2008/166/EC: Commission Decision of 13 November 2007 — State aid C 39/06 (ex NN 94/05) — First time shareholders scheme implemented by the United Kingdom (notified under document number C(2007) 5398) (Text with EEA relevance)
Date: 2007-11-13
Institutions: European Commission
Subjects: State aid, United Kingdom, control of State aid, fishing vessel, shareholding

28.2.2008

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Official Journal of the European Union

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 13 November 2007
State aid C 39/06 (ex NN 94/05) — First time shareholders scheme implemented by the United
Kingdom

(notified under document number C(2007) 5398)

(Only the English version is authentic)

(Text with EEA relevance)

(2008/166/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

mation by letters dated 10 December 2004, 6 April
2005, 8 September 2005 and 31 January 2006.

Having regard to the Treaty
Community,
and in particular
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)
and Article 14 thereof,

(2)

By letter dated 13 September 2006, the Commission
the decision to
informed the United Kingdom of
initiate the procedure laid down in Article 88(2) of the
EC Treaty in respect of the aid. The United Kingdom
provided its comments on the aid by letter dated
16 October 2006.

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

to submit

their

(3)

Whereas:

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union on
30 November 2006 (3). The Commission invited any
interested parties to submit their comments on the aid.
No comments were received.

I. PROCEDURE

(1)

the Commission was
By letter dated 15 June 2004,
informed by a citizen of
the United Kingdom of
unlawful aid granted by the Shetland Islands Council,
the public authority of
the
United Kingdom. By letters dated 24 August 2004,
4 February 2005, 11 May 2005 and 16 December
2005, the Commission requested the United Kingdom
to provide information about such aid. The United
Kingdom provided the Commission with further infor-

the Shetlands Islands of

(4)

II. DETAILED DESCRIPTION

the scope of

The Shetland Islands Council made payments to the
fisheries sector under
two general aid
measures named ‘Aid to the Fish Catching and Processing
Industry’ and ‘Aid to the Fish Farming Industry’, which
types of aid
actually consisted of
these
schemes
schemes was the ‘First time shareholders scheme’
(the
was
that
scheme).

the 1970s. One of

several different

in force

scheme,

Under

which

since

(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 291, 30.11.2006, p. 5.

(3) OJ C 291, 30.11.2006, p. 5.

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in force from 1982 until 14 January 2005, grants could
be given as contribution to matching own financial
contribution for the purchase of a share in an existing
or new fishing vessel. Aid was only granted to persons
over 18 years old that did not already own a share in a
fishing vessel.

in the fisheries sector (5), as amended by Regulation (EC)
No 2369/2002 of 20 December 2002 (6). In addition,
the scheme seemed not to contain any provisions with
regard to the additional requirements provided for in
Regulation (EC) No 2792/1999 as amended by Regu-
lation (EC) No 2369/2002.

(5)

(6)

(7)

Aid was granted for 50 % of the acquisition costs of the
share, with a maximum of GBP 7 500 in case of an
existing vessel and GBP 15 000 in case of a new vessel.
The other 50 % could only be financed by the benefi-
ciaries own contribution, derived either from his own
savings or from a family loan. The amount of aid
could never exceed 25 % of the value of the vessel.

The aid was granted subject to the condition that the
vessel would be used for
the
following five years and that
the beneficiary retained
his share in the vessel for a period of five years from
receipt of the aid.

full-time fishing for

Grounds for initiating the procedure

The Commission had serious doubts that the aid granted
under the scheme for individuals who acquired for the
first time a share in a second-hand vessel could to be
compatible with the requirements established in point
2.2.3.3 of the Guidelines for the examination of State
aid to fisheries and aquaculture of 1994, 1997 and
2001 respectively (1). In particular, it had doubts on the
compliance of the scheme with the condition to grant aid
only with regard to vessels not older than 10 (2) or
respectively 20 (3) years that could be used for at least
the Commission had
another 10 years.
In addition,
the
the aid rate of
doubts on the compatibility of
scheme of 25 % of the actual cost of acquisition of the
vessel, which seemed not
to comply with the 2001
Guidelines, applicable to existing aid schemes as from
1 July 2001, allowing an aid rate up to 20 % only (4).

As regards the aid granted for the acquisition of a share
in a new vessels the Commission considered that the
scheme seemed to make no reference to the reference
level for the size of the fishing fleet nor to the hygiene
and safety requirements and the obligation for the regis-
tration of the vessel in the fleet register, in accordance
with the conditions of Articles 6, 7, 9 and 10 of and
Annex III to Council Regulation (EC) No 2792/1999 of
17 December
laying down the detailed rules and
arrangements regarding Community structural assistance

(1) OJ C 260, 17.9.1994, p. 3; OJ C 100, 27.3.1997, p. 12; and OJ C

19, 20.1.2001, p. 7.

(2) Guidelines of 1994 and 1997.
(3) Guidelines of 2001.
(4) Point 2.2.3.3(c) of the Guidelines for the examination of State aid to

fisheries and aquaculture of 2001.

(8)

(9)

(10)

(11)

III. COMMENTS FROM THE UNITED KINGDOM

In its reply dated 16 October 2006, the United Kingdom
provided further information on the aid granted under
the scheme. It pointed out that the total amount of aid
granted under the scheme was GBP 581 750 rather that
the GBP 8 000 000 referred to by the Commission in its
decision to initiate
laid down in
Article 88(2) of
the EC Treaty. The United Kingdom
also pointed out that after 1 July 2001, no aid had
been granted with regard to new vessels, and that,
therefore, the question of the non-compatibility of the
scheme after that date was of no relevance.

the procedure

the vessel, nor a provision requiring that

Concerning the aids for acquisition of a share in a
second-hand vessel, the United Kingdom confirmed that
the scheme did not contain any condition regarding the
age of
the
vessels could be used for at
least another 10 years.
However, the United Kingdom argued that the scheme
did contain a five-year grant condition and that
this
provision represented an implicit commitment that the
vessel would at least continue to be used for fishing for
that length of time.

The United Kingdom provided a list of all 78 individual
aids, each amounting to GBP 7 500, granted between
25 April 1996 and 15 July 2003 for the acquisition of
a share in a second-hand vessel, specifying the name of
the beneficiary and the name and age of the vessel. The
rate of the aid varied between 0,12 % and 25 %. After
1 January 2001,
the aid rate was never higher than
3,75 %.

loss,

sequestration,

The United Kingdom pointed out that 36 of those 78
grants seemed to be non-compliant, but that 28 of those
had been or were in the process of being recovered
following the
sale, or decom-
missioning of the vessel in question. In the case of two
of the eight residual items, grant recovery had not been
not pursued as the loss occurred after the expiry of the
five-year grant period. The United Kingdom thus
six potentially non-compliant
concluded that only
grants remained, concerning vessels that were still
in
operation or subsequent vessels to which the benefit of
the grant in question had been transferred.

(5) OJ L 337, 30.12.1999, p. 10. Regulation as last amended by Regu-

lation (EC) No 1421/2004 (OJ L 260, 6.8.2004, p. 1).

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

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(12)

(13)

(14)

respect,

In that

expectations.

Finally, the United Kingdom maintained that, should the
Commission adopt a negative decision, recovery of aid
granted prior to 3 June 2003 should not be required as
that be contrary to the principle of the protection of
the United
legitimate
to Commission Decision
Kingdom made
reference
2003/612/EC of 3 June 2003 on loans
the
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) (2), stating that until
3 June 2003 the Shetland Islands Council
legitimately
considered the funds used for such aid to be private
rather than public.

Kingdom) (1)

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.

The 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
resources and
benefited companies which are in direct competition
with other companies
sector, both
within the United Kingdom and in other Member
States. Therefore, the aid distorts or threatens to distort
competition and appears to be State aid within the
meaning of Article 87 of the EC Treaty.

in the fisheries

from state

Legality

(15) According to the United Kingdom,

However,

Economic

the two general
schemes referred to in Recital 4 have been applied
the United Kingdom to the
before the accession of
European
the
Community.
Commission notes that according to the information
provided, the First time shareholders scheme was only
put in place in 1982. In any event, due to the absence
of past records, the United Kingdom has not been able to
provide evidence that the aid existed already before the
United Kingdom joined the Community. In addition, the
United Kingdom confirmed that the aid schemes have
been changed over the years and that
these changes
were never notified to the Commission in accordance
(former
with Article
Article 93(3)). As a result, the aid should be considered
as new aid.

EC Treaty

88(3)

the

of

Basis for the assessment

(16)

Regulation (EC) No 659/1999 does not lay down any
limitation period for the examination of ‘unlawful aid’, as
defined in Article 1(f) thereof, namely aid implemented
before the Commission is able to reach a conclusion as
to its compatibility with the common market. However,

(17)

(18)

Article 15 of that Regulation stipulates that the power of
the Commission to require the recovery of aid is subject
to a limitation period of 10 years and that the limitation
period begins on the day on which the unlawful aid is
awarded to the beneficiary and that that limitation period
is interrupted by any action taken by the Commission.
Consequently, the Commission considers that it is not
necessary in this case to examine the aid covered by
the limitation period, namely aid granted more than
ten years before any measure taken by the Commission
concerning it.

The Commission considers that in this case the limitation
period was interrupted by its request for information sent
the United Kingdom on 24 August 2004.
to
Accordingly,
to aid
granted to beneficiaries before 24 August 1994. Conse-
quently, the Commission has limited its assessment to
the aid granted between 24 August 1994 and January
2005.

limitation period applies

the

if

State aid can be declared compatible with the common
market if it complies with one of the exceptions provided
for in the EC Treaty. As regards State aid to the fisheries
sector, State aid measures are deemed to be compatible
they comply with the
with the common market
conditions of
the Guidelines for the examination of
State aid to fisheries and aquaculture. According to the
second paragraph of point 5.3 of the Guidelines of 2004:
‘An unlawful aid’ within the meaning of Article 1(f) of
Regulation (EC) No 659/1999 will be appraised in
accordance with the guidelines applicable at the time
when the
aid has
entered into force.’ This is also in accordance with the
general rules expressed in Commission notice on the
determination of the applicable rules for the assessment
of unlawful State aid (3). The aid thus needs to be
assessed on the basis of
its compatibility with the
Guidelines of 1994, 1997 and 2001.

act granting the

administrative

New Vessels

(19) As regards the aid granted for the acquisition of a share
in a new vessel, in its decision to initiate the procedure
the EC Treaty,
laid down in Article 88(2) of
the
Commission pointed out
the aid granted before
that
1 July 2001 could be regarded compatible with the
common market. After that date, however, the conditions
of the scheme seemed no longer compatible with the
applicable conditions and therefore the Commission has
had serious doubts that any such aid granted after that
date would be incompatible.

(20)

From the information provided by the United Kingdom,
it can be established that no aid has been granted after
1 July 2001 for the acquisition of a share in a new vessel
and that since 14 January 2005 the scheme is no longer
in force.

(1) OJ L 211 of 21.8.2003, p. 63.
(2) OJ L 81 of 18.3.2006, p. 36.

(3) OJ C 119, 22.5.2002, p. 22.

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Used vessels

(21) According to point 2.2.3.3 of the 1994, 1997 and 2001
Guidelines, aid may be deemed compatible with the
common market only when the vessel can be used for
at least another 10 years. In addition, under the 1994
and 1997 Guidelines the vessel has to be at least 10
years old, and under the 2001 Guidelines, at least 20
years old.

Article 87(1) of the EC Treaty. At the same time, the
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 authorities and bodies
involved through the combination of a number of
elements taken together which precluded recovery of
the incompatible State aid.

(22)

(23)

The scheme does not contain any conditions with regard
to the age of the vessels and the United Kingdom has
confirmed that no other conditions or actions could have
ensured the compatibility with this condition. Moreover,
the scheme did not require that the vessels be used for at
least another 10 years. This makes the scheme clearly
incompatible with the 1994, 1997 and 2001 Guidelines.

cannot be

for at
for

removed by

Such incompatibility
requirement of
vessel
vessel
merely ensured that vessels would be operational
the first
required by the Guidelines.

the
the scheme to keep the share in the
least another five years and to use the
fishing during those years. This provision
for
the time

thus only for half of

five years,

(28)

(29)

(24)

Therefore, it is considered that the aid granted under the
scheme for the acquisition of a share in a second-hand
vessel is incompatible with the common market.

Recovery of the aid

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

the Commission is to decide that

take

in

into

taken

account

The Commission considers, however, that in this case the
elements
the Decisions
2003/612/EC and 2006/226/EC cannot be applied in
the same way and the legitimate expectations have not
been created. The Commission notes,
in particular, the
actions and statements from the United Kingdom, clearly
showing that, at the respective times of granting of aid,
the responsible authorities were convinced that
the
scheme was in fact a State aid scheme and that the
rules on State aid were applicable.

included

to be applicable, as

To reach that conclusion, the Commission observes that,
unlike the aids the subject of 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 considered
they have
the State aid rules
continuously
the
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
2005 that ‘My authorities have, over many years, acted in
good faith and in the belief
the Schemes were
compliant with the State aid guidelines’.

expenditure

that

(26)

(27)

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

taken by

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
2003/612/EC and 2006/226/EC,
referred to in
Recital 12 of the present Decision. In those cases the
these funds have to be
Commission considered that
the purposes of
regarded as State

resources

for

as

case,

considers

(30) With regard to those statements and the circumstances of
that
the Commission therefore
the
requiring the recovery of the aid cannot be considered
to be contradictory to a general principle of Community
law. Thus, in accordance with Article 14(1) of Regulation
(EC) No 659/1999,
that
United Kingdom must take all necessary measures to
recover the aid from the beneficiaries of
the scheme
(regardless of
taken), 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).

the Commission considers

already

actions

the

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

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(33)

(34)

(31)

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). The United Kingdom should
that
therefore
already
in progress will comply with this
undertaken or still
such interest has not been
condition and, where
included in the recovery, take the necessary measures
to recover also the concerned amount of interest from
those beneficiaries.

recoveries

also the

ensure

(32)

The Commission would ask United Kingdom to return to
it
the attached questionnaire concerning the current
status of the recovery procedure and to draw up a list
of beneficiaries to which the recovery relates.

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 scheme.

the United Kingdom has,

Article 2

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

Article 3

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

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

3.
The interest shall be calculated on a compound basis in
accordance with Chapter V of Commission Regulation (EC)
794/2004.

The United Kingdom shall

4.
all outstanding
payments of aid under the scheme referred to in Article 1(2)
with effect from the date of adoption of this Decision.

cancel

The Commission considers that the aid granted under the
scheme is not compatible with the common market as
far as it concerns aid granted for the first time acquisition
of a share in a second-hand fishing vessel.

Article 4

The recovery of the aid granted under the scheme referred

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

(35) As, after 1 July 2001, no aid has been granted for the
first time acquisition of a share in a new fishing vessel, all
such aid granted under
considered
compatible with the common market,

scheme

the

is

HAS ADOPTED THIS DECISION:

Article 1

The State aid which the United Kingdom has implemented
1.
on the basis of the First time shareholder scheme (the scheme)
is compatible with the common market as far as it concerns aid
granted for the first time acquisition of a share in a new fishing
vessel.

2.
The State aid which the United Kingdom has implemented
on the basis of the scheme is incompatible with the common
market as far as it concerns aid granted for the first
time
acquisition of a share in a second-hand fishing vessel.

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

Article 5

1. Within two months
this
Decision, the United Kingdom shall submit the following infor-
mation to the Commission:

following notification of

(a)

the list of beneficiaries that have received aid referred to
Article 1 of this Decision that does not fulfil the conditions
laid down by Regulation (EC) No 875/2007, and the total
amount of aid received by each of them;

(b) total amount (principal and interests) to be recovered from

each beneficiary;

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

planned to comply with this Decision; and

(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).

(d) documents demonstrating that the beneficiaries have been

ordered to repay the aid.

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The United Kingdom shall keep the Commission informed
2.
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(2) has been completed.

Article 6

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

shall

immediately submit

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

Done at Brussels, 13 November 2007.

It shall also provide detail information concerning the amounts
of aid and recovery interest already recovered from the ben-
eficiaries.

For the Commission

Joe BORG
Member of the Commission