
irrigation works which do not lead to a reduction of
previous water use of 25 %. The maximum amount of aid
fixed in Article 4(9) of Regulation No 1857/2006 does not
apply.

(33) Aid of 75 % for extra costs of investments in the Member
States which acceded to the Community on 1 May 2004
and 1 January 2007 for the implementation of Directive
91/676/EEC shall be declared compatible with Article 87(3)
(c) of the Treaty until 31 December 2008 and 31 December
2010 respectively, . This aid intensity must be limited to the
extra eligible costs necessary and does not apply in the case
of investments which result in an increase in production
capacity. The Commission will
take particular care of
verifying the compatibility of the aid measures proposed
with the action plans established in conformity with
Directive 91/676/EEC.

(30) Aid for the conservation of

traditional

landscapes and
buildings shall be declared compatible with Article 87(3)(c)
or (d) of the Treaty if it fulfils all the conditions of [Article 5
of the BER replacing R 1/2004]. However, the limit of EUR
10 000 fixed in [Article 5 (2) of the BER replacing R 1/
2004] could be exceeded in duly justified cases.

(31) Aid for the relocation of farm buildings in the public
interest shall be declared compatible with Article 87(3)(c) of
the Treaty if it fulfils all the conditions of [Article 6 of the
BER replacing R 1/2004].

the environment,

(32) Aid for investments resulting in extra costs relating to the
the
protection and improvement of
improvement of hygiene conditions of livestock enterprises
or the welfare of farm animals shall be declared compatible
with Article 87(3)(c) of
the
conditions of [Article 4(2)(e) of the BER replacing R 1/
2004]. For investment expenditure incurred after the dates
for compliance with newly introduced standards established
by [Article 2(10) of the BER replacing R 1/2004], the
maximum aid intensity shall be:

the Treaty if

fulfils all

it

(a) 50 % of eligible investments in less favoured areas or in
areas referred to in Article 36(a)(i),
(ii) and (iii) of
Regulation (EC) No 1698/2005, and 40 % of eligible
investments in other areas, for expenditure incurred
the date by which the
within three years after

(34) Aid of 50 % in less favoured areas or in areas referred to in
Article 36(a)(i), (ii) and (iii) of Regulation (EC) No 1698/
2005, and 40 % of eligible investments in other areas in
respect of extra costs of investments for the implementa-
tion of Directive 91/676/EEC shall be declared compatible
with Article 87(3)(c) of
the Treaty in so far they are
supported under Regulation (EC) No 1698/2005. This aid
intensity must be limited to the extra eligible costs
necessary and does not apply in the case of investments
which result in an increase in production capacity. The
Commission will
to verify the
compatibility of the aid measures proposed with the action
plans established in conformity with Directive 91/676/EEC.
Aid measures for the implementation of Directive 91/676/
EEC declared compatible with the Treaty by the Commis-
sion before the entry into force of these guidelines may
continue up to 31 December 2008, at
the aid rates
authorised by the Commission.

take particular

care

(35) No aid shall be authorised for investment to comply with
existing Community or national
standards. However,
investment aid granted to young farmers for investments
to comply with existing Community or national standards
shall be declared compatible with Article 87(3)(c) of the
Treaty when identified in the business plan referred to in
Article 22(1)(c) of Regulation (EC) No 1698/2005. Such aid
shall be authorised at a rate of up to 60 % of the amount of
eligible investment by young farmers in the less favoured
areas or areas referred to in Article 36(a)(i), (ii) and (iii) of
Regulation (EC) No 1698/2005, and up to 50 % of eligible

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investments by young farmers in other areas. Aid must be
limited to extra costs relating to the implementation of the
standard incurred no later than 36 months from the date of
setting up.

(36) Notifications of

investment aid to agricultural holdings
must be accompanied by documentation showing that
support is targeted at clearly defined objectives reflecting
identified structural and territorial needs and structural
disadvantages.

(37) Where a common market organisation,

including direct
support schemes, financed by the European Agricultural
Guarantee Fund (EAGF) places restrictions on production or
limitations on Community support at the level of individual
farmers, holdings or processing plants, no investment shall
be supported by State aids which would increase produc-
tion beyond those restrictions or limitations.

(38) The Commission will also apply the rules set out in this
section by analogy to investments in primary agricultural
production which are not made by farmers, for example
where equipment is purchased for shared use by a group of
producers.

(39) The Commission will not declare aid for the purchase of
second-hand equipment compatible with the Treaty if such
aid is granted in favour of large companies.

IV.B.

Aids for investments in connection with the

processing and marketing of agricultural products

(40) This sub-chapter applies to investment aid in connection
with the processing and marketing of agricultural products.

IV.B.1. Analysis

(41)

In order to determine its future policy, the Commission has
in particular taken into account the following considera-
tions:

(a)

insofar as Regulation (EC) No 1698/2005 specifies aid
rates for investment support granted to small and
medium-sized enterprises active in agricultural proces-
sing and marketing, such aid rates should be main-
tained;

(b) Regulation (EC) No 1698/2005 excludes investments by
certain large processing and marketing enterprises from
Community support. However, because of the simila-
rities between large agricultural processing and market-
ing companies and non-agricultural companies, e.g. in
the food processing sector, it seems justified to accept
State aid to such agricultural processing and marketing
companies up to the maximum aid rates authorised by
the Commission for non-agricultural companies of the
same size;

(c) Article 28(3) of Regulation (EC) No 1698/2005 has
introduced special maximum aid rates for investment

less

with

enterprises (15)

aid granted to enterprises not covered by Article 2(1) of
Commission Recommendation 2003/361/EC of 6 May
2003 concerning the definition of micro, small and
medium-sized
than
750 employees and/or with a turnover of
less than
EUR 200 million. Such enterprises are considered as
large enterprises as far as State aid rules applicable to
non-agricultural activities are concerned. Clear guidance
for the application of State aid rules to this group of
‘intermediate’ enterprises seems necessary in order to
avoid uncertainty in relation to the application of the
right aid rate. Notably, it should be established that all
the other conditions of Recommendation 2003/361/EC
apply to the definition of such ‘intermediate’ enter-
prises, notably as to the independence criterion and the
calculation of turnover. Also, special maximum aid
rates should be reserved to intermediate companies
with less than 750 employees and/or a turnover of less
than EUR 200 million;

(d) aids intended to promote the diversification of primary
producers (farmers) into other activities connected with
the processing and marketing of agricultural products
falling within the scope of Annex I of the Treaty should
be treated in the same way as aid granted to agricultural
processing and marketing firms that are independent of
primary producers. For example, the same rules should
apply to investment aid for a slaughterhouse, no matter
whether it is built on or outside of a farm;

(e) although they may fall within the scope of Regulation
(EC) No 1698/2005, aids granted to promote the
into
diversification of primary producers (farmers)
activities which are not connected to the production,
processing and marketing of agricultural products
falling within the scope of Annex I of the Treaty, such
as agro-tourism, the development of craft industries or
aquaculture, fall outside of the scope of these guidelines.
These aids will therefore continue to be assessed in
accordance with the usual principles applied by the
Commission for the assessment of aids outside of the
agricultural sector, in particular the de minimis rule, the
rules governing aid for
small and medium-sized
companies, the Commission's guidelines on national
regional aid for 2007-2013, the multisectoral frame-
work on regional aid for large investment projects (16)
the
and,
examination of State aid to fisheries and aquacul-
ture (17);

in appropriate cases,

the guidelines

for

(f) State aid for the purchase of second-hand equipment
should be accepted in favour of small and medium-
such
sized enterprises, where the lower cost of
equipment may be
step towards
a useful
modernisation notably for companies that start from
a very low technical standard and which have little

first

(15) OJ L 124, 20.5.2003, p. 36.

(16) OJ C 70, 19.3.2002, p. 8.
(17) OJ C 229, 14.9.2004, p. 5.

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capital. Large companies should only receive investment
aid for the purchase of new equipment.

IV.B.2. Policy on aid to companies active in the processing and

marketing of agricultural products

(42) Aid for investment granted to companies active in the
processing and marketing of agricultural products shall be
declared compatible with Articles 87(3)(a) or (c) of the
Treaty if it fulfils all the conditions of one of the following
provisions:

(a) Article 4 of Regulation (EC) No 70/2001 ;

(b) Commission Regulation (EC) No 1628/2006;

(c) the Commission guidelines on national regional aid for
2007–2013. In that case, the maximum aid intensity
resulting from the application of these guidelines may
be increased to:

regional aid.
in the regions eligible for
2007–2013,
Investment aid not fulfilling these conditions will normally
be declared incompatible with the Treaty. No aid may be
granted which concerns the manufacture and marketing of
products which imitate or
substitute milk and milk
products.

(44) The Commission will declare aid for the purchase of
second-hand equipment compatible with the Treaty only if
such aid is granted in favour of small and medium-sized
enterprises.

(45) Aid for investments with eligible expenses in excess of EUR
25 million, or where the actual amount of aid will exceed
EUR 12 million must be specifically notified to the
Commission in accordance with Article 88(3) of the Treaty.

(46) Notifications of

investment aid in connection with the
processing and marketing of agricultural products must be
accompanied by documentation showing that support is
targeted on clearly defined objectives reflecting identified
structural and territorial needs and structural disadvantages.

(i) 50 % of eligible investments in regions under
Article 87(3)(a) of the Treaty and 40 % of eligible
investments in other regions eligible for regional
aid, as determined in the regional aid map approved
for the Member States concerned for the period
2007–2013, if the beneficiary is a small or medium-
sized enterprise;

(47) Where a common market organisation,

including direct
support schemes, financed by the European Agricultural
Guarantee Fund (EAGF) places restrictions on production or
limitations on Community support at the level of individual
farmers, holdings or processing plants, no investment shall
be supported under State aids which would increase
production beyond those restrictions or limitations.

(ii) 25 % of eligible investments in regions eligible
under Article 87(3)(a) of the Treaty and 20 % of
eligible investments in other regions eligible for
regional aid, as determined in the regional aid map
approved for the Member States concerned for the
period 2007–2013, if the beneficiary has less than
750 employees and/or less than EUR 200 million
turnover, on condition that such beneficiary fulfils
all the other conditions of Recommendation 2003/
361/EC.

(d) In regions not eligible for regional aid, for companies
that are not small and medium-sized enterprises but
which have less than 750 employees and/or less than
EUR 200 million turnover, on condition that such
beneficiary fulfils all other conditions of Recommenda-
tion 2003/361/EC, aid up to 20 % of eligible invest-
ments as listed in the guidelines on national regional aid
for 2007–2013, and fulfilling the relevant conditions of
those guidelines.

(43) Unless specified elsewhere in these guidelines, for example
for aid linked to environmental protection, the Commission
will thus only authorise aid for investment for companies
active in the processing and marketing of agricultural
products with 750 employees and more and a turnover of
EUR 200 million and more, if it fulfils all the conditions of
the guidelines on national regional aid 2007–2013, up to
the maximum amount determined in the regional aid map
approved for the Member States concerned for the period

IV.C.

Environmental and animal welfare aid

(48) Unless expressly specified, this sub-chapter only applies to

aid granted to primary producers (farmers).

IV.C.1. General Principles

(49) In order to determine its future policy, the Commission has
in particular taken into account the following considera-
tions:

(a)

in accordance with Article 174 of the Treaty, Commu-
nity policy on the environment shall aim at a high level
of protection taking into account
the diversity of
situations in the various regions of the Community. It
shall be based on the precautionary principle and on
the principles that preventative action should be taken,
that environmental damage should as a priority be
rectified at source and that the polluter should pay;

(b) all environmental aid schemes in the agricultural sector
should be compatible with the general objectives of
Community environmental policy.
In particular, aid
schemes which fail to give sufficient priority to the
elimination of pollution at source or to the correct
application of the polluter pays principle cannot be

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considered compatible with the common interest, and
therefore cannot be authorised by the Commission;

sector

(c) since the adoption of the Community guidelines for
in 1999 (18),
State aid in the agriculture
Community State aid policy in favour of environmental
protection has been changed substantially, for example
as far as operating aid or aid in favour of renewable
energy is concerned. The rules set out in the 1999
guidelines for State aid in the agriculture sector are now
in part stricter than those applied to other sectors. In
order to avoid discrimination and in order to allow
Member States to implement environmental policy
across all sectors,
the Commission has on various
occasions applied the rules developed for other sectors
also to the agriculture sector. For these reasons, apart
from various measures that remain specific to the
agriculture sector such as agri-environmental support,
the Community guidelines on State aid for environ-
mental protection (19) shall in the future also apply to
the agriculture sector;

(d) Articles 3 and 4 of Regulation (EC) No 1782/2003
establish an obligation for farmers to respect certain
statutory management requirements. Article 5 imposes
an obligation to keep all agricultural
land in good
agricultural and environmental condition. No State aid
under this chapter should be granted to farmers not
meeting these conditions, nor should State aid be
granted for simply respecting these conditions, unless
this is specifically foreseen in Regulation (EC) No 1698/
2005 notably as far as Natura 2000 payments are
concerned;

(e) aid for investment in the field of primary production
will be evaluated in accordance with the general rules
set out in chapter IV.A above.

IV.C.2. Aid for Agri-environmental or animal welfare commit-

ments

IV.C.2.a. A n a l y s i s

(50) In order to determine its future policy, the Commission has
in particular taken into account the following considera-
tions:

(a) Regulation (EC) No 1698/2005 and in particular
Articles 39 and 40 thereof set out a framework for
Community support for agricultural production meth-
ods designed to protect
the environment and to
maintain the countryside, and for animal welfare
payments. Additional conditions and specifications are
set out in implementing rules adopted by the Commis-
sion. In accordance with Article 88(4) of Regulation
(EC) No 1698/2005, State aid to support farmers who
give agri-environmental or animal welfare commit-
ments which fail to satisfy the conditions laid down in
Articles 39 and 40 thereof are prohibited;

(18) OJ C 232, 12.8.2000, p. 19.
(19) OJ C 37, 3.2.2001, p. 3.

(b) in accordance with Article 88(4) of Regulation (EC)
No 1698/2005, additional State aid exceeding the
maximum amounts set in the Annex thereto, as regards
Articles 39(4) and 40(3) of that Regulation, may be
granted if duly justified. Moreover, in exceptional cases,
duly justified derogations may be permitted in respect
of the minimum duration of those commitments as laid
down in Articles 39(3) and 40(2) of that Regulation.
For the sake of clarity,
it appears useful to set out
conditions for the application of these specific State aid
provisions. Such higher support should normally only
be accepted for commitments which entail a real change
of current agricultural practice, leading to a demon-
strable positive effect on the environment. Care should
be taken that high absolute amounts of support granted
per hectare or animal do not lead to or accentuate
imbalances
level between
Member States.

in the overall

support

IV.C.2.b. P o l i c y o n a i d f o r a g r i - e n v i r o n m e n t a l

a n d a n i m a l w e l f a r e c o m m i t m e n t s

(51) Aid for agri-environmental or animal welfare commitments
shall be declared compatible with Article 87(3)(c) of the
in
Treaty if
Articles 39 or 40 of Regulation (EC) No 1698/2005, and of
the relevant implementing rules adopted by the Commis-
sion.

the requirements as set out

fulfils all

it

(52) When notifying State aid in favour of agri-environmental or
animal welfare commitments, Member States must under-
take to adapt such schemes to any relevant modification of
Regulation (EC) No 1698/2005 or its implementing rules
adopted by the Commission.

(53) A Member State wishing to grant additional aid exceeding
the maximum amounts fixed in accordance with Articles 39
(4) or 40(3) of Regulation (EC) No 1698/2005 shall provide
supporting evidence that
the
conditions laid down in that Regulation and the relevant
implementing rules. It shall also provide a justification for
the additional aid payments including a detailed breakdown
of the cost components involved on the basis of income
foregone and additional costs resulting from the commit-
ment given.

the measure meets all

(54) Aid exceeding the amounts

fixed in the Annex to
Regulation (EC) No 1698/2005 shall in principle only be
declared compatible with Article 87(3)(c) of the Treaty if it
is granted for demonstrated additional costs and/or income
in exceptional cases taking into account of
foregone,
in favour of
specific circumstances to be duly justified,
commitments which entail a real change of current
agricultural practice and lead to a demonstrable and
significant positive effect on the environment. Unless
exceptional benefits for environmental protection can be
demonstrated, such higher aid shall thus not be authorised
to change
in favour of

farmers simply proposing not

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current agricultural practice on the land involved (for
example, for not changing extensive grazing into more
intensive forms of production).

(55) If a Member State wants to compensate for transaction
costs caused by entering into agri-environmental or animal
welfare commitments, it must provide convincing proof of
such costs, for example by presenting cost comparisons
with farms not entering into such commitments. The
Commission will therefore not normally authorise State aid
for transaction costs for the continuation of agri-environ-
mental or animal welfare commitments already entered
into in the past, unless a Member State demonstrates that
such costs continue to occur or that new transaction costs
are being borne.

(56) Where transaction costs are calculated on the basis of
average costs and/or average farms, Member States should
demonstrate that in particular large farms are not over-
compensated. For the purpose of calculating compensation,
the
Member States
transaction costs in question are incurred per farm or per
hectare.

take into account whether

shall

(57) Aid for the costs of non-productive investments linked to
the achievements of commitments undertaken under agri-
environmental commitments may be granted up to 100 %
of eligible expenses. For this purpose, non productive
investments should not lead to a net increase in farm value
or profitability.

(58) Where, exceptionally, a Member State proposes to grant
State aid in respect of commitments of a shorter duration
than that prescribed in accordance with Regulation (EC)
No 1698/2005, it should provide a detailed justification,
the full environmental
including a demonstration that
effects of the measure can be realised in the shorter time
proposed. The amount of aid proposed should reflect the
shorter duration of the undertakings given.

IV.C.3. Natura 2 000 payments and payments linked to directive

2000/60/ec

IV.C.3.a. A n a l y s i s

(59) For

the establishment of

the following
considerations have in particular been taken into account:

future policy,

(a) Article 38 of Regulation (EC) No 1698/2005 establishes
Community support for farmers to compensate for
costs incurred and income foregone as a result of
disadvantages in the areas concerned related to the
implementation of Council Directive 79/409/EEC of

2 April 1979 on the conservation of wild birds (20),
Council Directive 92/43/EEC of 21 May 1992 on the
conservation of natural habitats and of wild fauna and
flora (21) and Directive 2000/60/EC of the European
Parliament and of the Council of 23 October 2000
establishing a framework for Community action in the
field of water policy (22);

(b) contrary to Article 16 of Council Regulation (EC)
No 1257/1999 of 17 May 1999 on support for rural
development from the European Agricultural Guidance
and Guarantee Fund (EAGGF) and amending and
repealing certain Regulations (23), Article 38 of Regula-
tion (EC) No 1698/2005 limits the possibility of
compensation to the effect of
the three directives
referred to in point (a). As a consequence, State aid for
income foregone or extra costs resulting from the
implementation of other Community standards should
no longer be authorised under this heading;

(c) with a view to the single farm payment established by
Regulation (EC) No 1782/2003 and the obligation to
land in good agricultural and
keep all agricultural
environmental condition set out in Article 5 of that
Regulation, no State aid should be granted for the costs
resulting from simply respecting these conditions.

IV.C.3.b. P o l i c y

(60) The Commission will declare State aid compatible with
Article 87(3)(c) of the Treaty if it fulfils all the conditions set
out in Article 38 of Regulation (EC) No 1698/2005 and the
relevant implementing rules adopted by the Commission.
Aid will only be permitted for obligations going beyond
cross compliance obligations and the conditions set out in
Article 5 of Regulation (EC) No 1782/2003. Any aid which
is granted in breach of the polluter pays principle should be
exceptional, temporary and degressive.

IV.C.4. Other aid in favour of environmental protection

(61)

Investment aid to farmers in relation to environmental
protection is dealt with under chapter IV.A above.

(62) The Commission will examine any other aid in favour of
environmental protection on the basis of the Community
guidelines on State aid for environmental protection, which
are thus declared applicable to the agriculture sector.
Should those guidelines be modified or replaced, such new
provisions shall be applied unless specified otherwise in
such rules.

(20) OJ L 103, 25.4.1979, p. 1.
(21) OJ L 206, 22.7.1992, p. 7.
(22) OJ L 327, 22.12.2000, p. 1. Directive as amended by Decision
No 2455/2001/EC of the European Parlament and of the Council (OJ
L 331, 15.12.2001, p. 1).

(23) OJ L 160, 26.6.1999, p. 80. Regulation as last amended by
Regulation (EC) No 1698/2005 (OJ L 271, 21.10.2005, p. 1).

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the Treaty if

(63) Aid for environmental protection in favour of companies
active in the processing and marketing of agricultural
products shall be declared compatible with Article 87(3)(c)
of
the
Community guidelines on State aid for environmental
investment aid in favour of
protection.
environmental protection, a possible higher maximum aid
rate resulting from the application of
for
investment aid set out above in chapter IV.B may be applied.

the conditions of

In case of

the rules

fulfils all

it

(67) A consistent method for calculating the economic impact of
recognised handicaps should be established, based on the
experience acquired by the Commission. This method shall
notably ensure that there is no overcompensation of the
economic effect of natural handicaps.

(68) Distortions of competition and serious imbalances in the
overall support levels between Member States should be
avoided. Therefore, an upper limit of compensation should
be established.

IV.D.

Aid to Compensate for Handicaps in certain

areas

(69) These rules may be reviewed following the entry into force
of Articles 37 and 88(3) of Regulation (EC) No 1698/2005.

(64) This sub-chapter only applies to support granted to primary

production (farmers).

IV.D.2. Policy

IV.D.1. Analysis

(65) Article 37 of Regulation (EC) No 1698/2005 provides for
in mountain areas of a
natural handicap payments
maximum of EUR 250 per hectare of UAA and payments
in other areas with handicaps of a maximum of EUR 150
per hectare of UAA. Payments higher than the maximum
amounts may be granted in duly justified cases provided
that the average amount of all these payments granted at
the level of the Member State concerned does not exceed
this maximum amount. Article 88(3) of Regulation (EC)
No 1698/2005 prohibits the payment of State aid to
farmers to compensate for natural handicaps in mountain
areas and in other areas with handicaps if it does not satisfy
the conditions laid down in Article 37. However, additional
aid exceeding the amounts fixed according to Article 37(3)
may be granted in duly justified cases.

(66) According to the third subparagraph of Article 94 of
Regulation (EC) No 1698/2005, Articles 37 and 88(3) shall
apply from 1 January 2010, subject to an act of Council
adopted in accordance with the procedure laid down in
Article 37 of the Treaty. Until then, in accordance with
Article 93(1) of Regulation (EC) No 1698/2005,
the
relevant provisions of Regulation (EC) No 1257/1999 are
maintained, notably Articles 14(2), 15 and 51(3) of that
Regulation. Council Regulation (EC) No 1783/2003 of
29 September 2003 amending Regulation (EC) No 1257/
1999 on support for rural development from the European
Agricultural Guidance and Guarantee Fund (EAGGF) (24) has
increased the maximum average amount per hectare that
may be granted on the basis of Article 15 of Regulation (EC)
No 1257/1999 from EUR 200 to EUR 250 in cases duly
justified by objective circumstances. Contrary to Article 88
(3) of Regulation (EC) No 1698/2005, Article 51(3) of
Regulation (EC) No 1257/1999 prohibits State aid above
the maximum amount set in the Annex to the Regulation, i.
e. State aid above an average of EUR 250 per hectare.

(24) OJ L 270, 21.10.2003, p. 70

(70) Until the entry into force of Articles 37 and 88(3) of
Regulation (EC) No 1698/2005,
the Commission will
declare State aid compatible with Article 87(3)(c) of the
Treaty if it fulfils all the conditions of Articles 14(1), the
first
two indents of Article 14(2) and Article 15 of
Regulation (EC) No 1257/1999, and any implementing
rules of this Regulation adopted by the Commission, and if
the beneficiaries fulfil cross-compliance obligations.

(71) Where State aid measures are combined with support under
Regulation (EC) No 1257/1999, the total support granted to
the farmer must not exceed the amounts determined in
accordance with Article 15 thereof.

(72) From the entry into force of Articles 37 and 88(3) of
Regulation (EC) No 1698/2005,
the Commission will
declare State aid compatible with Article 87(3)(c) of the
Treaty if it fulfils all the conditions of these Articles, and
any implementing rules adopted by the Council or the
Commission.

(73) In all cases, for aid granted under both Regulation (EC)
No 1257/1999 and under Regulation (EC) No 1698/2005,
State aid shall only be declared compatible with Article 87
(3)(c) of the Treaty under the following conditions:

(a) The Member State must demonstrate the handicaps in
question and provide proof
the amount of
compensation to be paid avoids any overcompensation
of the effect of these handicaps;

that

(b) The level of compensatory payments shall be propor-
tionate to the economic impact of the handicaps. The
level of payments shall
therefore be differentiated
according to the relative impact of handicaps in
different areas with handicaps. That means that where
the average impact of handicaps per hectare of
comparable farms differs by e.g. 20 %, compensatory
payments should be differentiated accordingly;

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(c) Only the economic impact of permanent handicaps
that lie outside of human control may be taken into
account for calculating the amount of compensatory
payments. Structural disadvantages open to improve-
ment through modernisation of farms or factors such as
taxes, subsidies or the implementation of the reform of
the common agricultural policy may not be taken into
account;

(d) The Commission will verify the absence of over-
compensation and the proportionality of payments by
using statistical tools that are harmonised at Commu-
nity level. Where such tools are not available or
sufficient, other data shall be used where the Commis-
sion can ascertain that they are sufficiently representa-
tive for the purposes of the verification;

(e) Compensatory payments

shall

reflect

the average

economic impact of the handicaps per hectare;

(f) The amount of compensation that can be granted shall
normally be established by comparing the average
income per hectare of farms in areas with handicaps
with the income of same-size farms producing the same
products in areas without handicaps situated in the
same Member State. The income to be taken into
account in this respect shall be direct income from
farming and notably exclude taxes paid or subsidies
received. In the case of a whole Member State being
considered as consisting of areas with handicaps, the
comparison shall be made with similar areas in other
Member States in which the production conditions, in
particular as regards climate and geography, can be
meaningfully compared to those in that first Member
State.

(74) The Commission,

in coherence with rural development
rules, reserves the right to require degressive payments for
farms above a certain size. To that effect, notifications
should specify the size of the farm that will benefit from
these payments.

(b) Article 88(5) of Regulation (EC) No 1698/2005
prohibits State aid to support farmers who adapt to
demanding standards based on Community legislation
in the fields of the environmental protection, public
health, animal and plant health, animal welfare and
occupational safety if it does not satisfy the conditions
laid down in Article 31. However, additional aid
exceeding the maximum amounts fixed in accordance
with that Article may be granted to help farmers to
comply with national legislation which exceeds Com-
munity standards;

(c)

legislation in the fields of

in the absence of Community legislation, Article 88(6)
of Regulation (EC) No 1698/2005 prohibits State aid to
support farmers who adapt to demanding standards
based on national
the
environmental protection, public health, animal and
plant health, animal welfare and occupational safety if it
does not satisfy the conditions laid down in Article 31.
However, additional aid exceeding the maximum
amounts set in the Annex, as regards Article 31(2),
may be granted if justified under Article 31;

(d) in order to provide for sufficient clarity, the notion of
what can be considered a ‘significant impact on typical
farm operating costs’ and ‘a significant number of
farms’ should be specified;

(e) Article 31 of Regulation (EC) No 1698/2005 limits the
overall compensation a farmer may receive over a
period of five years for costs incurred and income
foregone due to the application of one or more of the
standards listed to EUR 10 000 Significant additional
State aid granted above this amount may lead to
distortions of competition notably in the case of
important differences between Member States or
regions in the actual level of support. Also, large farms
should be better able to support
the impact on
operating costs of new compulsory standards. There-
fore, an absolute maximum level of support should be
established;

IV.E.

Aid for meeting standards

(75) This sub-chapter only applies to support granted to primary

production (farmers).

(f) as far as new standards not based on Community
standards are concerned, support should be limited to
costs caused by standards which risk creating a real
competitive handicap for the farmers concerned.

IV.E.1. Analysis

IV.E.2. Policy

(76)

In order to determine its future policy, the Commission has
in particular taken into account the following considera-
tions:

to farmers towards parts of

(a) Article 31 of Regulation (EC) No 1698/2005 provides
the costs
for support
incurred and income foregone as a result of
the
application standards in the fields of environmental
protection, public health, animal and plant health,
animal welfare and occupational safety;

(77) The Commission will declare State aid compatible with
Article 87(3)(c) of the Treaty if it fulfils all the conditions of
Articles 31 and 88(5) or (6) of Regulation (EC) No 1698/
2005, and any implementing rules adopted by the
Commission

(78) Support going above the maximum limit set in the Annex
to Regulation (EC) No 1698/2005 shall not cover more

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than 80 % of costs incurred and income foregone by
farmers. Altogether, and taking into account any Commu-
nity support that may be granted, support shall not exceed
EUR 12 000 per holding. This amount shall not be
exceeded over any period of
in case of
compensation granted for meeting more than one standard.

five years

IV.G.

Aid for Early Retirement or for the cessation

of farming activities

(85) This chapter only applies to support granted to primary

production (farmers).

(79) Support may only be granted in relation to standards
which, if calculated for an average farm of the sector and
Member State concerned by the standard, can be shown to
be the direct cause of :

IV.G.1. Analysis

(86) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(a) an increase in operating costs for the product or
products concerned by the standard of at least 5 %; or

(b) an income loss equal to at least 10 % of net profits from
the product or products concerned by the standard.

to conditions

— Article 23 of Regulation (EC) No 1698/2005 provides
for early retirement. Provided they are
for support
subject
requiring a permanent and
definitive cessation of commercial farming activities,
such aid schemes have only a limited effect on
competition, whilst contributing to the long-term
development of the sector as a whole.

(80) Support may only be granted in relation to standards which
lead to such an increase in operating costs or loss of income
for at least 25 % of all farms of the (sub)sector in the
Member State concerned by the standard.

IV.G.2. Policy

(81) In relation to national standards, the Member State shall
demonstrate that the introduction of the relevant standard
at national
level would risk causing an important
competitive handicap to the producers concerned. The
demonstration of such handicap shall be made on the basis
of average net profit margins for average farms of the (sub)
sector concerned by the standard.

IV.F.

Aid for the setting up of young farmers

(87) The Commission will declare State aid for early retirement
compatible with Article 87(3)(c) of the Treaty if it fulfils the
conditions of Article 23 of Regulation (EC) No 1698/2005.
The Commission will authorise payments going above the
maximum amounts set out in that Regulation provided the
Member State demonstrates that such payment
is not
passed on to active farmers.

(88) Provided they are subject

requiring a
permanent and definitive cessation of commercial farming
activities, the Commission will authorise State aid for the
withdrawal of farmers from any agricultural activity.

to conditions

(82) This sub-chapter only applies to support granted to primary

production (farmers).

IV.H.

Aid for Producer Groups

IV.F.1. Analysis

(83) Support

for the setting-up of young farmers tends to
encourage the development of the sector as a whole and
prevent the depopulation of rural areas. Article 22 of
Regulation (EC) No 1698/2005 therefore provides for a
Community scheme to support the setting-up of young
farmers.

IV.F.2. Policy

IV.H.1. Analysis

(89) In order to establish its future policy, the Commission has
in particular taken account of the following considerations.
Because of the disparate nature of agricultural production,
the Commission has traditionally taken a favourable view of
‘start-up’ aids intended to provide an
the payment of
incentive for
the constitution of producers groups to
promote the bringing together of farmers with a view to
concentrating their supply and adapting their production to
market requirements. In order to focus support on small
producer groups, and in order to avoid large amounts of
support being granted, such aid should, however, be limited
to small and medium-sized enterprises, within a maximum
amount.

(84) The Commission will declare State aid to support the
setting-up of young farmers compatible with Article 87(3)
(c) of the Treaty if it fulfils the conditions of Article 22 of
Regulation (EC) No 1698/2005 and any implementing rule
of this Regulation adopted by the Commission.

IV.H.2. Policy

(90) The Commission will declare start-up aid for producer
groups compatible with Article 87(3)(c) of the Treaty if it

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fulfils all the conditions of [Article 9 of draft exemption
regulation].

IV.I.2. Policy

(91) Aids granted to other agricultural associations, which
undertake tasks at the level of agricultural production,
such as mutual support and farm relief and farm manage-
ment services,
in the members' holdings without being
involved in the joint adaptation of supply to the market are
not covered by this section. However, the Commission will
apply the principles set out in this section to aids which are
granted to cover the start-up costs of associations of
producers which are responsible for the supervision of the
use of denominations of origin or quality marks.

(92) Aids which are granted to producer groups or associations
to cover expenses which are not linked to start-up costs,
such as investments or promotion activities, will be
assessed in accordance with the rules governing such aids.

(93) Aid schemes authorised under this section will be subject to
a condition requiring them to be adjusted to take account
of any change in the regulations governing the common
organisations of the market.

(94) As an alternative to providing aid to producer groups or
associations thereof, aid up to the same overall amount may
be granted directly to producers to offset their contribu-
tions to the cost of running the groups during the first five
years following the formation of the group. The Commis-
sion will not authorise State aid towards the costs covered
by this sub-chapter in favour of large companies.

IV.I.

Aid for land reparcelling

IV.I.1. Analysis

(95) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(96) The Commission will declare aid for land reparcelling
compatible with Article 87(3)(c) of the Treaty if it fulfils all
the conditions of Article 13 of
[the new exemption
Regulation].

IV.J.

Aid to encourage the production and marketing

of quality agricultural products

IV.J.1. Analysis

(97) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(a) aid measures intended to provide an incentive to
improve the quality of agricultural products tend to add
to the value of agricultural production, and help the
sector as a whole to adjust to consumer demand, which
places increasing emphasis on quality. The Commission
has generally taken a favourable position in respect of
such aids. However, experience has shown that such aid
measures may present a risk of a distortion of the
conditions of competition, and may affect
trade
between Member States in a manner contrary to the
common interest. This is particularly the case where
large amounts of aid are granted, or where the payment
of aid continues after the aid has ceased to have any
incentive effect, and therefore takes on the nature of
operating aid;

(b) Article 32 of Regulation (EC) No 1698/2005 has
introduced a specific support measure for the participa-
tion of farmers in food quality schemes. State aid rules
should be brought in line with this support measure;

(c)

large companies should be able to finance the costs of
such measures themselves; therefore, support should be
limited to small and medium-sized enterprises; in this
context, the Annex to Regulation (EC) No 1698/2005
establishes a maximum amount per holding;

(a) support for land reparcelling tends to encourage the
development of the sector as a whole and improve the
infrastructure. Article 30 of Regulation (EC) No 1698/
2005 therefore provides for a Community scheme to
support land reparcelling.

(d) because of the similarities between companies active in
the processing and marketing of agricultural products,
support to such companies should be authorised in line
with the rules for support granted to other manufactur-
ing enterprises.

(b) the Community guidelines

for State aid in the
agriculture sector 2000–2006 have established rules
governing the granting of aid for land reparcelling; the
purpose of these aids was to support the exchange of
plots of agricultural land and to facilitate the establish-
ment of economically viable holding;

(c) experience has shown that aid for land reparcelling can
be maintained, given its contribution to the develop-
ment of the agriculture sector as well as its limited
effects on competition.

IV.J.2. Policy

(98) The Commission will declare State aid to encourage the
production of quality agricultural products granted to
primary producers (farmers) compatible with Article 87(3)
(c) of the Treaty if it fulfils all the conditions of [Article 14
of future exemption Regulation].

(99) The Commission will declare State aid to encourage the
production of quality agricultural products granted to

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companies active in the processing and marketing of
agricultural products compatible with Article 87(3)(c) of
the Treaty if it fulfils all the conditions of Article 5 of
Regulation (EC) No 70/2001.

(105) The Commission will declare State aid for the provision of
technical support granted to companies active in the
processing and marketing of agricultural products compa-
tible with Article 87(3)(c) of the Treaty if it fulfils all the
conditions of Article 5 of Regulation (EC) No 70/2001.

(100) The Commission will not authorise State aid towards the
costs covered by this sub-chapter in favour of
large
companies.

(101) Aid for

investments which are necessary to upgrade
production facilities,
including investments necessary to
manage the documentation system and perform process
and product controls, may only be granted in accordance
with the rules set out in chapters IV.A and IV.B above, as
appropriate.

IV.K.

Provision of technical support in the

agricultural sector

IV.K.1. Analysis

(102) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

aids

improve

sector. Such soft

(a) the Commission takes a favourable view of aid schemes
which are intended to provide technical support in the
agricultural
the
efficiency and professionalism of agriculture in the
Community, and thus contribute to its long-term
viability while producing only very limited effects on
competition. Since support in favour of the costs of
farmers from the use of the service of machinery rings
for the exchange of machines and farm labour is a re-
occurring expense and part of the normal operating
costs of a farmer, such support should in the future be
limited to de minimis support.

(b) large companies should be able to finance the costs of
such measures themselves. Therefore, support should
be limited to small and medium-sized enterprises;

(c) because of the similarities between companies active in
the processing and marketing of agricultural products,
support to such companies should be authorised in
line with the rules for support granted to other
manufacturing enterprises.

IV.K.2. Policy

(103) The Commission will declare State aid for the provision of
technical support granted to primary producers (farmers)
compatible with Article 87(3)(c) of the Treaty if it fulfils all
future exemption
[Article 15 of
the conditions of
Regulation].

(106) The Commission will not authorise State aid towards the
costs covered by points 104 and 105 in favour of large
companies.

(107) The Commission will examine on a case by case basis State
aid in favour of other activities for the vulgarisation of new
techniques, such as reasonable small scale pilot projects or
demonstration projects. The Member State shall provide a
clear description of the project including an explanation of
the novel character of the project and of the public interest
in granting support for it (for example because it has not
been tested before) and demonstrate compliance with the
following conditions:

(a) the number of participating companies and the
duration of the pilot scheme shall be limited to what
is necessary for proper testing;

(b) the combined amount of aid for such projects granted
to a company shall not exceed EUR 100 000 over three
fiscal years;

(c) the results of the pilot scheme shall be made publicly
least on the internet, at an address

available, at
indicated in the aid scheme;

(d) any other condition the Commission may deem
necessary to avoid the scheme having a distorting
effect on the market or amounting to operating aid.

IV.L

Aids in the livestock sector

IV.L.1. Analysis

(108) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(a) the Community guidelines

for State aid in the
agriculture sector 2000–2006 have established rules
governing the granting of aids in the livestock sector;
the purpose of
the
these aids was
maintenance and improvement of the genetic quality
of Community livestock;

to support

(104) The provision of technical support to primary producers
(farmers) can be undertaken by producer groups or other
organisations, regardless of their size.

(b) experience has shown that

these aids should be
maintained only where they really contribute to the
maintenance and improvement of the genetic quality
of livestock; aids aimed at covering part of the cost of

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keeping individual male breeding animals cannot be
considered as meeting this objective, as they only
relieve farmers of costs they should normally bear in
their activity;

(c) aids aimed at covering a part of the costs linked to the
introduction at
innovative animal
farm level of
breeding techniques or practices may be maintained
for a certain period of time, although they also relieve
farmers from costs they should normally bear in their
activity, given the innovation element they focus on;
artificial insemination should not be eligible for aid, as
it is not considered as an innovative practice;

(d) animal reproduction is not a proper primary produc-
tion activity; therefore investments aids for animal
reproduction centres should be governed by the rules
applicable to aids to companies active in the processing
and marketing of agricultural products;

(e)

large companies should be able to finance the costs of
measures under this sub-chapter themselves. Therefore,
support should be limited to small and medium-sized
enterprises;

IV.L.2. Policy

(109) The Commission will declare State aid in the livestock
sector compatible with Article 87(3)(c) of the Treaty if it
fulfils all conditions of Article 16(1)(a), (b) and (c) and
Article 16(3) of [the new exemption Regulation]. The
Commission will not authorise State aid towards the costs
covered by this chapter in favour of large companies.

IV.M.

Aids for the outermost regions and the

aegean islands

IV.M.1. Analysis

(i) additional support for premium or aid schemes
under a common organisation of the market, save
in exceptional cases justified by objective criteria;

(ii) support for research projects, measures to support
research projects or measures eligible for Commu-
nity financing under Council decision 90/424/EEC
of 26 June 1990 on expenditure in the veterinary
field (26);

(iii) support for measures within the scope of Regula-

tion (EC) No 1698/2005;

(c) since 2000, the Commission has only gained limited
experience with State aid measures notified for the
it is difficult to
outermost regions. For this reason,
draw up a generic description of the measures that
could be specifically authorised for these regions;

(d) Article 16 of Regulation (EC) No 247/2006 provides
that the Commission may authorise operating aid in
the sectors producing, processing and marketing
agricultural products falling within the scope of Annex I
of the Treaty, to which Articles 87, 88 and 89 of the
Treaty apply, with a view to mitigating the specific
constraints on farming in the outermost regions as a
insularity and distant
result of
location;

remoteness,

their

(110) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(e) Article 21 of Regulation (EC) No 247/2006 authorises
Spain to grant State aid for the production of tobacco
in the Canary Islands.

(a) Regulation (EC) No 1698/2005 provides for specific
derogations and aid rates for
investment support
granted to both farmers and processing and marketing
companies in the outermost regions and the smaller
Aegean islands within the meaning of Regulation (EC)
No 2019/93. These aid rates have already been taken
into account in the chapter relating to investment aid;

(b) Article 11 of Council Regulation (EC) No 247/2006 of
30 January 2006 laying down specific measures for
agriculture in the outermost regions of the Union (25)
provides that measures taken under support pro-
grammes in the outermost regions must comply with
Community law and be consistent with other Com-
munity policies and with the measures taken under
those policies.
In particular, no measure under
Regulation (EC) No 247/2006 may be financed as:

(25) OJ L 42, 14.2.2006, p. 1.

IV.M.2. Policy

(111) The Commission will examine proposals to grant State aid
designed to meet the needs of these regions on a case by
case basis, on the basis of the specific legal provisions
applying to these regions, and having regard to the
compatibility of the measures concerned with the Rural
Development Programmes for the regions concerned, and
their effects on competition both in the regions concerned
and in other parts of the Community.

(26) OJ L 224, 18.8.1990, p. 19. Decision as last amended by Decision

2006/782/EC (OJ L 328, 24.11.2006, p. 57).

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V.

RISK AND CRISIS MANAGEMENT

V.A.

General

(112) Good risk and crisis management is a key tool for a
in the
sustainable and competitive agriculture sector
Community. Debate has been stimulated recently by the
Communication from the Commission on risk and crisis
management in agriculture (27). The discussion at Council
level during 2005 concluded (28) unanimously that the use
of State aid for risk and crisis management measures must
be subject to the appropriate Community competition
rules. The Council agreed that eligible risk management
tools must therefore comply with the provisions laid down
in the Community guidelines on State aid in the agriculture
sector. There was broad consensus amongst Member States
that although public financing may be essential, especially
for the establishment and smooth start-up of new tools,
joint responsibility and therefore a financial contribution
from agricultural producers is also essential.

(113) For certain types of risk and crisis in the agriculture sector,
the granting of State aid can be an appropriate means of
support. However, it must always be borne in mind that
there is no obligation on a Member State to actually grant
State aid. As a consequence, for a similar risk or crisis,
producers in one Member State or region may receive
support while those in other Member States or regions do
not. Such differences in support may lead to distortions of
competition. Therefore, just as for other types of State aid,
the authorisation of State aid for risk and crisis manage-
ment must take into consideration the need to avoid undue
distortions of competition. Requiring a minimum con-
tribution from producers to losses or the cost of such
measures or some other adequate counterpart should be
foreseen to mitigate the risk of distortions of competition
and to provide an incentive for minimising risk.

(114) It is primary production (farming) that is exposed to the
particular risks and crises confronting the agriculture
sector. Companies active in the processing and marketing
of agricultural products normally have much better
possibilities to hedge risks. Therefore, certain types of risk
and crisis support should be limited to primary produc-
tion.

(115) State aid should be limited to helping farmers facing
various difficulties despite having undertaken reasonable
efforts to minimise such risks. State aid should not have as
its effect to entice farmers into taking unnecessary risk.
Farmers should themselves bear
the consequences of
imprudent choices of production methods or products.

(116) Based on these considerations,

the Commission has
reviewed the existing series of risk and crisis management
measures that may be financed through State aid. The
conclusion of this review is that the existing combination
of tools is adequate, but should be refined in the light of
experience. In the light of the large-scale evaluation and re-
examination of Community animal disease compensation
policy that is still going on, it will however be necessary to
review sub-chapter V.B.4 as soon as this evaluation has
been concluded.

(27) COM(2005) 74.
(28) Council document 11120/05 of 15 September 2005.

agricultural processing

(117) The introduction in 2005 of a de minimis facility (29) at the
level of primary production offers an additional tool to
Member States to grant a minimum of support quickly and
without any need to seek Commission authorisation. The
inclusion of
and marketing
companies in the de minimis Regulation covering non-
agricultural companies, which opens up the possibility of
support up to [EUR 200 000] per company and per period
of
facility to
support such companies. However, it must be clear that de
minimis support cannot solve bigger economic problems
resulting from a crisis. Any more substantial support must
be granted within a State aid framework that ensures
Commission control and avoids distortions of competition.

three fiscal years provides an additional

(118) It should be clear that these State aid rules alone cannot as
such provide for or replace optimal crisis management.
State aid can only facilitate it in certain circumstances. A
crisis may happen overnight, requiring rapid reaction.
Effective crisis management requires Member States to
think early about which State aid measures shall be made
available.
is the responsibility of Member States to
examine the various State aid support possibilities and to
set up aid schemes in time, so that they can be immediately
put to use in the event of acute problems. Otherwise, the
need to establish a compensation system, notify it and seek
Commission authorisation may take precious time before
help can be offered to those most in need.

It

V.B.

Aids to Compensate for Damage to

Agricultural production or the Means of Agricultural
Production

V.B.1. General

(119) In order to avoid a risk of the distortion of the conditions
of competition, the Commission considers it important to
ensure that aid to compensate enterprises for damage
caused to agricultural production is paid as soon as
possible after
the adverse event
concerned. Where aid is paid only several years after the
occurrence of the event in question, there is a real danger
the payment of such aid will produce the same
that
economic effects as operating aid. This is particularly the

the occurrence of

(29) Commission Regulation (EC) No 1860/2004 of 6 October 2004 on
the application of Articles 87 and 88 of the EC Treaty to de minimis
aid in the agriculture and fisheries sectors (OJ L 325, 28.10.2004,
p. 4).

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case where aid is paid retrospectively in respect of claims
which were not properly documented at
the time.
Therefore,
in the absence of a specific justification,
resulting for example from the nature and extent of the
event, or the delayed or continuing nature of the damage,
the Commission will not approve proposals for aid which
are submitted more than three years after the occurrence of
the event, nor for aid to be paid out more than four years
following the event.

insurance policies, should be deducted from the amount of
aid. The Commission will also accept aid to compensate
for loss of income resulting from the destruction of the
means of agricultural production, provided that there is no
over-compensation. In all cases, the case law of the Court
of Justice requires the Member State to demonstrate a
direct link between the damage caused by the exceptional
occurrence and the State aid and as precise an assessment
as possible to be made of the damage suffered by the
producers concerned.

V.B.2. Aid to make good the damage caused by natural disasters

or exceptional occurrences

(120) This sub-chapter applies to the whole of the agriculture

sector.

(121) Because they constitute exceptions to the general principle
the incompatibility of State aid with the common
of
market laid down by Article 87(1) of
the Treaty, the
Commission has consistently held that the notions of
‘natural disaster’ and ‘exceptional occurrence’ contained in
Article 87(2)(b) must be interpreted restrictively. This has
been confirmed by the Court of Justice of the European
Communities (30). Hitherto the Commission has accepted
that earthquakes, avalanches, landslides and floods may
constitute natural disasters. In order to facilitate rapid crisis
management, the Commission will in the future authorise
aid schemes to compensate for the damages of natural
disasters in the form of earthquakes, avalanches, landslides,
floods and other natural disasters provided that a
sufficiently precise description can be established.

(122) Exceptional occurrences which have hitherto been
internal
accepted by the Commission include war,
disturbances or strikes, and with certain reservations and
depending on their extent, major nuclear or industrial
accidents and fires which result in widespread loss. On the
other hand the Commission did not accept that a fire at a
single processing plant which was covered by normal
commercial insurance could be considered as an excep-
tional occurrence. As a general rule, the Commission does
not accept that outbreaks of animal or plant diseases can
be considered to constitute natural disasters or exceptional
occurrences. However, in one case the Commission did
recognise the very widespread outbreak of a completely
new animal disease as an exceptional occurrence. Because
of the inherent difficulties in foreseeing such events, the
Commission will continue to evaluate proposals to grant
aid in accordance with Article 87(2)(b) of the Treaty on a
case by case basis, having regard to its previous practice in
this field.

(123) Once the existence of a natural disaster or an exceptional
occurrence has been demonstrated, the Commission will
permit aid of up to 100 % to compensate for material
damage. Compensation should normally be calculated at
the level of the individual beneficiary. In order to avoid
over-compensation, any payments due, for example under

V.B.3. Aid to compensate farmers for losses caused by adverse

weather conditions

(124) This sub-chapter applies only to support granted to

primary production (farmers).

V.B.3.1. A n a l y s i s

(125) In order to establish its future policy, the Commission has
in particular taken account of the following considera-
tions:

(a) the Commission has consistently held that adverse
weather conditions such as frost, hail,
ice, rain or
drought cannot of themselves be regarded as natural
disasters within the meaning of Article 87(2)(b).
However, because of
the damage that such events
may cause to agricultural production or the means of
agricultural production, such events may be assimi-
lated to natural disasters once the level of damage
reaches a certain threshold of normal production.
Compensation for such assimilated events contributes
to the development of the farm sector and should be
authorised on the basis of Article 87(3)(c) of the Treaty.

(b) contrary to the Commission's practice in the past, a
common minimum threshold of damages of 30 % of
normal production for all areas would seem more
Instead of requiring a lower level of
appropriate.
damage in less favoured areas, the economic weakness
of farmers operating in such regions would seem better
taken into account by foreseeing a higher maximum
level of compensation.

(c) because of

the inherent variability of agricultural
production, the maintenance of a minimum threshold
also appears necessary to ensure that weather condi-
tions may not be used as a pretext for the payment of
operating aid. In order to ensure such a minimum level
damage is attained, and contrary to its past practice,
the minimum threshold of damage to perennial crops
such as fruit trees should also be attained in year one,
and not over several years.

(30) See judgment of 11 November 2004 in Case C-73/03 Spain v
Commission, paragraph 37; Judgement of 23 February 2006 in Case
C-346/03 and C-529/03 Giuseppe Atzeni and others, paragraph 79.

(d) once the minimum threshold of damage has been
reached, the Commission has in the past accepted that
compensation is also paid for the first 30 % of losses.

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This system has created the paradox result that a
farmer in normal areas with a loss of 29 % received no
compensation whatsoever, whilst a farmer with a loss
of 30 % may have received compensation for 30 %.
Such a system may not sufficiently encourage farmers
to make all efforts to limit damages. To the contrary,
there is an economic incentive to reach the minimum
threshold of damage triggering a right to compensa-
tion. Such incentives should be reduced by introducing
a rule that some damage must always be borne by the
farmer.

(e)

in order to further improve risk management, farmers
should be encouraged to take out insurance wherever
possible. Therefore, from a certain moment in the
future onwards, bad weather compensation should be
reduced in respect of farmers who have not taken out
insurance for the product concerned. Only if a Member
State can convincingly show that, despite all reasonable
efforts, affordable insurance for a given type of event
or product is not available, should the Commission
waive this requirement.;

(f) water scarcity may increasingly become a determining
feature of agricultural production in certain parts of
the Community. Farmers and Member States must
actively contribute to good water management,
in
order to mitigate the effect of drought. Therefore, no
compensation for drought should be authorised in
Member States
fully implemented
Article 9 of Directive 2000/60/EC in respect of
agriculture, and do not ensure full recovery of the
costs of water services provided to agriculture;

that have not

(127) In order to enable the Commission to assess such aid
schemes, notifications of aid measures to compensate for
damage caused by adverse weather conditions should
include appropriate supporting meteorological
informa-
tion. Such information may also be provided ex post in the
form of annual reports in line with the requirements of the
last sentence of [Article 20(3) future exemption Regula-
tion].

(128) The Commission will accept alternative methods of
calculation of normal production,
including regional
reference values, provided it is satisfied that these are
representative and not based on abnormally high yields. If
the adverse weather conditions have affected a wide area in
the same way, aid payments may be based on average
losses provided that these are representative and do not
result in significant overcompensation of any beneficiary.

(129) Aid under this sub-chapter may only be paid to farmers or,
alternatively, to a producers' organisation of which the
farmer is a member, and the amount of aid should not
exceed the actual loss incurred by the farmer.

(130) For losses suffered from 1 January 2010, the Commission
will derogate from the condition of [Article 11(8) of the
future exemption regulation] only if a Member State can
convincingly show that, despite all reasonable efforts,
affordable insurance covering the statistically most fre-
quent climatic risks in the Member State or
region
the time the damage
concerned was not available at
occurred.

(g) as in the past, bad weather compensation should be
limited to the level of primary production (farmers).
For companies active in the processing and marketing
of farm products the risk of bad weather must be
considered a normal business risk. If such companies
face economic difficulties because of bad weather
events,
they may be supported via rescue and
restructuring aid;

V.B.4. Aid for combating animal and plant diseases

(131) This sub-chapter only applies to support granted to
primary producers (farmers). In the light of the large-scale
evaluation and re-examination of Community animal
disease compensation policy that is still going on, it will
however be necessary to review the relevant sub-chapter as
soon as this evaluation has been concluded.

(h) contrary to its practice, and in order to facilitate quick
crisis management, the Commission should authorise
aid schemes not requiring the presentation of loss data
beforehand; Member States should however be obliged
to provide adequate documentation of
the adverse
climatic event
in question in the form of annual
reports.

V.B.4.1. A n a l y s i s

(132) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

V.B.3.2. P o l i c y

(126) The Commission will declare aid for losses due to adverse
climatic events compatible with Article 87(3)(c) of the
Treaty if it fulfils all the conditions of [Article 11 future
exemption Regulation].

(a) where a farmer loses livestock as a result of animal
disease, or where his crops are affected by plant
disease, this does not normally constitute a natural
disaster or an exceptional occurrence within the
meaning of the Treaty. In such cases aids to provide
compensation for the losses incurred, and aids to
prevent future losses may only be permitted by the
Commission on the basis of Article 87(3)(c) of the
Treaty, which provides that aids to facilitate the

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development of certain activities may be considered
compatible with the common market provided that it
does not affect trading conditions to an extent contrary
to the common interest;

farmer (e.g. the choice of production method) has
contributed to an increased risk of disease.

common market. Therefore

(b) in accordance with the above-mentioned principles,
the Commission considers that the payment of aid to
farmers to compensate for losses resulting from animal
or plant diseases may only be accepted as part of an
appropriate programme at Community, national or
regional level for the prevention, control or eradication
of the disease concerned. Aids which simply compen-
sate farmers for losses incurred without taking any
steps to remedy the problem at source must be
considered as pure operating aids which are incompa-
tible with the
the
Commission will require that Community or national
provisions exist, whether laid down by law, regulation
the
or administrative action,
competent national authorities should deal with the
disease in question, either by organising measures to
eradicate it,
in particular through binding measures
giving rise to compensation, or initially by setting up
an alert system combined, where appropriate with aid
to encourage individuals to take part in preventative
measures on a voluntary basis (31). Accordingly, only
diseases which are a matter of concern for the public
authorities, and not measures for which farmers must
reasonably take responsibility for themselves may be
the subject of aid measures;

to the effect

that

(c) the objectives of the aid measures should be either:

(i) Preventative, in that they involve screening mea-
sures or analyses, the extermination of pests which
may transmit the disease, preventative vaccinations
of animals or treatment of crops, and preventative
slaughtering of livestock or destruction of crops, or

(ii) Compensatory,

in that

the affected livestock is
slaughtered or crops are destroyed on the orders or
recommendation of the public authorities or die as
result of vaccinations or other measures
a
recommended or ordered by the
competent
authorities, or

(e) as in the past, compensation for animal and plant
diseases should be limited to the level of primary
production (farmers). For companies active in the
processing and marketing of agricultural products the
impact of such diseases on their business must be
considered a normal business risk. If such companies
face economic difficulties because of the effects of
animal or plant diseases, they may be supported via
rescue
inclusion of
agricultural processing and marketing companies in
the de minimis Regulation covering non-agricultural
companies, opening the possibility of support up to
EUR 200 000 per company and three fiscal years
provides
such
companies;

and restructuring aid. The

facility to support

an additional

(f) as regards aid for TSE (transmissible spongiform
encephalopathies) tests, the following considerations
have been taken into account:

(i)

the tests serve the purpose of avoiding the spread
of TSE, a disease that is of particular concern from
the point of view of the protection of human
health;

(ii) there is a risk of distortion of competition arising
from different levels of State aid granted, at least as
far as slaughter cattle is concerned. However, most
Member States do currently grant some State aid.
Prices for TSE tests continue to vary between
Member States.
In order to reduce the risk of
distortions of competition which could be caused
by aid granted towards TSE tests
for cattle
slaughtered for human consumption, and in order
to encourage research towards low-price tests, aid
should be limited to EUR 40, which is roughly the
best price currently available in the Community;

(iii) Combined, in that the compensatory aid scheme
for the losses resulting from the disease is subject
to the condition that the recipient undertakes to
take suitable future preventative measures as laid
down by the public authorities.

(iii) there is concern that making farmers pay for the
cost of testing fallen stock could make some of
them try to avoid controls by illegally disposing of
carcasses, reducing the reliability of statistical data,
and create health risks;

(d) in order to improve risk management, account should
be taken of the fact whether the behaviour of the

(31) In cases where animal or plant diseases have been shown to result
from adverse weather conditions, the Commission will evaluate the
aid measure in accordance with the provisions of sub-chapter V.B.3
above and these requirements will not apply.

(iv) as regards low-value animals such as sheep and
goats, TSE tests may cost more than the value of
the animal. Making owners pay for tests could
entail the risk that such animals are marketed
without testing, again reducing the availability of
data;

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(v) for both fallen stock and low-value animals, the
risk of distortions of competition from the
granting of aid seems to be lower than in the case
of slaughter cattle;

(g) As

regards

aid for

fallen stock,

the

following

considerations have been taken into account:

(i)

fallen stock is a regular feature of keeping live
animals, and therefore part of normal production
costs;

(ii) the

‘polluter pays’ principle (32)

establishes a
primary responsibility of producers to take proper
care of removal of fallen stock, and to finance the
costs of it;

(iii) granting aid for the elimination of waste may go
against the principle applied in agriculture that aid
should only be granted for behaviour, which goes
beyond good agricultural practice. Community
legislation, which is part of good agricultural
practice, requires proper disposal of carcasses;

(iv) the costs of removing fallen stock can be high, in
particular where carcasses of heavy animals such as
cattle or horses have to be removed from remote
locations;

Parliament and of the Council of 22 May 2001
laying down rules for the prevention, control and
eradication of certain transmissible spongiform
encephalopathies (33) specifies that ‘owners shall be
compensated without delay for the loss of the
animals which have been killed or products of
animal origin destroyed in accordance with
Article 12(2) and paragraph 1(a) and (c) of this
Article.’;

(h) as to aid for slaughterhouse waste,

the following

considerations have been taken into account:

(i)

slaughterhouse waste is any waste occurring at the
level of slaughterhouses, cutting plants or butchers,
including in particular animal by-products covered
by categories 1, 2 and 3 of Regulation (EC)
No 1774/2002 of the European Parliament and of
the Council of 3 October 2002 laying down health
rules concerning animal by-products not intended
for human consumption (34);

(ii) the removal and destruction of slaughterhouse
waste is a major cost factor for slaughterhouses and
cutting plants (and their clients, if they are charged
for it);

(v) it is difficult to control what farmers do with
carcasses. There is a risk that carcasses are disposed
of illegally, creating serious health risks;

(iii) the ‘polluter pays’ principle establishes a primary
responsibility of producers of waste to take proper
care of its removal, and to finance the costs of it;

(vi) where carcasses have to be tested for TSE, their
uncontrolled disposal in order to avoid test costs
could have the additional inconvenience that these
animals are not tested, although it could be that
precisely these animals should be tested, in order to
assure solid statistical data on TSE;

(vii) the risks of distortions of competition from State
fallen stock is

aid granted for the removal of
considered relatively low;

(viiii) State aid should only be accepted for fallen stock
occurring at the level of farmers, and not at any
other level, e. g. slaughterhouses, where control
of proper removal is easier;

(ix) where animals are culled for disease reasons on the
basis of a public order, compensation for the
farmer
should continue to be examined and
authorised on the basis of the general rules for
animal disease compensation as set out in sub-
chapter V.B.4. In relation to TSE, Article 13(4) of
Regulation (EC) No 999/2001 of the European

(32) Article 174(2) EC. As far as State aid is concerned, see in particular
section 5 of
the ‘Community guidelines for State aid in the
agriculture sector’, and the ‘Community guidelines on State aid for
environmental protection’ (OJ C 37, 3.2.2001, p. 3).

(iv) the granting of State aid for this can create serious

distortions of competition;

(v) control normally appears to ensure that slaughter-

house waste is dealt with properly;

(vi) there is broad agreement amongst most Member
States that the costs of the removal of slaughter-
house waste
should be borne by operators
responsible for them;

(vii) it would therefore seem appropriate to clearly
exclude State aid for the cost of the disposal of
slaughterhouse waste, or other operating costs of
slaughterhouses. State aid for investments under-
taken in relation to the disposal of slaughterhouse
waste will be examined under the relevant rules
applying to investment aid.

(33) OJ L 147, 31.5.2001, p. 1. Regulation as

last amended by
Commission Regulation (EC) No 1041/2006 (OJ L 187, 8.7.2006,
p. 10).

(34) OJ L 273, 10.10.2002, p. 1. Regulation as last amended by
Commission Regulation (EC) No 208/2006 (OJ L 36, 8.2.2006,
p. 25).

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V.B.4.2. P o l i c y

(133) The Commission will declare State aid for combating
animal and plant diseases compatible with Article 87(3)(c)
of the Treaty if it fulfils all the conditions of [Article 10 of
future exemption Regulation].

(134) The Commission will declare State aid concerning TSE
tests and fallen stock compatible with Article 87(3)(c) of
the Treaty if it fulfils all the conditions of [Article 16 of
future exemption Regulation].

(135) In relation to fallen stock and slaughterhouse waste, the

Commission will not authorise the following State aid:

(a) aid for fallen stock given to operators active in the

processing and marketing;

(b) aid towards the costs of the disposal of slaughterhouse
waste produced after the entry into force of these
guidelines.

(136) Where aid is provided under Community and/or national
and/or regional aid schemes, the Commission will require
evidence that there is no possibility of overcompensation
through the cumulation of the different schemes. Where
Community aid has been approved, the date and references
of the relevant Commission decision should be provided.

(137) The Commission will authorise such State aid in favour of

farmers only.

V.B.5. Aid towards the payment of insurance premia

(138) This

sub-chapter only applies

to primary producers

(farmers).

V.B.5.1. A n a l y s i s

(139) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(a)

in many instances, insurance is a most helpful tool for
good risk and crisis management. Therefore, and in
view of the often reduced financing possibilities of
farmers,
the Commission has a positive attitude
towards State aid for insurance in favour of primary
production (farmers);

(b) large companies, and companies active in the proces-
sing and marketing of agricultural products should be
able to finance the cost of insurance on their own. No
State aid for insurance premiums should be authorised
for such companies;

(c) experience has shown that the obligation to combine
insurance for animal or plant diseases with insurance
against catastrophes and assimilated events is not

necessary. Member States should also be allowed to
offer public support for animal and plant disease alone.
However, the differentiation in terms of maximum aid
intensity on the basis of the risk(s) covered should be
maintained.

V.B.5.2. P o l i c y

(140) The Commission will declare aid towards the payment of
insurance premiums compatible with Article 87(3)(c) of
the Treaty if it fulfils all conditions of [Article 12 future
exemption Regulation].

(141) The Commission will examine other aid measures in
connection with insurance against natural disasters and
exceptional occurrences on a case by case basis,
in
particular reinsurance schemes and other aid measures to
support producers in particularly high risk zones.

(142) The Commission will not authorise State aid towards the
payment of
large
insurance premiums
companies, and companies active in the processing and
marketing of agricultural products.

in favour of

V.C.

Aid for Closing Production, Processing and

Marketing Capacity

V.C.1. Analysis

(143) The Commission takes a favourable view of aid schemes
for
the closing of capacity in the agriculture sector
provided that they are coherent with any Community
arrangements to reduce production capacity, and certain
conditions are met, namely:

(a) the aid must be in the general interest of the sector

concerned,

(b) there must be a counterpart on the part of

the

beneficiary,

(c) the possibility of

the aid being for

rescue and

restructuring must be excluded,

(d) there must be no over-compensation of loss of capital

value and of future income.

V.C.2. Policy

(144) The Commission will declare aid for the closing of capacity
compatible with Article 87(3)(c) of the Treaty if it fulfils
the following conditions:

(a) aid must be demonstrated to be in the interest of the
sector as a whole. Where excess capacity does not exist
and it is clear that capacity respecting all applicable
standards and which would otherwise not close is

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being reduced for animal or human health, sanitary or
environmental reasons such as reduction of overall
stocking densities, this will be sufficient to show that
this condition is met;

there is no counterpart on the part of the beneficiary,
and aid may not be paid;

(b) in other cases, aid should only be granted for closing
production capacity in sectors where clear excess
capacity exists, either at regional or national level. In
such cases, it would appear reasonable to expect that
market forces will eventually result in the necessary
structural adjustments. Aid for capacity reduction can
therefore only be accepted if it is part of a programme
for the restructuring of the sector which has defined
objectives and a specific timetable. The Commission
will not accept aid schemes of unlimited duration,
since experience suggests that
these may result in
postponing the necessary changes;

(c)

in order to ensure rapid impact on the market, the
duration of schemes aimed at reducing overcapacity
should normally be limited to a period of not more
than six months
for
participation, and a further 12 months for actually
closing down;

collecting applications

for

(d) the Commission reserves the right to attach conditions

to the authorisation of the aid;

(e) no aid may be paid which would interfere with the
mechanisms of
the
market. Aid schemes applying to sectors which are
subject to production limits or quota will be evaluated
on a case by case basis;

the common organisations of

(f)

there must be a sufficient counterpart
from the
beneficiary of the aid. This counterpart will normally
consist of a definitive and irrevocable decision to scrap
or irrevocably close the production capacity con-
cerned. This will involve either the complete closure of
capacity by the undertaking concerned or — in the
case of a company operating more than one produc-
tion site — the closure of a specific production site.
Legally binding commitments must be obtained from
the beneficiary that
the closure is definitive and
irreversible, and that the beneficiary will not start the
same activity elsewhere. These commitments must also
bind any future purchaser of the facility concerned;

(g) only farmers who have actually been producing, and
only production capacities that have actually been in
constant use over the past five years before closing,
shall be admitted to capacity closure schemes. In cases
where the production capacity has already closed
definitively, or where such closure appears inevitable,

(h) in order to avoid erosion and other negative effects on
the environment, open farmland or orchards taken out
of production must in principle be afforested in such a
way as
to ensure that negative effects on the
environment are avoided. Alternatively, open farmland
or orchards may be re-used after 15 years following
effective capacity closure. Until then, such farmland or
orchards have to be maintained in good agricultural
and environmental condition,
in accordance with
Article 5 of Regulation (EC) No 1782/2003, and with
implementing rules. The closure of
the relevant
installations covered by Council Directive 96/61/EEC
of 24 September 1996 concerning integrated pollution
prevention and control (35) shall be made in accord-
ance with Article 3 of that Directive which requires
that the necessary measures are taken to avoid any
pollution risk and that the site of operation is returned
to a satisfactory state;

(i)

(j)

in order to ensure that
the public support made
available achieves a maximum impact on existing
production capacities, the Member State shall ensure
that only enterprises fulfilling compulsory minimum
standards are eligible and that enterprises which do not
fulfil these standards and which would be obliged to
stop production anyway are excluded;

it must be possible to exclude the possibility that aid is
paid for the rescue and restructuring of companies in
difficulty. Therefore where the beneficiary of the aid is
in financial difficulty,
the aid will be assessed in
accordance with the Community guidelines on rescue
and restructuring of firms in difficulty;

(k) the scheme should be accessible to all economic
operators in the sector concerned under the same
conditions. In order to achieve maximum impact, the
Member State should use a transparent system of calls
for
interest which publicly invites all potentially
interested producers to participate. At the same time,
the organisation of the scheme should be managed in
such a way that it neither requires nor facilitates anti-
practices
competitive
between the enterprises concerned;

agreements

concerted

or

(l)

the amount of aid should be strictly limited to
compensation for
the loss of value of assets —
measured as the current selling value of the assets —
plus an incentive payment which may not exceed 20 %
of the value of the assets. Compensation may also be
granted for the costs of destruction of the production
capacity, and for the cost of afforesting. Aid may also

(35) OJ L 257, 10.10.1996, p. 26. Directive as last amended by Regulation
(EC) No 166/2006 of the European Parliament and of the Council
(OJ L 33, 4.2.2006, p. 1).

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be paid to offset the obligatory social costs resulting
from the implementation of the scheme;

support would still appear
distortions resulting from such an approach.

to outweigh the risk of

(m) since the objective of

these aid measures is the
restructuring of the sector concerned, to the ultimate
benefit of
those economic operators who remain
active in that sector, and in order to reduce any
potential risk of a distortion of the conditions of
competition, and the dangers of overcompensation,
the Commission considers that at least half the costs of
these aids should be met by a contribution from the
sector. This means that the sector must provide a cash
contribution of at least 50 % of the actual public
expenditure incurred for the execution of the scheme.
This requirement does not apply where capacity is
closed for health or environmental reasons;

(n) if a Member State introduces a scheme for closing
capacity, it shall undertake not to grant any aid for
in the sector
creating new production capacities
concerned for the five years following the termination
of the capacity closure program.

V.D.

Aid for Rescue and restructuring firms in

difficulty

(145) Aids for rescuing and restructuring firms in difficulty in
the agriculture sector will be assessed in accordance with
the applicable Community guidelines on State aid for
rescuing and restructuring firms in difficulty (36).

VI.

OTHER TYPES OF AID

VI.A.

Aids for Employment

VI.A.1. Analysis

(146) Since 2002, aid for the creation of employment in the
agriculture sector is covered by Commission Regulation
(EC) No 2204/2002 of 12 December 2002 on the
application of Articles 87 and 88 of the EC Treaty to
State aid for employment (37). The rules set out in that
Regulation establish a coherent
such
support. Aid for employment limited to the agriculture
sector but fulfilling all other conditions of the Regulation is
not exempted. Because of the specificities of the agriculture
sector, and notably of primary production, Member States
may have an interest in introducing specific aid schemes
for employment in the agriculture sector. As long as such
aid is open to the whole of the agriculture sector, without
limiting support to certain products, the benefits of such

framework for

(36) OJ C 244, 1.10.2004, p. 2.
(37) OJ L 337, 13.12.2002, p. 3. Regulation as amended by Regulation

(EC) No 1040/2006 (OJ L 187, 8.7.2006, p. 8).

VI.A.2. Policy

(147) The Commission will declare State aid for employment in
the agriculture sector compatible with Article 87(3)(c) of
the Treaty if it fulfils all the conditions of Articles 1 and 2
as well as Articles 4 to 9 of Regulation (EC) No 2204/
2002. Aid limited to the agriculture sector shall be
authorised under the same conditions.

VI.B.

Aid for Research and Development

(148) Aid for research and development in the agriculture sector
will be examined in accordance with the criteria set out in
the applicable Community framework for State aid for
research and development (38), including the possibility for
additional support for research in favour of the agriculture
sector.

VI.C.

Horizontal aid instruments applicable to the

Agriculture sector

(149) For the sake of completeness, it should be pointed out that
in addition to the aid instruments and rules described
above, notably the
concerning the
definition of aid and the compatibility of aid with the
Treaty are also applicable to the agriculture sector:

following rules

(a) Commission Regulation (EC) No 68/2001 of 12 Jan-
uary 2001 on the application of Articles 87 and 88 of
the EC Treaty to training aid (39),

(b) Commission communication on State aid and risk

capital (40),

(c) Commission notice on the application of Articles 87
and 88 of the EC Treaty to State aid in the form of
guarantees (41),

(d) Community framework for State aid in the form of

public service compensation (42),

(e) Commission Decision 2005/842/EC of 28 November
2005 on the application of Article 86(2) of the EC
Treaty to State aid in the form of public service
compensation
undertakings
to
entrusted with the operation of services of general
economic interest (43),

granted

certain

(38) OJ C 45, 17.2.1996, p. 5, as subsequently amended as regards its
application in the agricultural sector, OJ C 48, 13.2.1998, p. 2; to be
replaced by a new framework from 1.1.2007 onwards.

(39) OJ L 10, 13.1.2001, p. 20. Regulation as last amended by Regulation

(EC) No 1040/2006 (OJ L 187, 8.7.2006, p. 8).

(40) OJ C 235, 21.8.2001, p. 3.
(41) OJ C 71, 11.3.2000, p. 14.
(42) OJ C 297, 29.11.2005, p. 4.
(43) OJ L 312, 29.11.2005, p. 67.

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(f) Commission Directive 80/723/EEC of 25 June 1980
financial relations between

on the transparency of
Member States and public undertakings (44),

(g) Commission communication on State aid elements in
sales of land and buildings by public authorities (45),

(h) Commission communication on the application of the
State aid rules to measures relating to direct business
taxation (46),

(i) application of Articles 92 and 93 [now 87 and 88] of

the Treaty to public authorities' holdings (47).

shall apply; in this context, the activities concerning
the organisation of and the participation in forums to
share knowledge between businesses, competitors,
exhibitions and fairs and the vulgarisation of scientific
knowledge and factual information on quality systems
are not considered advertising but technical support;

(c) the provision of general information about the benefits
of a food product (for example, fruit) not aimed at
encouraging consumers to buy the product is not
considered as advertising because it does not benefit
producers directly;

(150) If any of

these aid instruments are reviewed,

the
Commission intends to maintain its policy of including
agriculture, unless convincing reasons appear to provide
for a specific treatment of the agriculture sector.

that

(151) As far as the application of Article 86(2) of the Treaty in
the agriculture sector is concerned, it should be pointed
out
the Commission has held that companies
producing and marketing products falling within the scope
of Annex I of the Treaty and covered by a common market
organisation cannot be regarded as undertakings entrusted
with the operation of services of general economic interest
within the meaning of Article 86(2) of the Treaty (48).

(d) normally, producers and traders would be expected to
bear the costs of advertising themselves, as part of their
normal economic activities; therefore, if aid granted for
the advertising of agricultural products is not to be
regarded as operating aid but compatible with the
common market under Article 87(3)(c) of the Treaty, it
should not interfere with trade to an extent contrary to
the common interest and should facilitate the devel-
opment of certain economic activities or of certain
economic areas;

VI.D.

Aid for Advertising of Agricultural Products

VI.D.1. Analysis

(152) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(e)

(a)

‘advertising’ in the sense of this sub-chapter means any
operation which is designed to induce economic
operators or consumers to buy the relevant product.
It includes all material which is distributed directly to
consumers for the same purpose, including advertising
activities aimed at consumers at the point of sale;

(b) on the other hand, promotion operations, defined as
the dissemination to the general public of scientific
knowledge, the organisation of trade fairs or exhibi-
tions, and participation in these and similar public
relations exercises,
including surveys and market
research, are not considered as advertising; wherever
expenses are listed as eligible for public support
elsewhere in these guidelines, and notably in sub-
chapter IV K, the provisions of the relevant sub-chapter

(44) OJ L 195, 29.7.1980, p. 35. Directive as last amended by Directive

2005/81/EC (OJ L 312, 29.1.2005, p. 47.

(45) OJ C 209, 10.7.1997, p. 3.
(46) OJ C 384, 10.12.1998, p. 3.
(47) Bulletin EC 9-1984.
(48) Commission Decision 2000/628/EC of 11 April 2000 on the aid
granted by Italy to Centrale Latte di Roma (OJ L 265, 19.10.2000,
p. 26, paragraphs 113-115).

confidence

in the medium and long term, consumers appreciate
products of a consistently high quality; the advertising
of quality control schemes which aim to achieve
consistently high quality standards is likely to promote
consumer
in Community agricultural
production, improve farm incomes and thus promote
the development of the sector as a whole; moreover,
quality products clearly have specific characteristics
which are not shared by other similar products;
advertising of these characteristics will not mislead
the consumer and is also likely to contribute to the
development of the sector; for those reasons, instead of
being spread on the basis of a set of positive criteria as
in the past, support should be focused on advertising
campaigns in favour of quality products defined as
products fulfilling the criteria established pursuant to
Article 32 of Regulation (EC) No 1698/2005;

the Commission has,

(f) as far as reference to the origin of products is
concerned,
for several years,
authorised certain types of support for advertising of
agricultural products; however, experience has shown
that advertising campaigns are very often aimed at
reinforcing the preferences of domestic consumers in

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favour of products from the same Member State, which
makes aids related to them incompatible with the
Treaty;

foodstuff

the product or

(g) nevertheless, where an agricultural or other product or
a foodstuff possesses particular characteristics which
are due to its geographical origin, it is possible for the
to apply,
producers of
through the competent authorities of
the Member
State concerned, for registration at Community level of
a protected designation of origin (PDO) or a protected
geographical indication (PGI) in accordance with the
provisions of Council Regulation No 510/2006 of
20 March 2006 on the protection of geographical
indications and designations of origin for agricultural
products and foodstuffs (49); the granting of registra-
tion means that the Community has recognised the
existence of very close links between the specific
qualities of the product concerned and its geographical
origin; in such cases, the common interest does not
oppose the granting of aid for advertising which
the product
includes a reference to the origin of
concerned, provided that
the references to origin
correspond exactly to those references which have
been registered by the Community; similar considera-
tions apply to other designations of origin which are
protected under Community legislation, for example
wines produced in specified regions in accordance with
Articles 54–58 of Council Regulation (EC) No 1493/
1999 of 17 May on the common organisation of the
market in wine (50);

(h) in the past,

the Commission has accepted public
support for setting up quality labels; such aid could
then be justified in the start-up phase of a label;
experience has shown that aids linked to advertising
for products with quality labels and reference to the
origin may be maintained both on the home market
and on the market of other Member States, provided
the reference to the origin is subsidiary in the message,
as this subsidiary value of the reference to the origin
should prevent infringements of Article 28 of the
Treaty;

(i) State aid for advertising relating directly to the
products of one or more particular companies presents
an immediate risk of competition distortion and
provides no lasting benefits for the development of
the sector as a whole; therefore, it should be prohibited.

(j)

to be eligible for State aid, advertising
in order
rules
campaigns must comply with the general
applying to all advertising activities conducted within
any publicly funded
the Community. Therefore,

campaign for the advertising of foodstuffs will have to
comply with the provisions of Article 2 of Directive
2000/13/EC of the European Parliament and of the
Council of 20 March 2000 on the approximation of
the laws of the Member States relating to labelling,
presentation and advertising of foodstuffs (51), as well
as with the specific labelling rules which have been laid
down for various products (such as wine, dairy
products, eggs and poultry;

(k) as a direct beneficiary, the sector concerned should
the cost of advertising

least 50 % of

cover at
campaigns;

(l) however, if the advertising is generic in its character
and in the benefit of the whole agricultural sector the
rate of aid could be up to 100 %.

(m) in view of the effects which large-scale advertising may
have on competition within the Community,
it
appears necessary to introduce a requirement for the
prior notification to the Commission of advertising
activities,
including those which are covered by an
existing aid scheme;

(n) State aid for advertising in third countries does
normally not create risks for the functioning of the
internal market. However, it can still have an impact on
competitiveness of companies, notably if such adver-
tising is used to the detriment of companies from other
Member States;

(o) the Commission has so far gained little experience with
State aid for advertising in third countries. Therefore, it
is difficult to draw up detailed criteria for evaluating
such State aid. However, the regulatory framework for
advertising support in third countries, Council Regula-
tion (EC) No 2702/1999 of 14 December 1999 on
measures to provide information on, and to promote,
agricultural products in third countries (52), would
appear an appropriate reference to evaluate State aid
for advertising in third countries.

VI.D.2. Policy

(153) State aid for advertising campaigns within the Community
will be declared compatible with the Treaty if the following
conditions are fulfilled:

(a) the advertising campaign is earmarked for quality
products, defined as products fulfilling the criteria to
be established pursuant to Article 32 of Regulation
(EC) No 1698/2005,
for Community-recognised
(protected designations of origin
denominations
indications (PGI) or
(PDO), protected geographical

(49) OJ L 93, 31.3.2006, p. 12.
(50) OJ L 179, 14.7.1999, p. 1. Regulation as last amended by Regulation

(51) OJ L 109, 6.5.2000, p. 29. Directive as last amended by Directive

2003/89/EC (OJ L 308, 25.11.2003, p. 15).

(52) OJ L 327, 21.12.1999, p. 7. Regulation as amended by Regulation

(EC) No 2165/2005 (OJ L 345, 28.12.2005, p. 1).

(EC) No 2060/2004 (OJ L 357, 2.12.2004, p. 3.

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other designations of origin which are protected under
Community legislation) or for national or regional
quality labels;

(b) risks endangering sales of or denigrates products from

other Member States.

(b) the advertising campaign is not

earmarked for
products of one or more particular company or
companies;

(c) the advertising campaign complies with Article 2 of
Directive 2000/13/EC, as well as, where relevant, with
the specific labelling rules which have been laid down
(see point 152(j)).

(154) Where the advertising campaign is earmarked for Com-
munity-recognised denominations, reference may be made
to the origin of the products provided that the reference
corresponds exactly to those references which have been
registered by the Community.

the Commission will

(155) In the case of national or regional quality labels, the origin
of the products may be mentioned as a subsidiary message.
the origin is indeed a subsidiary
To assess whether
message,
the
overall importance of the text and/or symbol, including
pictures and general presentation, referring to origin and
the importance of the text and/or symbol referring to the
unique selling point of the advertisement, i.e. the part of
the advertising message which does not focus on origin.

take into account

VI.E.

Aid in the form of Subsidised Short-term

loans

VI.E.1. Analysis

(160) In order to establish its future policy, the Commission has
in particular taken account of the following considerations:

(a)

in the past, the Commission has authorised State aid
for short term credits (53). Such costs are in fact simple
operating costs that should be borne by the sector —
just as they are borne by all other sectors;

(b) also,

this support measure has contributed to the
complexity of State aid rules and does not reflect the
general demand for a more simplified system;

(c) the introduction of a de minimis

facility in the
agriculture sector establishes a simple and decentralised
system allowing Member States who so wish to
continue with such support in favour of small farmers;

(d) the Commission should therefore no longer authorise

State aid for short term credits .

VI.E.2. Policy

(156) The rate of direct aid shall not exceed 50 %. If the sector
contributes to at least 50 % of the costs, whichever the
form of the contribution, the aid rate may go up 100 %.

(161) The Commission will not declare State aid for short term

loans compatible with the Treaty.

(157) In addition, State aid for advertising up to 100 % will be
declared compatible if it is generic in character and in the
benefit of all producers of the type of product concerned.
No mention may be made of product origin in such
advertising. The advertising can be carried out by producer
groups or other organisations, regardless of their size.

(158) Advertising activities with an annual budget in excess of

EUR 5 million shall be notified individually.

(159) The Commission will examine and authorise State aid in
favour of advertising in third countries compatible with
Article 87(3)(c) of the Treaty if it is in line with the
principles of Regulation (EC) No 2702/1999. The
Commission will however not declare compatible State
aid for advertising which:

(a)

is granted towards specific enterprises;

VI.F.

Aids linked to tax exemptions under directive

2003/96/EC

VI.F.1 Analysis

(162) The possibility to grant reduced tax rates and exemptions
in Community excise
to agricultural
taxation exist
legislation since 1993. No clear policy as
to the
compatibility of these measures with State aid rules was
laid down so far. The current Council Directive 2003/96/
EC of 27 October 2003 restructuring the Community
framework for
the taxation of energy products and
electricity (54) allows Member States to apply tax exemp-
tions, tax reductions, tax differentiation and tax refunds. Its
Article 26(2) explicitly points to the fact that ‘measures
such as tax exemptions, tax reductions, tax differentiation
and refunds within the meaning of this Directive might
constitute State aid and in those cases have to be notified
to the Commission pursuant to Article 88(3) of the Treaty’.

(53) See Commission on State aids: subsidised short-term loans in

agriculture (crédits de gestion), OJ C 44, 16.2.1996, p. 2.

(54) OJ L 283, 31.10.2003, p. 51. Directive as last amended by Directive

2004/75/EC (OJ L 157, 30.4.2004, p. 100).

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(163) The measures in question may indeed constitute State aid
for the following reasons: they may be considered as
publicly financed, as, by applying them, the State deprives
itself of financial resources; if applied in a specific sector of
the economy,
they provide an advantage to certain
companies or certain types of products; they may distort
or threaten to distort competition in a sensitive sector such
as agriculture, where trade flows are very intensive.

(164) A set of rules must be designed in order to evaluate the
compatibility of such measures with Article 87(3)(c) of the
Treaty.

(165) Article 8 of Directive 2003/96/EC states that

lower
minimum levels of taxation set out in Table B of Annex I
thereto shall apply to products used as motor fuel for the
purposes of agricultural and horticultural works as well as
for forestry.

(166) Article 15(3) of Directive 2003/96/EC states that Member
States may apply a level of taxation down to zero to energy
products and electricity used for agricultural and horti-
cultural works, as well as for forestry, but also that on the
basis of a proposal from the Commission, the Council shall
before 1 January 2008 examine if
the possibility of
applying a level of taxation down to zero shall be repealed.

(167) The Commission takes these provisions into consideration
when drawing up its rules for State aid compatibility for
primary production in the agricultural
sector, whilst
ensuring that no tax differentiation is applied within the
sector. When a tax measure provided for in Articles 8 and
15(3) of Directive 2003/96/EC is applied equally to the
whole agricultural sector, the Commission considers that
this measure may contribute to the development of the
sector. The Commission until now has only received
notifications for tax reductions in connection with motor
fuels used in primary agricultural production. In view of
the fact that these reductions are based on quantities of
motor fuel actually used in primary production (which
should be substantiated by invoices presented by farmers)
and in the light of the small scale structure of farms in the
European Union (more than 60 % of farms have less than 5
hectares of utilized agricultural area)
the Commission
considers
this measure will not unduly distort
competition. By way of analogy, tax exemptions for energy
and electricity used in primary agricultural production
should also be rather small-scale and should thus not
adversely affect trading conditions to an extent contrary to
the common interest.

that

(168) It is possible that unlawful State aids in the form of tax
exemptions, reductions, differentiation and refunds have
been granted since the entry into force of Directive 2003/
96/EC in connection with primary agricultural production.
If they fulfil the relevant provisions of the Directive and no

tax differentiation has been applied within agriculture, they
should be declared compatible with Article 87(3)(c) of the
Treaty.

VI.F.2 Policy

(169) The application of lower minimum level of taxation as set
out in Table B of Annex I to Directive 2003/96/EC to
products used as motor fuel for the purposes of primary
agricultural production will be declared compatible with
Article 87(3)(c) of the Treaty, provided no differentiation is
made within agriculture.

(170) The application of a level of taxation down to zero to
energy products and electricity used for primary agricul-
tural production, will be declared compatible with
Article 87(3)(c) of the Treaty until 31 December 2007 or
any other date decided by the Council, provided no
differentiation is applied within agriculture.
In case
Directive 2003/96/EC is modified, the present provision
will be reviewed accordingly.

(171) If the possibility of applying a level of taxation down to
zero to energy products and electricity used for agricultural
works, is repealed by the Council, State aid linked to a tax
reduction under Directive 2003/96/EC will be declared
the
compatible with Article 87(3)(c) of
reduction in question fulfils all the relevant provisions of
the directive and no tax differentiation is applied within
agriculture.

the Treaty if

(172) Unlawful State aid granted since the entry into force of
Directive 2003/96/EC will be declared compatible with
Article 87(3)(c) of the Treaty if it fulfils all the relevant
provisions set out in this chapter and no tax differentiation
has been applied within agriculture.

VII.

AIDS FOR THE FOREST SECTOR

VII.A.

Introduction

(173) No specific Community rules exist governing State aid for
the forest sector (forestry and forest-based industries) (55).
in addition to State aid granted under
Nevertheless,
Community rules common to all sectors, notably the
Community framework for Research and Development (56)
and the Community guidelines on State aid for rescuing
and restructuring forms in difficulty (57), certain Commu-
nity instruments governing State aid granted for trade and
industrial production apply also to the forest sector,
notably the Commission guidelines on national regional
aid for 2007–2013 and the Community Guidelines on
State Aid for Environmental Protection (58). The forest
sector can also benefit from aid granted under the de
minimis Regulation applicable to industrial activities and

(55) For the purpose of these Guidelines, the term forestry follows the
definition By Eurostat (production of standing timber as well as
extraction and gathering of wild growing forest materials including
products which undergo little processing, such as wood for fuel of
industrial use).

(56) OJ C 45, 17.2.1996, p. 5.
(57) See footnote 36.
(58) See footnote 19.

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Regulation (EC) No 70/2001, which do not apply to
agricultural production. Moreover, in addition to the rules
and instruments mentioned it is established Commission
practice to authorise State aid for conservation, improve-
ment, development and maintenance of forests on account
of the ecological, protective and recreational functions of
forest. In order to make this practice transparent and to
determine its scope in relation to the other rules for State
aid for the forest sector, it is appropriate to set out the
policy the Commission will apply to State aid for the forest
sector. When formulating this policy it is also necessary to
take into account the aid available for measures targeting
the sustainable use of forestry land under the Regulation
(EC) No 1698/2005 in order to assure consistency of State
aid and co-financed support for forestry.

VII.B.

Analysis

(174) In order to determine its future policy, the Commission has
in particular taken into account the following considera-
tions:

(a) State aid may be granted for the forest sector under the
Community rules common either to all sectors or to
trade and industry. The provisions of this Chapter are
without prejudice to the possibility of applying those
rules but should be limited to authorising additional
State support for forestry promoting the ecological,
protective and recreational functions of forests as well
as ensuring consistency with State aid for agricultural
production and rural development measures;

(b) the rules in this Chapter should apply only to living
trees and their natural environment in forests and other
wooded land,
including measures to maintain and
enhance the ecological and protective functions of
forests and measures to promote the recreational use
and social and cultural dimensions of forests. They
should not apply to State aid to forest based industries
or for transportation of timber or for processing of
wood or other forestry resources into products or for
energy generation, as aid to such activities can be
granted under other Community rules;

measures contribute to increasing long-term forest
cover and maintaining or restoring biodiversity and a
healthy forest ecosystem and the protective function of
forests. Such aid should also be accepted for restoring
forests damaged by storms,
floods or similar
In line with that policy, no aid should be
events.
accepted for commercially viable felling or restocking
after
felling or establishing and maintaining any
plantation with no demonstrated environmental or
recreational benefit;

fire,

(d) the above policy should also continue to apply to
measures favouring the recreational use of the forests
including the promotion of
the benefits of multi-
functional use of forests, such as visitors' infrastructure,
forestry roads and information materials concerning
forests in general. The condition for approving such aid
should be that the eligible forest areas and infrastruc-
tures are accessible for recreational purposes to all
users without payment and that
the information
materials contain only generic information on forests
to the exclusion of all advertising or promotion of
products or producers;

(e)

in the past the Commission has approved aid for
training of forest owners and forestry workers on the
basis of the agriculture Guidelines. Since forest owners
are, in many cases, agricultural producers, the training
and counselling services they receive are likely to
concern both the agricultural and forestry part of their
enterprise and the rules applicable to aid for training
and consultancy in agriculture should also apply to
forestry. This principle should also apply to aid to
forestry associations, as the Commission has in the past
authorised such aid on the basis of the agriculture
Guidelines, and to aid for pilot and demonstration
projects in forestry as well as for the purchase of
forestry land;

(f)

in order to make the State aid rules concerning forestry
consistent with rural development policies, aid for
forestry measures satisfying the conditions of Arti-
cles 43–49 of Regulation (EC) No 1698/2005 should
be authorised under this Chapter.

(c) the Commission has traditionally accepted State aid up
to 100 % of eligible costs for measures promoting the
maintenance of
including
plantation, felling and pruning of trees or removing
fallen trees, phytosanitary measures and soil improve-
ment. Such aid should continue to be accepted in the
future where the Member State can show that the

the forest environment

VII.C.

Policy concerning forestry

(175) In order to contribute to the maintenance and improve-
ment of forests and to promote their ecological, protective
function the Commission will declare
and recreational
State aid up to 100 % compatible with Article 87(3)(c) of

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the Treaty for the following eligible costs where the
Member State can demonstrate that these measures are
directly contributing to maintaining or restoring ecologi-
cal, protective and recreational
forests,
biodiversity and a healthy forest ecosystem:

functions of

fire,

(a) planting, pruning, thinning and felling of trees and
other vegetation in existing forests, removing fallen
trees, as well as restoring forests damaged by air
floods or similar
pollution, animals, storms,
events, and the planning costs of such measures,
where the primary objective of such measures is to
contribute to maintaining or
to restoring forest
ecosystem and biodiversity or the traditional landscape.
However, no aid may be granted for felling the primary
purpose of which is the commercially viable extraction
of timber or for restocking where the felled trees are
replaced by equivalent ones. Aid may be granted for
including planning costs, to
afforestation measures,
increase forest cover, to promote biodiversity, to create
wooded areas for recreational purposes, to combat
erosion and desertification or to promote a comparable
protective function of the forest. Aid to increase forest
cover may be granted only for demonstrated environ-
mental reasons, such as low existing forest cover or the
creation of contiguous wooded areas; it may not be
granted for afforestation with species cultivated in the
term. Wooded areas created for recreational
short
purposes must be open to the public free of charge for
recreational use. Access may be restricted if this is
necessary to protect sensitive areas.

(b) maintaining and improving the soil quality in forests
and ensuring balanced and healthy tree growth.
Measures may include soil improvement by fertilisation
and other treatments to maintain its natural balance,
reducing excessive vegetation density and ensuring
sufficient water retention and proper drainage. Aid may
cover
the planning costs of such measures. The
measures must not reduce biodiversity, cause nutrient
leaching or adversely affect natural water ecosystems or
water protection zones.

Biological and mechanical prevention and treatment
methods should be preferred when granting the aid
unless it can be shown that such methods are not
sufficient to fight the disease or pest in question. Aid
may be granted to compensate for the loss of stock and
for restocking costs up to the market value of the stock
destroyed on the order of the authorities to fight the
disease or pest in question or the stock destroyed by
animals. When calculating the market value of the
increment loss, the potential increment of the stock
destroyed until the normal felling age may be taken
into consideration.

(d) restoration and maintenance of natural pathways,
landscape elements and features and the natural habitat
for animals, including planning costs.

(e) constructing, improving and maintaining forest roads,
visitors' infrastructures including facilities for persons
with special needs, signposts, observation platforms
and similar constructions,
including planning costs,
where the forests and infrastructure are open to the
public at no cost for recreational purposes. Access to
forests and infrastructures may be restricted if this is
necessary to protect sensitive areas or to ensure the
proper and safe use of the infrastructures.

(f)

the costs of information materials and activities such as
seminars, public relations events and information in
the printed and electronic media, which disseminate
general information concerning forests. The supported
actions and materials may not contain references to
named products or producers or promote domestic
products.

(g) the costs of purchase of forestry land used or to be
used as nature protection areas. The forestry land in
question must be entirely and permanently secured for
nature protection purposes by the means of a statutory
or contractual obligation.

(c) preventing, eradicating and treating pests, pest damage
and tree diseases and preventing and treating damage
done by animals as well as targeted measures, including
building and maintaining roads and other infrastruc-
ture, to prevent forest fires. The eligible costs may
include preventative and treatment measures, including
replanting, and the products,
soil preparation for
appliances and materials necessary for such measures.

(176) The Commission will declare State aid for afforestation of
land, establishment of
agricultural or non-agricultural
land, Natura 2000
agroforestry systems on agricultural
forest-environment payments, restoration of
payments,
forestry potential and introduction of prevention actions as
well as non-productive investments compatible with
Article 87(3)(c) of the Treaty if the aid meets the conditions
laid down in Articles 43–49 of Regulation (EC) No 1698/
2005 and does not exceed the maximum intensity
stipulated therein.

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(177) The Commission will authorise State aid for the additional
costs and income foregone due to the use of environmen-
tally friendly forestry technology going beyond the relevant
mandatory requirements if the forest owners enters into a
voluntary commitment concerning the use of
such
technology and the commitment satisfies the conditions
of Article 47 of Regulation (EC) No 1698/2005. Aid
exceeding the amounts fixed in the Annex to Regulation
(EC) No 1698/2005 shall
in principle only be declared
compatible with Article 87(3)(c) of the Treaty if granted for
demonstrated additional costs and/or income foregone, in
exceptional cases taking into account specific circum-
stances to be duly justified,
in favour of commitments
which lead to a demonstrable and significant positive effect
on the environment.

(178) The Commission will declare State aid for the purchase of
forestry land compatible with Article 87(3)(c) of the Treaty
if the aid intensity does not exceed that laid down in
[Article 4 of the Block Exemption Regulation] for the
purchase of agricultural land.

(179) The Commission will declare State aid for training of forest
owners and forestry workers and for consultancy services
provided by third parties, including the establishment of
business plans, forestry management plans and feasibility
studies, as well as participation in competitions, exhibi-
tions and fairs compatible with Article 87(3)(c) of the
Treaty if the aid fulfils the conditions set out in [Article 15
of future Exemption Regulation].

(180) The Commission will authorise State aid for the setting up
of forestry associations if the aid fulfils the conditions set
out in [Article 9 of future Exemption Regulation].

VIII.

PROCEDURAL MATTERS

VIII.A.

Notification

(183) Subject to the points below, all new aid schemes and all
new individual aids must be notified to the Commission
before they are put into effect in accordance with Article 88
(3) of the Treaty and Council Regulation (EC) No 659/
1999 laying down detailed rules for the application of
Article 88 of the Treaty (59). This does not apply to aid
covered by one of the exemption Regulations adopted by
the Commission on the basis of Council Regulation (EC)
No 994/98 of 7 May 1998 on the application of Articles 92
and 93 of the Treaty establishing the European Commu-
nity to certain categories of horizontal State aid (60).

additional

(184) In accordance with Article 89 of Regulation (EC) No 1698/
2005, a separate notification under Article 88(3) of the
Treaty is not required in respect of State aid intended to
rural development
provide
financing for
measures
is granted
for which Community support
provided that this aid has been notified to and approved
by the Commission in accordance with the provisions of
the Regulation as part of the programming referred to in
that Regulation.

(185) In order to benefit from this exception, the measures
themselves respect all conditions of
concerned must
substance for State aid, and notably the eligible costs and
aid intensities set out in these guidelines. The amount of
additional State aid allocated to each of them must be
clearly identified in the rural development plan in
accordance with the provisions of the Rural Development
Implementing Regulation. Commission approval of the
plan will cover only measures which have been identified
in this way. State aids granted for other measures, whether
or not included in the plan, or measures which are subject
to different conditions from those set out in the plan must
be the subject of a separate notification to the Commission
in accordance with Article 88(3).

(181) The Commission will authorise State aid in favour of
activities for the vulgarisation of new techniques, such as
reasonable small scale pilot projects or demonstration
projects if the aid fulfils the conditions set out in point 107
of these Guidelines.

(186) Furthermore, Commission approval of the plan will only
cover the amount of aid set out by the Member State.

(182) The provisions of this Chapter are without prejudice to the
possibility of applying other State aid rules applicable to all
sectors or trade and industry to the forest sector.

(59) OJ L 83, 27.3.1999, p. 1. Regulation as amended by the 2003 Act of

Accession.

(60) OJ L 142, 14.5.1998, p. 1.

(187) The same rules apply by analogy to amendments to rural

development plans.

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VIII.B. Duration of schemes

Commission will no longer apply the following texts from
1 January 2007 :

(188) Under the Community Guidelines for State aid in the
agriculture sector applied during the period 2000–2006,
the Commission has accepted notifications of State aid
schemes of unlimited duration. This can create a lack of
transparency, notably where an aid measure is not used for
several years. It also makes the regular review of all existing
schemes more difficult for the Commission.

(189) Therefore,

the Commission will,

in the future, only
authorise schemes of limited duration. Schemes covering
State aid for measures that can also benefit from co-
financing under Regulation (EC) No 1698/2005 should be
limited to the duration of the programming period 2007–
2013. Other aid schemes should not apply for more than
seven years.

VIII.C.

Annual reports

(190) Article 21 of Regulation (EC) No 659/1999 requires
Member States to submit annual reports to the Commis-
sion on all existing aid schemes with regard to which no
specific reporting obligations have been imposed in a
conditional decision. Details are set out in 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. (61)

(191) The Commission reserves the right to seek additional
information on existing aid schemes on a case by case
its
basis, where this is necessary to enable it to fulfil
responsibilities under Article 88(1) of the Treaty.

(192) Where annual reports are not provided in accordance with
these guidelines,
the Commission may proceed in
accordance with Article 18 of Regulation (EC) No 659/
1999.

(193) Having regard to the annual reports provided by the
Member States, the Commission will take appropriate steps
to ensure an increase in the transparency of information
regarding State aid in the agricultural sector.

VIII.D.

Application to new aids

(194) The Commission will apply these guidelines to new State
aids with effect
from 1 January 2007. Notifications
pending on 31 December 2006 will be assessed according
to the Community State aid guidelines that were applicable
in the agricultural sector on the date of notification of the
aid. Except for measures referred to in point 195, the

(61) OJ L 140, 30.4.2004, p. 1. Regulation as amended by Regulation

(EC) No 1627/2006 (OJ L 302, 1.11.2006, p. 10).

(a) Community guidelines for State aid in the agriculture

sector;

(b) Community guidelines for State aid for advertising of
products listed in Annex I to the EC Treaty and of
certain non-Annex I products (62);

(c) Community guidelines for State aid concerning TSE
fallen stock and slaughterhouse waste (63).
tests,
Replacement of that text is warranted for reasons of
better regulation because the substantive rules therein
have been included into these guidelines. For unlawful
aid granted before the entry into force of
these
guidelines, the Commission will however continue to
apply the provisions on unlawful aid as set out in
points 43 and following of those guidelines;

(d) Commission on State aids: subsidised short-term loans

in agriculture (crédits de gestion) (64).

VIII.E

Existing State aid measures in acordance with

2003 act of accession

(195) For the assessment of the aid schemes and individual aids
that are regarded as existing aid in accordance with Point 4,
Chapter 4 of Annex IV to the 2003 Act of Accession (65),
the Community guidelines for State aid in the agriculture
sector applicable on 31 December 2006 will remain
applicable until 31 December 2007 without prejudice of
point 196, provided that such aid complies with those
guidelines by 30 April 2007 at the latest.

VIII.F.

Proposals for appropriate measures

(196) In accordance with Article 88(1) of

the Treaty the
Commission proposes that Member States amend their
existing aid schemes to conform with these guidelines by
31 December 2007 at the latest, except for existing aid
schemes for investments in connection with processing
and marketing of agricultural products, that have to be
eliminated by 31 December 2008 at the latest, and for
investments concerning land purchase in agricultural
holdings, that have to be amended to conform with these
guidelines by 31 December 2009.

(62) OJ C 252, 12.9.2001, p. 5.
(63) OJ C 324, 24.12.2002, p. 2.
(64) See footnote53.
(65) OJ L 236, 23.9.2003, p. 797.

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(197) The Member States are invited to confirm that they accept
these proposals for appropriate measures in writing by
28 February 2007 at the latest.

(198) In the event that a Member State fails to confirm its
acceptance in writing before that date, the Commission
will apply Article 19(2) of Regulation (EC) No 659/1999
and, if necessary, initiate the proceedings referred to in that
provision.

VIII.G.

Expiry

(199) These guidelines shall apply until 31 December 2013. The
Commission may amend them before that date on the
basis of important competition policy considerations, or
agricultural or human and animal health policy considera-
tions, or in order to take account of other Community
policies or international commitments