2007/499/EC: Commission Decision of 21 February 2007 on State aid No C 16/2006 (ex NN 34/2006) to be implemented by the Region of Sicily for Nuova Mineraria Silius SpA (notified under document number C(2007) 473)   (Text with EEA relevance)
Date: 2007-02-21
Institutions: European Commission
Subjects: Sardinia, State aid, aid to undertakings, company in difficulties, control of State aid, liquidation, mining of ore

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Official Journal of the European Union

17.7.2007

COMMISSION DECISION

of 21 February 2007

on State aid No C 16/2006 (ex NN 34/2006) to be implemented by the Region of Sicily for
Nuova Mineraria Silius SpA

(notified under document number C(2007) 473)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2007/499/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

(1)

(2)

(3)

PROCEDURE

The aid that Italy is planning to grant to Nuova Mineraria
Silius was notified to the Commission by letter of 30
November 2005. The Commission requested further
information on 21 December 2005 and Italy replied by
letter registered as received on 7 February 2006.

By letter of 26 April 2006, the Commission informed
Italy that it had decided to initiate the procedure laid
down in Article 88(2) of the EC Treaty in respect of
the aid.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission invited interested parties to submit their
comments on the measure.

(4)

A meeting with the Italian authorities took place on 12
May 2006. The same authorities reacted to the initiation

(5)

(6)

(7)

(8)

of the procedure by means of letters dated 14 July and
30 August. The Commission requested additional infor-
mation by letter of 18 September 2006, to which Italy
replied on 3 November and 31 December.

The Commission received comments from interested
parties. It forwarded them to Italy, which was given the
opportunity to react. The reply by the Italian authorities
was submitted by letter of 3 November 2006.

DESCRIPTION OF THE BENEFICIARY AND AID
MEASURES

The aid beneficiary would be Nuova Mineraria Silius
S.p.A. (hereinafter ‘NMS’), a company wholly owned by
(‘RAS’). NMS
the Autonomous Region of Sardinia
exploits a deposit of fluorite (3) in the municipality of
Silius, Sardinia.
for
In 2004 (the most
which data are available) the company had a turnover
of EUR 4,96 million and 163 employees.

recent year

Company.

subsequently

NMS was established in 1992 by RAS and the Minmet
assigned
RAS
Financing
to
ownership (97,5 % in 1996 and currently 100 %)
the public entity Ente Minerario Sardo (‘EMSA’).
In
1998 EMSA was put
into liquidation. The official
charged with privatising the activities
receiver was
where possible and otherwise with arranging their
closure. However, when the attempts to privatise NMS
failed and EMSA ceased activities (June 2002), NMS was
not wound up.

the new capital would allow investments

Following the failure of the privatisation, Italy notified to
the Commission a plan for a new capital injection into
the company of some EUR 24 million. According to
in
Italy,
preparation for
deeper
deposits,
leading to an increase in the fluorite content
of the minerals extracted and in overall production at the
mine.

exploitation of new,

the

(1) OJ C 210, 1.9.2006, p. 39.
(2) See footnote 1.

(3) Fluorite is used in the synthesis of organic molecules for the
production of plastic materials such as teflon, resins, aerosols and
lubricants.

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Official Journal of the European Union

(9)

Italy argued that the measure had been notified solely for
purposes of legal certainity as it did not involve State aid,
and this for two reasons:

(a)

Intra-Community trade would not be affected as the
supply of fluorite in the Community covers hardly
30 % of demand. Hence, the only likely results of the
plan would have been a reduction in imports from
third countries and a moderation of price increases.

(b) RAS was behaving in the same way as a market
economy investor since (i) exports of fluorite from
some 50 % of world
China, which account
for
production,
increased
are declining because of
domestic consumption, and this is likely to have a
positive impact on fluorite prices, (ii) the company
had prepared a new industrial plan for the next eight
years which foresaw a full recovery in investment and
a generation of profits as from the fourth year, even
and (iii) by
given current market
shareholder
continuing
avoided loss of
in the
company and probably a number of legal disputes
with clients.

the
investments

its previous

conditions,

activities,

business

L 185/19

(EUR)

2001

2002

2003

2004

2005

Year

Amount transferred

11 671 925

11 834 000

14 379 827

6 890 000

11 200 000

90 705 931

Total

The transfers are entered in the company balance sheet
under the items ‘RAS cover for future losses’ and ‘EMSA
cover for future losses’.

(11)

Furthermore, the Italian authorities confirmed that NMS
had benefited from the following public support:

In the alternative, if the Commission concluded that there
might be an element of State aid in the planned measure,
Italy claims that the aid element would have been limited
to the amount in excess of the profits to be obtained
from the investment project. According to Italy's calcu-
lations, this excess would not be greater than 26 % of the
investment, which would be below the threshold for
compatible regional aid in the area (4).

(10)

the information
In addition to the notified measure,
provided by the Italian authorities shows that NMS has
benefited in recent years from a continuous transfer of
public funds from its single shareholder RAS (5), with the
objective of covering losses during the pre-liquidation
period. Since 1997, these transfers have amounted to
EUR 90,7 million:

Year

Amount transferred

(12)

(EUR)

1997

1998

1999

2000

7 230 397

9 296 224

5 706 849

12 496 708

(4) The municipality of Silius is located in the NUTS III region of
Cagliari, Sardinia, and is eligible under Article 87(3)(a) with an aid
intensity of 35 % nge for the entire period 2000-06. For SMEs there
is a top-up of 15 % gge.

(5) Including funds from the Sardinian public holding EMSA until 2003.

(a) By the Ministerial Decree of 9 May 2002,

the
company was granted EUR 7,66 million under Law
No 488/92 (6) of 19 December 1992 in respect of
eligible
to EUR 14,31
million.

investments

amounting

(b) By the Ministerial Decree of 28 December 2000 (7),
the company was granted EUR 1,869 million under
Article 9 of Law No 752/82 of 6 October 1982 in
order to finance 60 % of the cost of prospecting for
deeper deposits at the mine. However, according to
the Italian authorities, this amount has not yet been
paid.

INITIATION OF THE FORMAL INVESTIGATION
PROCEDURE

the formal

In its decision to initiate
investigation
the Commission raised doubts as to the
procedure,
compatibility of the above measures with the common
market, and in particular
their compliance with the
Community Guidelines on State aid for rescuing and
restructuring firms in difficulty (8) (‘the Guidelines’).

(6) Law No 488/92 concerns a regional aid scheme approved by the
Commission by decision of 12 July 2000 (Case N 715/99). The
scheme expired on 31 December 2006.

(7) Extended by the Ministerial Decree of 20 December 2002, which
provided for its expiry in December 2004. The company's accounts
for 2004 show an amount of EUR 1,41 million entered under this
heading. They also show that a request for a further extension
beyond 2004 was envisaged.
(8) OJ C 244, 1.10.2004, p. 2;

these Guidelines replaced the text

adopted in 1999 (OJ C 288, 9.10.1999, p. 2).

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COMMENTS FROM INTERESTED PARTIES

(13)

The Commission's invitation to submit comments on the
measure resulted in reactions from three competitors.

orities confirmed that NMS was indeed to be wound up,
as decided by the extraordinary general meeting held on
28 July 2006.

for

increased significantly in the

(14) According to the first competitor, the situation at NMS
twenty years and the
the last
has been critical
company is able to survive only thanks to the constant
provision of public funds. Even though market prices
have
five years,
leading other companies to expand their existing mines
or
to open new ones, NMS remained unprofitable
throughout. Furthermore, it was impossible to privatise
because it was not considered viable despite the State aid
it had already received. According to this competitor, the
aid amounts are spectacular, scandalous, and incredibly
disproportionate, as shown by the fact that during 2004
they exceeded the company's turnover two-fold.

last

(15)

The second competitor expressed its astonishment at the
situation. NMS and the other European fluorite producers
suffered severely from the adverse market conditions of
the 1990s, which were triggered by dumping from China
and eased only after 2000. Whereas it was known that
NMS received public funds, this competitor claims not to
have been aware of the magnitude of the aid, which, in
its view, was unreasonably high. On the basis of its own
rough calculations, it estimates that the funds received by
NMS from RAS during the last five to six years have
been about 10 times the amount of a typical investment
industry standards. This
per
competitor concludes
that, as a European producer
operating in the very competitive market for fluorite, it
cannot accept a situation where a single company is kept
afloat by means of large state transfers over many years.

tonne applying normal

(16)

The third competitor expressed its strong opposition to
the granting of aid to NMS that was,
in its view,
and disproportionate. According to this
substantial
submission, the amount of
financial support intended
company with such small mining activities
for
appears to represent extremely poor value for money,
and it risks being used merely to support uneconomic
employment at the mine.

a

REACTION FROM ITALY

(17)

In their reaction to the initiation of the formal investi-
gation procedure, the Italian authorities announced that
RAS had decided not to implement the notified aid and,
in view of
to wind up the
company. By letter of 30 August 2006, the Italian auth-

its financial difficulties,

(18)

Italy further claimed (i) that the liquidation of NMS assets
would not permit the repayment of RAS financing, (ii)
that, with the company's exit from the market, there
would be no further effects on intra-Community trade,
and (iii) that, under those circumstances, any order to
recover the aid could not produce any practical effects.
By way of conclusion, Italy requested the Commission to
refrain from issuing a recovery order.

(19) As regards the comments made by NMS competitors,
Italy considers that they are no longer relevant insofar
as the notification has been withdrawn and the company
will be wound up.

ASSESSMENT OF THE MEASURE

1. Existence of State aid

(20) Article 87(1) of the EC Treaty declares incompatible with
the common market any aid granted by a Member State
or through state resources in any form whatsoever which
distorts or threatens to distort competition by favouring
certain undertakings or the production of certain goods
and affects trade between Member States.

(21)

Investment project and loss cover

The Commission notes that the measures listed in para-
graphs 8 and 10 involve the allocation of state resources
attributable to the public authorities. As the public
support is directed to one individual company, the selec-
tivity criterion is met. Furthermore, since NMS has been
active in the fluorite market, a sector in which trade
exists between Member States, the criterion of effect on
intra-Community trade is also fulfilled. In particular, the
argument by the Italian authorities according to which
there would be no effect on intra-Community trade has
to be rejected since, according to settled caselaw, when
aid granted by a State or
through state resources
strengthens the position of an undertaking compared
in intra-
with all other undertakings
Community trade, the latter must be regarded as being
affected by that aid (9). Furthermore,
the presence of
intra-Community trade is borne out by the observations
received from competing suppliers of fluorite in different
Member States in reaction to the decision to initiate the
procedure.

competing

(9) See, for example, Case 730/79 Philip Morris v Commission [1980]
and Case C-156/98 Germany v

ECR 2671, paragraph 11,
Commission [2000] ECR I-6857, paragraph 33.

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(22) As regards the argument in the original notification to
the effect that RAS behaved in a manner comparable to
that of a market economy investor,
the Commission
points out that,
in view of its performance in recent
years and the change in its financial ratios (10), NMS
had to be considered a ‘firm in difficulty’ within the
meaning of Section 2.1 of the Guidelines.

Funds provided under Laws Nos 488/92 and 752/82

(27) As regards the measures mentioned in paragraph 11, it is
not contested that they constitute State aid within the
meaning of Article 87(1) of the EC Treaty. Nevertheless,
Italy has declared that no aid has as yet been paid under
Law No 752/82.

(23) Accordingly,

into

taking

loss cover

consideration

the
and
company's continuing need for
in recent
years, it seems very unlikely if there is no improvement
in its financial situation that a market economy investor
would have committed additional
funds of EUR 24
million to a project
that had hitherto proved un-
profitable. This conclusion is further supported by the
fact that all attempts to privatise the company in the
period from 1998 to 2002 resulted in failure. This has
also been confirmed by the reactions received from
competitors in the industry.

(24)

(25)

in the past

In addition, RAS showed no interest
in
weighing the costs to be borne in the event of liquidation
against the costs of continuing with NMS activities. On
liquidation was explicitly avoided in June
the contrary,
2002, when it became clear
the privatisation
that
procedure had failed.

Furthermore, it was apparent from the notification that,
to a large extent, RAS had been supporting NMS on the
basis of public welfare considerations, such as the fact
that
companies
remaining in the region. However, arguments of that
kind are not relevant for a market economy investor.

it was one of

few industrial

the

(26) Accordingly,

as

cover

losses

designed

shareholder

the Commission concluded in the
and would again
decision initiating the procedure
stress, the investments proposed in the original notifi-
together with all previous contributions from
cation,
the
and
to
amounting to EUR 114,7 million constitute State aid
within the meaning of Article 87(1) of the EC Treaty.
The latter aid (loss cover) is illegal as it was granted in
breach of Article 88(3) of the Treaty. As regards the
measure in the original notification, the Italian authorities
have confirmed that some of the funds had already been
granted to the beneficiary in order to undertake some
urgent and non-delayable works. Therefore, this part of
the aid,
totalling an unknown amount, was granted
unlawfully.

2. Derogations under Article 87(2) and (3) of the
EC Treaty

(28)

In such cases, provided that

the measures mentioned in
The primary objective of
paragraphs 8 and 10 seems to be to assist a firm in
difficulty.
the relevant
conditions are met, only the derogation in Article
87(3)(c), which permits State aid designed to facilitate
the development of certain economic activities where
such aid does not adversely affect trading conditions to
an extent contrary to the common interest can apply.

(29)

Rescue or restructuring aid to ailing firms is currently
governed by the Guidelines.

(30)

the authorisation of

The transitional provisions stipulate that the Guidelines
will apply for the assessment of any rescue or restruc-
turing aid granted without
the
Commission (unlawful aid) if some or all of the aid is
granted after 1 October 2004, the date of publication of
the new Guidelines in the Official Journal of the European
Union (point 104). Consequently, the new Guidelines are
applicable in the present case as the notification took
place in 2005 and at least EUR 11 million of public
the EUR 90,7 loss cover mentioned in
aid (out of
paragraph 10) was granted after 1 October 2004.

contribute

to the development of

(31) As regards the aid granted under Law No 488/92 and
possibly under Law No 752/82,
its compatibility must
also be assessed in the light of the Guidelines insofar as
the Commission considers that aid to firms in difficulty
may
economic
activities without adversely affecting trade to an extent
contrary to the Community interest only if the conditions
in the Guidelines are met (11). As firms in
set out
difficulty are explicitly excluded from the scope of Law
No 488/92, the Commission concludes that NMS was
not eligible for regional aid under Law No 488/92, the
firm already being in difficulty at the time the aid was
granted (May 2002) (12).

(10) In particular,

the 2004 annual accounts show losses totalling
EUR 10,46 million, equivalent to 101 % of the subscribed capital
at the time (EUR 10,33 million). Losses in 2003 were EUR 9,61
million. Turnover also followed a downward trend, from EUR 7,31
million in 2003 to EUR 4,96 million in 2004.

(11) Point 20 of the Guidelines.
(12) According to point 56 of the Guidelines, the fact that the firm is
located in an assisted area under Article 87(3)(a) plays a role only as
regards the implementation of compensatory measures and the size
of the beneficiary's contribution.

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(32)

For the same reason, the subsidiary argument by the
Italian authorities according to which the supposed aid
would have to be regarded as falling below the threshold
set for regional aid in Sardinia has to be rejected.

(33) As regards the eligibility of NMS for restructuring aid, the
Commission considers that the criteria for compatible aid
laid down in the Guidelines are not met. In particular:

(35)

(a)

kept

the successive amounts of aid for loss cover have
artificially
that
bankruptcy;
otherwise would
apparently, no restructuring was carried out;
the
measures must therefore be regarded as operating aid;

in business
gone

a
into

company

have

(b) neither the loss cover in the past nor the measure
indicated
in the original notification can be
considered as compatible rescue aid since they both
extend over a period of several years,
they were
granted in a non-eligible form and no reimburse-
ment/restructuring plan/liquidation of the company
was planned within a period of six months;

(c)

the industrial plan sent to the Commission in the
notification consisted in an analysis of the profit-
ability prospects in the light of the new investment
project, with no mention of restructuring measures,
with no conditions for the granting of public aid and
without taking into account the illegal support in the
past;

(d) in the

a

absence of

restructuring plan,

the
Commission is not able to ascertain whether the
proposed aid could restore long-term viability and
would be kept to a minimum and whether undue
distortions
avoided
continuous debt
(notably having regard to the
the
in breach of
cover provided in recent years,
Deggendorf ruling (13)).

competition

could

be

of

company. However, contrary to the claims by Italy, the
Commission considers pursuant to Council Regulation
(EC) No 659/1999 (14)
laying down detailed rules for
the application of Article 93 of the EC Treaty that, in
cases of unlawful aid which is not compatible with the
competition should be
common market,
restored and that, for this purpose, the aid,
including
interest, needs to be recovered without delay.

effective

CONCLUSION

In addition,

The Commission finds that
Italy has unlawfully im-
plemented, in breach of Article 88(3) of the Treaty, the
measures consisting in repeated cover for NMS losses, in
the granting of aid to NMS under Law No 488/92 and
the Ministerial Decree of 28 December 2000, and poten-
tially in a partial payment of additional aid under the
the Commission finds
notified measure.
that the aid indicated in the original notification and
the
aid granted by the Ministerial Decree of 28
December 2000 under Article 9 of Law No 752/82,
are neither compatible with the common market nor
the EC Treaty.
eligible
Therefore, the parts of the above measures that have
not yet been granted or paid must not be imple-
mented (15), and the aid already paid totalling EUR
loss
98,36 million,
cover (see paragraph 10) and EUR 7,66 million granted
by the Ministerial Decree of 9 May 2002 (see paragraph
1), has to be recovered,

including EUR 90,7 million of

any derogation under

for

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Italy has implemented for Nuova
is

1.
Mineraria Silius S.p.A., amounting to EUR 98 360 000,
incompatible with the common market.

2.
The State aid which Italy is planning to grant to Nuova
Mineraria Silius S.p.A., amounting to EUR 25 869 000, is also
incompatible with the common market and may not therefore
be implemented.

Article 2

Italy shall recover from the beneficiary the aid referred to

1.
in Article 1(1).

Withdrawal of the notification and winding-up of the
company

(34)

The Commission takes note of the announcement by
the
Italy that RAS has decided not
in view of
notified aid of some EUR 24 million and,
to wind up the
the financial difficulties of NMS,

to implement

(13) Case C-355/95 P Textilwerke Deggendorf v Commission and others

[1997] ECR I-2549.

The sums to be recovered shall

2.
include interest for the
entire period running from the date on which they were at the
disposal of the beneficiary until the date of their recovery.

(14) OJ L 83, 27.3.1999, p. 1.
(15) According to the information submitted by Italy, this would include
EUR 24 million in the original notification plus EUR 1,869 million
pursuant
to the Ministerial Decree of 28 December 2000 and
Italian Law No 752/82 (see paragraph 11).

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The interest shall be calculated on a compound basis in
3.
conformity with Chapter V of Commission Regulation (EC) No
794/2004 of 21 April 2004 implementing Council Regulation
(EC) No 659/1999 laying down detailed rules for the appli-
cation of Article 93 of the EC Treaty (16).

Article 3

Italy shall take all necessary measures to recover from the
1.
beneficiary the illegal and incompatible aid referred to in Art-
icle 1(1).

Recovery shall take place without delay and in accordance
2.
with the procedures under national law provided that they allow
the immediate and effective execution of the decision.

Italy shall ensure that the present decision is implemented

3.
within four months of the date of notification.

Article 4

1.
Italy shall keep the Commission informed of the progress
of the national proceedings to implement this decision until
these proceedings have been completed.

2. Within two months of notification of this decision, Italy
shall submit information specifying the total amount (principal
and interest) to be recovered from the beneficiary and a detailed
description of the measures already taken or planned to comply
with the present decision. By the same deadline, it shall send to
the Commission all
the
beneficiary has been ordered to repay the aid.

the documents demonstrating that

After the period of two months referred to in paragraph
3.
2, Italy shall submit, on a simple request by the Commission, a
report on the measures already taken or planned to comply
with this decision. This report shall also provide detailed infor-
mation on the amounts of aid and interest already recovered
from the beneficiary.

Article 5

This decision is addressed to Italy.

Done at Brussels, 21 February 2007.

For the Commission

Neelie KROES
Member of the Commission

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