2008/154/EC: Commission Decision of 13 November 2007 — State aid C 38/2006 (ex NN 93/2005) — Fish factory improvement scheme implemented in the United Kingdom (notified under document number C(2007) 5397) (Text with EEA relevance)
Date: 2007-11-13
Institutions: European Commission
Subjects: State aid, United Kingdom, control of State aid, fish, food processing, infringement of EU law

22.2.2008

EN

Official Journal of the European Union

L 48/71

COMMISSION DECISION

of 13 November 2007
State aid C 38/2006 (ex NN 93/2005) — Fish factory improvement scheme implemented in the
United Kingdom

(notified under document number C(2007) 5397)

(Only the English version is authentic)

(Text with EEA relevance)

(2008/154/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

interested parties to submit their comments on the aid.
No comments were received.

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,

(4)

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,

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

to submit

their

(5)

Whereas:

(1)

(2)

(3)

I. PROCEDURE

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 in the Shetland Islands 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 information by
letters dated 10 December 2004, 6 April 2005,
8 September 2005 and 31 January 2006.

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
EC Treaty. The United Kingdom provided its comments
on the case by letters dated 16 October 2006 and
30 January 2007.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union on
28 November 2006 (3). The Commission invited

II. DETAILED DESCRIPTION

the scope of

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
types of aid
actually consisted of
the so-called ‘Fish
schemes, one such scheme was
Factory Improvement Scheme’.

several different

the

scheme

improvement

Under
(the
Fish factory improvement
‘scheme’), aid could be granted for the purchase of new
the
processing machinery and equipment
construction,
fish
factories. Repairs
to machinery or buildings were,
however, not eligible. Aid for second-hand equipment
was only considered for assistance in special circum-
stances and was to be inspected or certified as fully
serviceable by an independent engineer.

and for
of

extension

or

(6)

(7)

Aid was granted up to a maximum of 20 % of
the
eligible costs, with a maximum amount of GBP 20 000
for factories with a turnover of less than GBP 1 000 000;
GBP 25 000 for factories with a turnover of between
GBP 1 000 000 and GBP 3 000 000; and GBP 30 000
for
than GBP
3 000 000.

factories with a turnover of more

From 13 August 1993 until 15 December 2004,
payments were made under the scheme in favour of
Shetland Fish Products Limited, a company involved in
the production of fish meal and fish oil, not intended for
human consumption. The following grants were paid to
that company:

(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 289, 28.11.2006, p. 10.
(3) OJ C 289, 28.11.2006, p. 10.

(a) on 13 August 1997, GBP 24 800 was granted to
assist with the purchase of an Alfa Laval Separator;
the purpose of which is to separate fish oil from
cooked press liquid;

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(b) on 3 September 1998, GBP 1 592 was granted to
assist with the partial
the factory
building; this work was carried out as part of the
factory's
to help it conform with
requirements as to foul air emissions;

re-cladding of

improvements

(c) on 7 January 1999, GBP 3 600 was granted to assist
with the purchase of a new feeding screw for the
factory's fish pits;

(d) on 25 February 1999, GBP 9 479 was granted to
assist with the installation of a new de-watering
system to reduce the amount of excess water
entering fish storage pits;

marketing of fishery and aquaculture products intended
to be used and processed for purposes, other than for
human consumption, which was not allowed under
Regulation (EC) No 3699/93 and Regulation (EC) No
2792/1999.

III. COMMENTS FROM THE UNITED KINGDOM

(10)

In its reply dated 16 October 2006, the United Kingdom
provided further information on the aids granted to
Shetland Fish Products Limited.

(e) on 10 December 1999, GBP 19 480 was granted to
assist with the replacement of decanters within the
factory, thereby improving production and efficiency;

(11)

(f) on 19 January 2001, GBP 14 949,86 was granted to
assist with the installation of a flash steam system to
improve energy efficiency within the factory and
production; and

(g) on 15 December 2004, GBP 19 700 was granted to
assist with the purchase of a fish offloading crane to
enable the factory to discharge larger vessels, improve
reliability and increase availability of spares.

Grounds for initiating the procedure

In its decision to initiate the procedure the Commission
considered that the conditions of the scheme and the
majority of the aid granted was compatible with the
common market, as it complied with the provisions of
Council Regulation (EC) No 3699/93 of 21 December
and arrangements
1993 laying down the
in the
assistance
regarding Community
fisheries and aquaculture sector and the processing and
the marketing of its products (1) and Council Regulation
(EC) No 2792/1999 of 17 December 1999 laying down
regarding
the
Community
fisheries
sector (2), applicable at the respective times of granting
of aid.

criteria
structural

rules
structural

arrangements

assistance

detailed

and

the

in

However, the Commission has serious doubts on the
compatibility with the common market of
the aid
granted to Shetland Fish Products Limited, as that aid
and
was

for processing

investments

granted

for

(8)

(9)

(1) OJ L 346, 31.12.1993, p. 1. Regulation as last amended by Regu-

lation (EC) No 25/97 (OJ L 6, 10.1.1997, p. 7).

It confirmed that the aid granted to that company cannot
be regarded as complying with the conditions of Regu-
lation (EC) No 3699/93 and Regulation (EC) No
2792/1999. The United Kingdom stated that
those
administering the scheme were not aware, at the time
that
the
processing and marketing for fishery and aquaculture
intended to be used and processed for
products
than for human consumption was
purposes other
precluded by those Regulations.

the grants were authorised,

that aid for

(12) However, the United Kingdom pointed out that at least
one of the investments which had been made, namely
the grant of GBP 1 592 of 3 September 1998, related to
improvements, being the re-cladding of
environmental
one of the company's buildings, the purpose of which
was to ‘seal’ the building and thereby reduce foul air
emissions. According to the United Kingdom this aid
could be regarded as compatible with paragraph 2.0(b)
of Annex III to Regulation (EC) No 3699/93.

(13)

In that respect,

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 would be contrary to the principle of the protection
legitimate expectations.
of
the United
to Commission Decision
Kingdom made
reference
2003/612/EC of 3 June 2003 on loans
the
purchase of
in the Shetland Islands
fishing quotas
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
legitimately
3 June 2003,
considered the funds used for such aid to be private
rather than public.

the Shetland Islands Council

Kingdom) (3)

for

(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.

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IV. ASSESSMENT OF THE AID

(14)

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.

(15) Aid has been granted to a company in the fisheries
sector, and is thus of a selective nature. The aid has
been granted by the Shetland Islands Council from state
resources and benefited Shetland Fish Products Limited,
in direct
competition with other
which operates
in the fisheries
sector, both within the
companies
United Kingdom and
States.
other Member
in
Therefore, the aid distorts or threatens to distort compe-
tition and appears to be State aid within the meaning of
Article 87 of the EC Treaty.

Legality

(16) According to the United Kingdom,

the two general
schemes have been applied before the accession of the
United Kingdom to the European Economic Community.
In any event, due to the absence of past records, the
United Kingdom has been unable to provide evidence
that the aid measures already existed before the United
Kingdom joined the Community. In addition, the United
the aid schemes have been
Kingdom confirmed that
changed over the years and that
these changes were
never notified to the Commission in accordance with
Article 88(3) of the EC Treaty (former Article 93(3)).
As a result, the aid measures have to be considered as
new aid.

Basis for the assessment

quently, the Commission has limited its assessment to
the aid granted by decisions taken after 24 August 1994.

(19)

for

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 is deemed to be compatible with the
common market if it complies with the conditions of
the Guidelines
the examination of State aid to
fisheries and aquaculture (1) of 2004 (‘2004 Guidelines’).
According to the second paragraph of point 5.3 of those
‘An “unlawful aid” within the meaning of
Guidelines:
Article 1(f) of Regulation (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.’ The aid thus needs to be
assessed on the basis of
its compatibility with the
Guidelines for the examination of State aid to fisheries
and aquaculture (2) of 1997 (‘1997 Guidelines’) and the
Guidelines for the examination of State aid to fisheries
and aquaculture (3) of 2001 (‘2001 Guidelines’).

Conditions under the Guidelines

(20) According to point 2.3 of

the 1997 and 2001
Guidelines, aid to investments in the processing and
marketing of
fishery products may be deemed to be
compatible with the common market provided that the
conditions for granting it are comparable with those laid
down in Regulation (EC) No 3699/93 and Regulation
(EC) No 2792/1999 respectively and are at
least as
stringent and the level of
the State aid does not
exceed, in subsidy equivalent, the total rate of national
and Community subsidies fixed in Annex IV to those
Regulations.

(17)

(18)

the power of

lay
Council Regulation (EC) No 659/1999 does not
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, Article 15 of that Regulation stipulates
that
the Commission to require the
recovery of aid is subject to a limitation period of ten
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
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.

Consequently,

Commission.

the

by

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-

limitation period applies

the

(21) According to both Article 11 of Regulation (EC) No
3699/93 and point 2.4 of Annex III
thereto, and
Article 13 of Regulation (EC) No 2792/1999 and point
2.4 of Annex III thereto, eligible investments are to relate
to the construction and acquisition of
in particular
acquisition of new
buildings
equipment and installations needed for
the time of
fishery and aquaculture
landing and the marketing of
products between the time of
landing and the end-
product stage and the application of new technologies
intended in particular to improve competitiveness.

and installation,

the

(22) According to those provisions,

products

investments are not be
eligible for assistance when they concern fishery and
and
intended
aquaculture
processed
human
other
consumption, with the exemption of investments exclu-
sively for the handling, processing and marketing of
fishery and aquaculture wastes.

to
than

purposes

used

for

for

be

(1) OJ C 229, 14.9.2004, p. 5.
(2) OJ C 100, 27.3.1997, p. 12.
(3) OJ C 19, 20.1.2001, p. 7.

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Compatibility

(23)

The United Kingdom has confirmed that all aid granted
to Shetland Fish Products Limited concerned aid for the
processing and marketing of
fishery and aquaculture
intended to be used and processed for
products
purposes other than for human consumption. The aid,
therefore,
comply with the provisions
mentioned under Recital 22 and consequently with the
conditions of the 1997 Guidelines and 2001 Guidelines
and is therefore incompatible with the common market.

does not

(24) However, the United Kingdom has stated that the grant
of GBP 1 592, of 3 September 1998, concerned aid for
investments
improvements,
which would be compatible with paragraph 2.0(b) of
Annex III to Regulation (EC) No 3699/93.

related to environmental

intended

investment

for physical

(25) According to paragraph 2.0(b) of Annex III to Regulation
(EC) No 3699/93, aid in the spheres referred to in Title
III
to improve
conditions of hygiene or human or animal health, to
improve product quality or reduce pollution of the envi-
ronments is to be eligible. One of the spheres of Title III
is ‘processing and marketing of fishery and aquaculture
products’
Investment aid for
processing and marketing, even though it concerned a
company active in the processing and marketing of
products not intended for human consumption, could
thus indeed be regarded compatible if the investment is
intended to reduce pollution of the environment.

(point 2.4 of that Title).

(26) Aid was granted to assist the re-cladding of one of the
company's buildings, the purpose of which was to ‘seal’
the building and thereby reduce foul air emissions. The
Commission considers that
this type of aid may be
deemed compatible with paragraph 2.0(b) of Annex III
to Regulation (EC) No 3699/93 and that this particular
grant of GBP 1 592 is thus compatible with the common
market.

Recovery of the aid

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

the Commission is to decide that

take

(28)

(29)

raised the issue that

The United Kingdom has
the
the aid if
Commission is not
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

(30)

(31)

Recital 13. In those cases, the Commission considered
that those funds had to be regarded as State resources
for the purposes of Article 87(1) of the EC Treaty. At the
same time, the Commission acknowledged that in the
specific circumstances 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.

The Commission considers, however, that in this case the
elements taken into account in 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
responsible authorities were convinced that the scheme
was in fact a State aid scheme and that the rules on State
aid were applicable.

the respective times of granting of aid,

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 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
in response to
with Community obligations.
questions posed by
the United
Kingdom stated in its letter dated 10 December 2004
‘payments under the schemes have been included
that:
to the
in the Annual State Aid Inventory and sent
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
that
the Schemes were compliant with the State aid
guidelines’.

the Commission,

In fact,

(32) With 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 a general principle of Community law. Thus,
in accordance with Article 14(1) of Regulation (EC) No
that United
659/1999 the Commission considers
Kingdom must take all necessary measures to recover
the aid from the beneficiary of
the scheme, without
prejudice to cases falling within the scope of 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 Regulation (EC) No
1860/2004 (1).

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

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(33)

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).

(34)

The Commission would ask United Kingdom to return to
it
the attached questionnaire concerning the current
status of the recovery procedure.

(35)

(36)

V. CONCLUSION

In the light of the assessment made in Section IV, the
in
Commission finds that
breach of Article 88(3) of
the EC Treaty, unlawfully
granted aid to Shetland Fish Products Limited under
the Fish factory improvement scheme.

the United Kingdom has,

The Commission considers that this aid is not compatible
with the common market, as far as it concerns the aid
granted on 13 August 1997, 7 January 1999,
25 February 1999, 10 December 1999, 19 January
2001 and 15 December 2004, amounting to a total
amount of GBP 92 009.

(37)

The aid granted on 3 September 1998 amounting to a
total of GBP 1 592 is considered compatible with the
common market,

HAS ADOPTED THIS DECISION:

Article 1

1.
The aid granted to Shetland Fish Products under the Fish
factory improvement scheme is compatible with the common
market as far as it concerns the amount of GBP 1 592, granted
on 3 September 1998.

The aid granted to Shetland Fish Products under the Fish
2.
factory improvement scheme is incompatible with the common
market as far as it concerns the amount of GBP 92 007, granted
on 13 August 1997, 7 January 1999, 25 February 1999,
10 December 1999, 19 January 2001 and 15 December 2004.

Article 3

1.
The United Kingdom shall recover the incompatible aid
granted under the scheme referred to in Article 1(2) from the
beneficiary, 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.

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

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

Article 4

The recovery of the aid granted under the scheme referred

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

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 following the date of notification of
this Decision, the United Kingdom shall submit the following
information to the Commission:

(a)

total amount (principal and interests) to be recovered from
the beneficiary that does not fulfil the conditions laid down
by Regulation (EC) No 875/2007;

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

planned to comply with this Decision; and

Article 2

(c) documents demonstrating that

the beneficiary has 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(2) 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 beneficiary.

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