2008/153/EC: Commission Decision of 13 November 2007 — State aid C 37/2006 (ex NN 91/2005) — Fishing Vessel Modernisation Scheme implemented in the United Kingdom (notified under document number C(2007) 5395) (Text with EEA relevance)
Date: 2007-11-13
Institutions: European Commission
Subjects: State aid, United Kingdom, control of State aid, fishing vessel, infringement of EU law, modernisation aid

22.2.2008

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Official Journal of the European Union

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COMMISSION

COMMISSION DECISION

of 13 November 2007
State aid C 37/2006 (ex NN 91/2005) — Fishing Vessel Modernisation Scheme implemented in the
United Kingdom

(notified under document number C(2007) 5395)

(Only the English version is authentic)

(Text with EEA relevance)

(2008/153/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
and in particular
Community,
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

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

Having regard to Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for the application
of Article 93 of the EC Treaty (1), and in particular Article 6(1)
Article 14 thereof,

Having called on interested third parties
comments pursuant to the provisions cited above (2),

to submit

their

Whereas:

I. PROCEDURE

(1)

By letter dated 15 June 2004,
the Commission was
informed by a citizen of the United Kingdom that the
the public authority in the
Shetland Islands Council,
the United Kingdom had imple-
Shetland Islands of
mented aid to the fisheries
sector, which possibly
concerned illegal state aid. By letters dated 24 August
and
February
2004,
2005,
16 December 2005,
the Commission requested the
United Kingdom to provide information about such
aid. By letters dated 10 December 2004, 6 April 2005,
8 September 2005 and 31 January 2006, the United
Kingdom provided the Commission with further infor-
mation.

11 May

2005

4

(2)

By letter dated 13 September 2006, the Commission
informed the United Kingdom that it had decided to
initiate the procedure laid down in Article 88(2) of the

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

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

(2) OJ C 293, 2.12.2006, p. 9.

EC Treaty in respect of the aid. The United Kingdom
provided its comments on the aid by letters dated
16 October 2006 and 6 February 2007.

(3)

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

(4)

The Commission received no comments from interested
parties.

II. DETAILED DESCRIPTION

(5)

(6)

the scope of

several different

to the
The Shetland Islands Council made payments
fisheries sector under
two general aid
measures, named ‘Aid to the Fish Catching and Processing
Industry’ and ‘Aid to the Fish Farming Industry’, which
actually consisted of
types of aid
schemes in force since the 1970's. One such scheme
(‘the
was
the
scheme’). Under
the scheme, which applied from at
least the 1980's until 14 January 2005, aid could be
granted for the modernisation of fishing vessels, related
to a major improvement, such as, for example, better
engine,
storage
improvements in working conditions or to crew safety.

‘Fishing Vessel Modernisation Scheme’

replacement

catches,

the

of

of

Aid was granted up to 10 % of the total cost of the
improvement project, with a maximum amount of GBP
40 000 per vessel. Only one application per year could
be considered.
Improvement projects which exceeded
50 % of the costs of a new vessel of the same type
were not eligible, as well as work to vessels less than
five years old. The works had to meet all the required
standards specified by Shetland Seafood Quality Control.

(3) OJ C 293, 2.12.2006, p. 9.

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All applicants had to hold a pressure stock licence and other
relevant certificates of competency and applicants had to
become members of the Shetlands Fishermen's Association.

(12)

In addition, the United Kingdom provided information
showing that none of the grants of aid exceeded 40 % of
the eligible costs.

(7)

(8)

(9)

The beneficiary of the aid had to undertake to operate
the vessel full-time, to retain ownership of the vessel and
to provide full-time employment for the vessel crew for a
period of at least five years from receipt of the aid.
Finally, beneficiaries had a yearly reporting obligation
in order
conditions had been
complied with and the scheme contained a provision
for reimbursement of the aid in case of non-compliance
with any of the conditions.

to prove

that

all

Grounds for initiating the procedure

(‘2001 Guidelines’)

The Commission had serious doubts that the aid granted
under the scheme after 1 July 2001 could be regarded as
compatible with the requirements of the Guidelines for
the examination of State aid to fisheries and aquaculture
of 2001 (1)
in conjunction with
Article 9 of Council Regulation (EC) No 2792/1999 of
17 December 1999 laying down the detailed rules and
arrangements regarding Community structural assistance
in the fisheries sector (2), in particular with the conditions
that no aid may be granted for modernisation of fishing
vessels if it concerns capacity in terms of tonnage or of
power.

(13)

(14)

(10)

III. COMMENTS FROM THE UNITED KINGDOM

In its letters dated 16 October 2006 and 6 February
2007, the United Kingdom provided further information
on the individual aids granted under the scheme after
1 July 2001.
In the period from August 2002 until
June 2005, 23 aids were granted for vessel moderni-
sation,
fish handling
concerning,
fire fighting equipment, aid for winches or
systems,
deck cranes and for engine replacement. The amount
of aid granted varied between GBP 403 and GBP
7 090 per beneficiary.

amongst others,

(11) As regards compliance with the condition of Article 9 of
Regulation (EC) No 2792/1999 that no aid may be
granted when the modernisation concerns capacity in
terms of
the United Kingdom
stated that none of the improvements facilitated by the
grants of aid affected the gross tonnage or the power of
any vessel.

tonnage or of power,

if

respect,

In that

expectations.

Finally,
the
the United Kingdom maintained that
Commission adopts a negative decision, recovery of aid
granted prior to 3 June 2003 should not be required as it
would be contrary to the principle of the protection of
legitimate
the United
to Commission Decision
Kingdom made
reference
the
2003/612/EC of 3 June 2003 on loans
in the Shetland Islands
fishing quotas
purchase of
Commission Decision
and
(United
2006/226/EC of 7 December 2005 on Investments of
Shetland Leasing and Property Developments in the
Shetland Islands (United Kingdom) (4), stating that until
3 June 2003,
legitimately
considered the funds used for such aid to be private
rather than public.

the Shetland Islands Council

Kingdom) (3)

for

IV. ASSESSMENT OF THE AID

It must be determined firstly if
the measure can be
regarded as State aid and if so, if it is compatible with
the common market. Aid has been granted to a limited
number of companies within the fisheries sector, and is
thus of a selective nature. The aid has been granted by
the Shetland Islands Council from state resources. The aid
benefited recipients which are in direct competition with
other companies in the fisheries sector, both within the
United Kingdom, and in other Member States. Therefore,
the measures distort or threaten to distort competition
and are to be considered State aid within the meaning of
Article 87(1) of the EC Treaty.

the 2004 Guidelines:

(15) As regards State aid to the fisheries sector, State aid is
deemed to be compatible with the common market if it
complies with the conditions of the Guidelines for the
examination of State aid to fisheries and aquaculture (5)
of 2004 (‘2004 Guidelines’). According to the second
‘an
paragraph of point 5.3 of
“unlawful aid” within the meaning of Article 1(f) of Regu-
lation (EC) No 659/1999 will be appraised in accordance
with the guidelines applicable at
the time when the
administrative act setting up the aid has entered into
force’. This is also in accordance with the general rules
expressed in the Commission notice on the determi-
nation of
the applicable rules for the assessment of
unlawful State aid (6). The aid is thus to be assessed
with regard to its compatibility with the 2001 Guidelines
and the 2004 Guidelines.

(1) OJ C 19, 20.1.2001, p. 7.
(2) OJ L 337, 30.12.1999, p. 10. Regulation as last amended by Regu-

lation (EC) No 485/2005 (OJ L 81, 30.3.2005, p. 1).

(3) OJ L 211, 21.8.2003, p. 63.
(4) OJ L 81, 18.3.2006, p. 36.
(5) OJ C 229, 14.9.2004, p. 5.
(6) OJ C 119, 22.5.2002, p. 22.

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Compatibility of the scheme

Conditions under the Guidelines

2001 Guidelines

(16) According

to point 2.2.3.2 of 2001 Guidelines,
applicable to existing aid as from 1 July 2001, aid for
the modernisation of commissioned vessels may be
deemed compatible with the common market provided
that it complies with the relevant requirements laid down
in Regulation (EC) No 2792/1999.

Regulation (EC) No 2792/1999

(17) Articles 6, 7, 9 and 10 of Regulation (EC) No
2792/1999 and Annex III
thereto require that any
entry of new capacity is to be compensated by the with-
drawal of a capacity without public aid which is at least
equal to the new capacity introduced in the segments
concerned. Until 31 December 2001, where
the
the fleet were not yet
objectives
least
respected,
have been 30 % more than the new capacity introduced.

for
the withdrawal of capacity should at

the size of

(18)

The aid may only be granted where the Member State
has submitted the information concerning the application
of the multiannual Guidance Programme (‘MAGP’), has
complied with its obligations under Council Regulation
(EEC) No 2930/86 of 22 September 1986 defining cha-
racteristics for fishing vessels (1), has implemented the
permanent arrangements for fleet renewal and moderni-
sation under Article 6 of Regulation (EC) No 2792/1999,
and has complied with the overall MAGP-objectives.

(19)

the aid for the modernisation of

In addition,
fishing
vessels can be granted only if the aid does not concern
capacity in terms of tonnage or of power.

(20)

Finally,
the vessels have to be registered in the fleet
register and any changes in vessels characteristics must
be communicated to this register. The replacement of
fishing gear is not eligible.

(21) As Shetland is an objective I region, aid may be granted

up to 40 % of the total eligible costs.

Regulation (EC) No 2369/2002

in the sense that such aid may only be granted provided
that the aid does not serve to increase the effectiveness of
the fishing gear.

(23) As regards the condition regarding the fact that the aid
may not concern capacity in terms of tonnage or of
power, the amendments made by Regulation (EC) No
2369/2002 introduced an exemption to that restriction,
allowing such types of aids when they are in line with
Article 11(5) of Regulation (EC) No 2371/2002 (3),
which allows capacity increases in the case of moderni-
sation works over the main deck to improve safety on
board, working conditions, hygiene and product quality.

Regulation (EC) No 1421/2004

(24) With regard to conditions concerning the replacement of
fishing gear, Regulation (EC) No 2792/1999 was later
amended by Regulation (EC) No 1421/2004 (4), which
to
entered into force on 26 August 2004. Pursuant
Regulation (EC) No 2792/1999, as thus amended, repla-
cement of fishing gear could be considered eligible if the
vessel is subject to a recovery plan and is required to end
its participation in the fishery concerned and fish for
other species with different fishing gear. In such a case,
the Commission may decide that the first replacement of
fishing gear, where fishing possibilities are significantly
reduced by a recovery plan, may be considered eligible.

(25)

(26)

2004 Guidelines

The 2004 Guidelines should be applied to all existing
schemes as from 1 January 2005. With regard to the
aid for modernisation of fishing vessels, these guidelines
refer to the Articles 9 and 10 of, and point 1.4 of Annex
III to, Regulation (EC) No 2792/1999 and thus the same
conditions continue to apply.

Compatibility

From the information provided by the United Kingdom,
it can be deduced that, during the period from August
2002 until June 2005, 23 aids were granted for vessel
modernisation, including five for replacements of engines
and one for a project regarding the auxiliary engine,
pump and clutch unit.

(22) On 1 January 2003, the relevant Articles and Annex of
Regulation (EC) No 2792/1999 were amended by Regu-
lation (EC) No 2369/2002 (2). In addition to the existing
conditions of Regulation (EC) No 2792/1999, the aid for
the modernisation of fishing vessels was further restricted

(27) According to the United Kingdom, none of

those
improvements
facilitated by the grants affected the
gross tonnage or the power of any vessel and therefore
the
the aids were compatible with the conditions of
respective guidelines.

(1) OJ L 274, 25.9.1986, p. 1. Regulation as amended by Regulation

(3) OJ L 358, 31.12.2002, p. 59. Regulation as amended by Regulation

(EC) No 3259/94 (OJ L 339, 29.12.1994, p. 11).

(2) OJ L 358, 31.12.2002, p. 49.

(EC) No 865/2007 (OJ L 192, 24.7.2007, p. 1).

(4) OJ L 260, 6.8.2004, p. 1.

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replacement of

(28) As regards the 17 grants for vessel modernisations, other
than the
and the project
concerning the auxiliary engine, pump and clutch unit,
the United Kingdom has provided information showing
the aid complies with the conditions under the
that
Guidelines applicable at the time the aid was granted.

engines

(29) However, as regards the remaining six grants, according
to Article 9(1)(c)(i) of Regulation (EC) No 2792/1999,
the aid may not ‘concern capacity in terms of tonnage
or power’. The replacement of an engine of a fishing
vessel concerns the capacity of the vessel
in terms of
such
power and thus no aid may be granted for
purpose. This was also been confirmed to all Member
dated 5 May 2003 (Reference
States
D(2003)37148)
from Mr. Holmquist, Director-General
for fisheries. In the same line, the aid for the project
concerning the auxiliary engine, pump and clutch unit
cannot be allowed.

letter

by

(30) As

regards

the amendments

to Regulation (EC) No
2792/1999, referred to in Recital 23, those six moder-
nisation projects have all taken place below deck and can
therefore not be regarded as falling within the scope of
Article 11(5) of Regulation (EC) No 2371/2002.

(31)

the foregoing Recitals 26 to 30,

the
In view of
Commission considers that the aid granted under the
scheme for the six modernisation projects concerning
the capacity of
tonnage or
power is incompatible with Article 9(1)(c)(i) of Regu-
lation (EC) No 2792/1999 and therefore incompatible
the 2001 and 2004 Guidelines. The other aid granted
under the scheme is, however, compatible with those
conditions.

in terms of

the vessel

Recovery of the aid

(32) Under Article 14(1) of Regulation (EC) No 659/1999,
where negative decisions are taken in case of unlawful
aid, the Commission is to decide that the Member State
concerned must take all necessary measures to recover
the aid from the beneficiary.

(33)

(34)

raised the issue that

the
The United Kingdom has
Commission is not
the aid if
that would be contrary to the principle of the protection
of legitimate expectations and claims that this principle
applies to this case.

to require recovery of

The funds used for the financing of the scheme are the
same funds used for the aids subject to the negative
the Commission in Decisions
decisions
referred to in
2003/612/EC and 2006/226/EC,

taken by

as

Recital 13 of the present Decision. In those cases, the
funds must be
these
Commission considered that
the purposes of
regarded as State
for
resources
Article 87 of
the
the EC Treaty. At
Commission acknowledged that in the specific circum-
stances of the cases in question, legitimate expectations
as to the private nature of the fund in question had been
created on the part of the Shetland Islands Council and
bodies involved through the combination of a number
of elements taken together which precluded recovery of
the incompatible State aid.

the same time,

(35)

(36)

in particular,

It is considered, however, that in this case the elements
taken into account in those two Commission Decisions
cannot be applied in the same way and the legitimate
expectations have not been created. The Commission
the actions and statements from
notes,
the United Kingdom,
the
clearly showing that, at
respective times of granting of aid, the responsible autho-
rities were convinced that the scheme was, in fact, a State
aid scheme and that
the rules on State aid were
applicable.

To reach that conclusion, the Commission observes that,
unlike the aids subject to Decisions 2003/612/EC and
2006/226/EC, the scheme in question has been set up
as a normal aid scheme and concerns direct grants to
fishermen, granted directly by the Shetland Islands Council.
In addition, the specific circumstances of this case clearly
show that the United Kingdom authorities themselves
considered the State aid rules to be applicable, as they
have continuously included the expenditure under the
scheme in the annual UK State aid reports submitted
to the Commission in accordance with Community obli-
gations. In fact, in response to questions raised by the
the United Kingdom stated in its letter
Commission,
‘payments under the
dated 10 December 2004 that:
schemes have been included in the Annual State Aid
Inventory and sent
to the Commission annually, as
required, for many years’ and in its letter dated 6 April
‘My authorities have, over many years, acted
2005 that:
in good faith and in the belief that the Schemes were
compliant with the State aid guidelines’.

(37) Having regard to those statements, and the circumstances
of the case, the Commission considers that requiring the
recovery of the aid cannot be considered to be contra-
dictory to the general principle of Community law. Thus,
in accordance with Article 14(1) of Regulation (EC) No
659/1999, the Commission considers that the United
Kingdom must take all necessary measures to recover
the aid from the beneficiaries of the scheme, without
prejudice to cases falling within the scope of Commission
Regulation (EC) No 875/2007 of 24 July 2007 on the
application of Articles 87 and 88 of the EC Treaty to de
minimis aid in the fisheries sector and amending Regu-
lation (EC) No 1860/2004 (1).

(1) OJ L 193, 25.7.2007, p. 6.

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(38)

it

that

respect,

should be pointed out

in
In that
accordance with Article 14(2) of Regulation (EC) No
659/1999, in order to ensure that effective competition
be restored, the recovery should include interest. This
interest should be calculated on a compound basis in
accordance with Chapter V of Commission Regulation
(EC) No 794/2004 (1).

(39)

The Commission asks the United Kingdom to return to it
the attached questionnaire concerning the current status
of the recovery procedure and to draw up a list of bene-
ficiaries to which the recovery of aid relates.

(40)

(41)

V. CONCLUSION

In the light of the assessment made in Section IV, the
Commission finds that
in
breach of Article 88(3) of
the EC Treaty, unlawfully
granted aid under
the Fishing Vessel Modernisation
Scheme.

the United Kingdom has,

The Commission considers that the aid granted under
that scheme is compatible with the common market,
with the exception of the aid granted for modernisation
projects concerning capacity in terms of
tonnage or
power,

HAS ADOPTED THIS DECISION:

Article 3

1.
The United Kingdom shall take all necessary measures to
recover the incompatible aid granted under the scheme referred
to in Article 1(2) from the beneficiaries, other than the aid
referred to in Article 2.

2.
The aids to be recovered shall include interest from the
date on which they were put at the disposal of the beneficiaries
until the date of their actual recovery.

The interest shall be calculated on a compound basis in
3.
accordance with Chapter V of Regulation (EC) No 794/2004.

The United Kingdom shall

all outstanding
4.
payments of aid under the scheme referred to in Article 1
with effect from the date of adoption of this Decision.

cancel

Article 4

The recovery of the aid granted under the scheme referred

1.
to in Article 1(2) shall be immediate and effective.

2.
The United Kingdom shall ensure that this Decision is
implemented within four months following the date of its noti-
fication.

Article 5

1. Within two months following the date of notification of
this Decision, the United Kingdom shall submit the following
information to the Commission:

Article 1

The State aid which the United Kingdom has implemented
1.
on the basis of the Fishing Vessel Modernisation Scheme is
compatible with the common market, as far as it concerns
aid granted
concerning
for modernisation projects not
capacity in terms of tonnage or power.

(a)

the list of beneficiaries that have received aid referred to
Article 1(2) of
the
conditions laid down by Regulation (EC) No 875/2007,
and the total amount of aid received by each of them;

this Decision that does not

fulfil

2.
The State aid which the United Kingdom has implemented
on the basis of the Fishing Vessel Modernisation Scheme is
incompatible with the common market, as far as it concerns
aid granted for modernisation projects concerning capacity in
terms of tonnage or power.

(b) the total amount (principal and interest) to be recovered

from each beneficiary;

(c) a detailed description of the measures already taken and

planned to comply with this Decision; and

Article 2

(d) documents demonstrating that the beneficiaries have been

ordered to repay the aid.

Individual aid referred to in Article 1(2) of this Decision does
not constitute aid if it fulfils the conditions of Regulation (EC)
No 875/2007.

(1) OJ L 140, 30.4.2004, p. 1. Regulation as last amended by Regu-

lation (EC) No 1935/2006 (OJ L 407, 30.12.2006).

2.
The United Kingdom shall keep the Commission informed
of the progress of the national measures taken to implement
this Decision until recovery of the aid granted under the scheme
referred to in Article 1 has been completed.

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It shall immediately submit any information which the Commission requests on the measures already taken
and planned to comply with this Decision.

It shall also provide detailed information concerning the amounts of aid and recovery interest already
recovered from the beneficiaries.

This Decision is addressed to the United Kingdom of Great Britain and Northern Ireland.

Article 6

Done at Brussels, 13 November 2007.

For the Commission

Joe BORG
Member of the Commission