2009/157/EC: Commission Decision of 16 July 2008 on the aid measure implemented by France for the IFP Group (C 51/05 (ex NN 84/05)) (notified under document number C(2008) 1330) (Text with EEA relevance)
Date: 2008-07-16
Institutions: European Commission
Subjects: State aid, control of State aid, economic recession, exchange of information, petroleum product, research body

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

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 16 July 2008

on the aid measure implemented by France for the IFP Group (C 51/05 (ex NN 84/05))

(notified under document number C(2008) 1330)

(Only the French text is authentic)

(Text with EEA relevance)

(2009/157/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Whereas:

1. PROCEDURE

(1)

By letter dated 25 November 2004, registered as received
on 29 November 2004 under number CP221/2004, the
Commission received a complaint concerning allegedly
unlawful State aid for the Institut Français du Pétrole
(IFP) and one of its subsidiaries, Axens. The complainant
asked that
fear of
negative repercussions in the market.

its identity not be disclosed for

(2)

(3)

(4)

(5)

(6)

the Commission
By letter dated 21 December 2005,
informed
the
procedure provided for in Article 88(2) of the Treaty
in respect of the measure.

decision to initiate

France of

its

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

By letter dated 16 January 2006, registered as received
on the same day, France asked for a further period of one
month in which to send its comments. The Commission
acceded to this request by letter dated 19 January 2006.
dated
France
23 February 2006, registered as received on the same
day.

comments

submitted

letter

by

its

By letter dated 15 March 2006, registered as received on
the same day, UOP asked for a further period of one
month in which to send its comments. The Commission
acceded to this request by letter dated 22 March 2006.

By letter dated 17 March 2006, registered as received on
the same day, Haldor Topsoe A/S asked for a further
period of one month in which to send its comments.
The Commission acceded to this request by letter dated
22 March 2006.

(1) OJ C 42, 18.2.2006, p. 5.

(2) See footnote 1.

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(7)

(8)

By letter dated 20 March 2006, registered as received on
22 March 2006, Axens submitted its comments on the
measure to the Commission.

(14)

By letter dated 13 October 2006, the Commission asked
France to provide additional information. This was sent
to the Commission by France by letter dated 24 October
2006, registered as received on 26 October 2006.

By letter dated 12 April 2006, registered as received on
the same day, Haldor Topsoe A/S asked for an extension
until 24 April 2006 in which to submit its comments.
The Commission acceded to this request by letter dated
19 April 2006.

(15) A working meeting took place between France and the

Commission on 15 June 2007.

(16)

(9)

By letter dated 18 April 2006, registered as received on
19 April 2006, UOP submitted its comments on the
measure to the Commission.

for

additional

By letter dated 19 June 2007, the Commission asked
France
information. By letter dated
10 July 2007, France asked for a further extension
until 31 August 2007. By letter dated 11 July 2007,
extension until
the Commission granted a
13 August 2007. The additional
information was sent
to the Commission by France by letters dated 9 and
22 August 2007,
received on 9 and
registered as
22 August 2007 respectively.

further

(10)

By letter dated 19 April 2006, the Commission asked the
complainant to furnish a non-confidential version of its
complaint. This was sent to the Commission by letter
dated 26 April 2006,
received on
27 April 2006.

registered as

(11)

By letter dated 3 May 2006, registered as received on the
same day, Haldor Topsoe A/S asked for a further
extension, which the Commission refused by letter
dated 4 May 2006.

(12)

By letter dated 22 June 2006, the Commission forwarded
to France a copy of the comments submitted by UOP
and Axens and of the complaint. It also sent a request for
additional
information. By letter dated 4 July 2006,
registered as received on 5 July 2006, France asked for
an extension of the time limit, which the Commission
granted by letter dated 7 July 2006. By letter dated
received by the
8 September 2006,
Commission on 12 September 2006, France submitted
to the Commission its comments on the comments from
interested third parties and answers to the additional
questions put by the Commission.

registered as

2. DESCRIPTION

2.1. The IFP Group

(17) Up until 2006, IFP was a trade body set up under private
law (établissement professionnel de droit privé (3), without any
capital or shareholders, placed under the economic and
financial control of the French Government (4). Ever since
Decree No 2006-797 of 6 July 2006 implementing Law
No 2005-781 of 13 July 2005, IFP has been an EPIC.
The question of the existence of State aid within the
meaning of Article 87(1) of the Treaty resulting from
this change of status is the subject of a Commission
investigation in another proceeding (NN 11/08).

(18) Under its statutes, IFP performs three tasks: research and
development in the fields of oil and gas prospecting and
refining and petrochemicals technologies; the training of
engineers and technicians; and the provision of sector
information and documentation. A contract of objectives
with the State lays down the broad lines of its work for
five years at a time.

(19)

In return, IFP receives an annual budgetary allowance.
This public financing amounted to EUR 144 million in
2005 and EUR 167,5 million in 2006 (5).

(13)

By letter dated 18 July 2006, registered as received on
19 July 2006, France informed the Commission of the
transformation of IFP into a State-owned industrial and
commercial establishment (établissement public à caractère
industriel et commercial – EPIC).

(3) Within the meaning of Law No 43-612 of 17 November 1943 on
the management of trade interests (Loi sur la gestion des intérêts
professionnels).

(4) Decrees Nos 2003-204 of 5 March 2003 and 55-733 of 26 May

1955.

(5) Source: IFP’s 2006 financial report.

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(20) Axens is the result of the merger, on 29 May 2001 (with
retroactive effect from 1 January 2001), between Proca­
talyse SA (a wholly owned subsidiary of ISIS, which was
the time by IFP) and IFP’s
in turn 52,8 %-owned at
the same
industrial division, which was split off at
time. On 22 October 2001,
IFP purchased from ISIS
its stake in Axens. Currently, IFP therefore holds 100 %
of the capital stock of Axens. Axens is active in the
market for catalysts and technologies for the refining
and petrochemicals industries. Its consolidated turnover
amounted to EUR 304,9 million in 2005 and EUR
308,45 million in 2006, about one third of which was
accounted for by process licensing (6). It employed 636
people in 2006 (7). Its share of the world market for
existing licensed refining units is estimated at 7 % (8).

(21)

(22)

enterprises,

Beicip-Franlab

IFP holds directly and indirectly (through the financial
holding company IFP Investissements) all the shares in
several
and
including
Prosernat. Beicip-Franlab is a commercial enterprise set
up by IFP in 1967. It specialises in the publication and
distribution of deposits exploration software and in
consultancy and advisory services. In 2006, its turnover
was EUR 42 million and it employs 166 people (9).
Prosernat is a commercial enterprise acquired in 2001
as part of the transfer by ISIS of ownership of IFP Inves­
It provides consultancy and other
tissements to IFP.
services
and sulphur
recovery plants.
its turnover was EUR 49,9
million and it employs 71 people (10).

and supplies

treatment

In 2006,

gas

2.2. Earlier Commission decisions

the

From 1944, when it was established, to the end of 2002,
IFP collected the proceeds of a parafiscal charge on
certain petroleum products. The repayment of
this
charge was
subject of Commission Decision
96/615/EC of 29 May 1996 on the renewal, for the
period 1993 to 1997, of the charge levied on certain
oil products for the benefit of the Institut Français du
Pétrole (11), which concluded that, pursuant to point 2.4
of the 1996 Community framework for State aid for
research
1996 R & D
and
framework) (12),
the proceeds from a
parafiscal charge for the benefit of IFP for the period
1993 to 1997 was not caught by Article 87(1) of the
Treaty.

development
the payment of

(the

(6) Source: Axens’s 2006 consolidated accounts.
(7) Source: Axens’s 2006 consolidated accounts.
(8) Source: data communicated by the French authorities.
(9) Source: Beicip-Franlab’s 2006 consolidated accounts.
(10) Source: Prosernat’s 2006 accounts.
(11) OJ L 272, 25.10.1996, p. 53.
(12) OJ C 45, 17.2.1996, p. 5.

(23) On 3 October 1997, France notified to the Commission
a new, substantially unchanged decree on the parafiscal
charge levied on certain petroleum products for the
benefit of IFP for the period 1998-2002. In its decision
of 4 February 1998 (13),
the Commission raised no
objection to its implementation for the period 1998-
2002.

2.3. Exclusive agreements between IFP and Axens

(24)

‘the

2001

France

letters’),

By letters dated 1 March and 18 May 2001 (hereinafter
the
called
Commission of a plan to reorganise
research
activities of IFP in the fields of refining, petrochemicals
and gas and asked the Commission to confirm that the
lead to the analysis adopted by the
plan would not
Commission in its earlier decisions being called into
question.

informed
the

(25)

The plan involved entrusting the management of
marketing the results in the above fields to a commercial
entity formed by merging IFP’s industrial division with
Procatalyse, which was indirectly controlled by IFP and
specialised in the industrial development, manufacture
and sale of all chemical products.

(26)

In addition to the transfer of the greater part of IFP’s
including its existing customers and
industrial division,
contracts, effected in exchange for a majority stake in the
new subsidiary, the plan involved the signature by IFP
and its subsidiary of the following agreements:

(a) a 10-year exclusive framework licensing agreement
under which the subsidiary may use IFP’s present
and future intellectual property rights essentially in
processes in its field of activity to provide engin-
eering services
in connection with
those processes and to transmit to them the right
in the form of
to use the related technologies
patent licence sub-grants;

to customers

(b) a 10-year exclusive product

licensing agreement
under which the subsidiary may use IFP’s present
and future technology in its field of activity to manu­
facture and sell to its customers catalysts, adsorbents,
captation masses, equipment, and other products and
software developed by IFP;

(13) OJ C 192, 19.6.1998, p. 4.

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if

it may,

(c) a 10-year industrial research agreement under which
[IFP proposes to its subsidiary the results of
its
research in the field of refining and petrochemicals
in order that
it so wishes, pursue the
research in a joint project with IFP and then exploit
the said results. Should the subsidiary not avail itself
of this possibility, IFP can propose its results to other
enterprises. Each partner bears the costs of its par-
ticipation in the research project, and at project end
IFP holds the ownership rights to the products and
processes while its subsidiary holds the ownership
rights to the industrialisation stages of the products
and processes] (*).

(27)

In return, the subsidiary pays IFP royalties under the
licensing agreements and remuneration […] (**)
for
access to IFP’s research capacity. […] (**).

(28)

The Commission took the view that the IFP reorgan-
isation plan presented was in keeping with the conditions
laid down in its decision of 4 February 1998 on the
renewal,
the parafiscal
charge levied on certain petroleum products and it
informed France accordingly by letter D/52473 dated
19 June 2001.

for the period 1998-2002, of

(29)

In conformity with the plan presented, Axens was set up
as an IFP subsidiary on 29 May 2001. The agreements
between IFP and Axens took effect on 1 January 2001
for a period of 10 years.

(32) An amendment was signed on 16 December 2005, with
retroactive effect from 1 January 2005. It modifies the
payment arrangements while at the same time retaining
the principle of total coverage of development costs by
Beicip-Franlab.

2.5. Exclusive

agreements

between

IFP

and

Prosernat

(33) A framework licensing agreement and an industrial
research agreement between IFP and Prosernat were
signed on 18 August 2003, with retroactive effect from
1 January 2002, for a period of 10 years. Under these
agreements [IFP is to offer up the results of its research in
the field of gas treatment and sulphur recovery tech­
nologies. IFP will hold the property rights to the correl-
ations, processes and specific equipment associated with
the processes.
is interested in marketing
them, then it must itself perform, while at the same
time preserving the associated property rights, the task
of industrialising these processes, for which it may then
be granted an exclusive licence] (*).

If Prosernat

(34)

the licence for

In consideration for
the processes,
Prosernat must pay a fee of […] (**) out of the annual
turnover from sub-licensing royalties for the first four
years. This fee rate is to rise to […] (**) after the first
four years. The fee rate for equipment is set on a case-by-
case basis. IFP’s remuneration for Prosernat’s access to the
the research work amounts to […] (**) of
results of
Prosernat’s global annual turnover.

(30)

By letter dated 27 November 2002, France informed the
the replacement, as from 1 January
Commission of
2003, of
levy by a
budgetary allowance for IFP.

the proceeds from the parafiscal

3. REASONS FOR INITIATING THE FORMAL

INVESTIGATION PROCEDURE

(35)

In initiating the formal
the
Commission expressed the following doubts about the
French State’s support for the IFP group and about the
justifications put forward at that time by France.

investigation procedure,

2.4. Exclusive agreements between IFP and Beicip-
Franlab

(31) An exclusive development, marketing and use agreement,
signed on 28 May 2003, with retroactive effect from
1 January 2003, for a period of 10 years provides that
[IFP will propose to Beicip-Franlab the results of
its
research into the algorithms, models and methodologies
developed by IFP in the field of ‘Exploration–Deposits’
and that Beicip-Franlab may request permission from
IFP to produce products on that basis. IFP will hold all
the ownership rights to the software products developed.
Beicip-Franlab will cover all of the product development
costs borne by IFP and make various additional payments
to cover maintenance and rights of use] (*).

(*) Paraphrase of information covered by professional secrecy.
(**) Information covered by professional secrecy.

(36)

First, the Commission considered that the conditions laid
down in its earlier decisions were no longer met. As a
reminder, its earlier decisions were based on:

(a)

the fact that no direct aid was granted to IFP insofar
as IFP was a non-profit-making research centre not
engaged in a commercial activity. In accordance with
the first paragraph of point 2.4 of the 1996 R & D
framework, public financing of R & D activities by
public
or
research establishments is not normally covered by
Article 87(1) of the Treaty;

non-profit-making

education

higher

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(b) the fact that no indirect aid was granted to firms
acquiring the findings of IFP studies insofar as the
potential advantage resulting from the transfer of
the findings was available without discrimination to
In this connection the Commission had
firms.
all
noted that
IFP transferred its research findings to
firms in four different ways: dissemination in the
public domain, services invoiced at cost price, colla­
borative research and sale of licences. In the latter
two cases, the Commission considered that, while
firms did not bear the total costs of research, this
advantage was available without discrimination to
all firms, irrespective of nationality;

(39)

Secondly, the Commission analysed the compatibility of
the aid in the light of the various Treaty provisions. It
concluded that, in view of its objectives, the potential aid
could be analysed only in the light of the provisions of
Article 87(3)(c) of the Treaty, and more particularly in
the light of the 1996 R & D framework. In the absence
of justification by France in that respect, the Commission
expressed doubts as to whether the necessary conditions
for authorising the aid under
those provisions were
fulfilled.

(c)

the fact that no indirect aid was granted to firms in
which IFP held shares insofar as IFP collaborated with
those firms on the same terms and conditions as
with other firms in which it did not hold shares.
Because of the involvement of other shareholders,
IFP’s minority shareholdings in firms active in its
research field and its collaboration with those firms
on the same terms and conditions as with other firms
in which it did not hold shares, the Commission
concluded that the firms in question did not receive
more favourable treatment.

(40)

The Commission accordingly invited France to submit its
comments and:

(a)

furnish evidence of the extent to which IFP and its
subsidiaries can be considered separate entities the
relationship between which is market driven;

(37)

this

licensing

agreements. Thus,

The Commission found that, since 2001 on the other
hand, IFP had been taking an increasingly structured and
up-front commercial approach thanks to the creation, in
the market for refining and petrochemicals technologies,
of Axens and the conclusion with it of exclusive research
and
commercial
subsidiary, majority held by IFP, has preferential access
to the R & D work conducted by IFP in its field of
in its decision to initiate the
activity. Consequently,
procedure the Commission took the view that
the
reasons justifying the 1996 and 1998 decisions were
no longer valid and that the first paragraph of point
the 1996 R & D framework was no longer
2.4 of
applicable
it
concluded as to the existence of State aid within the
meaning of Article 87(1) of the Treaty in favour of IFP
and its subsidiary Axens.

activity. Hence

to Axens’s

field of

(b) draw a

clear distinction,

in conformity with
Commission Directive 80/723/EEC of 25 June
1980 on the transparency of
relations
between Member States and public undertakings (14),
and the non-economic
between the
activities of IFP and its subsidiaries so as to make
clear what proportion of
subsidy
the public
supports the group’s commercial activities;

economic

financial

(c) provide precise proof that any aid is compatible with

the Community rules on R & D aid.

(38) Moreover,

insofar as IFP had majority shareholdings in
two other commercial subsidiaries, Beicip-Franlab and
IFP had signed exclusive
Prosernat, and insofar as
agreements with those subsidiaries,
the Commission
could not rule out the existence of State aid within the
meaning of Article 87(1) of the Treaty in the fields of
activity of the subsidiaries Beicip-Franlab and Prosernat.

4. COMMENTS FROM FRANCE ON THE INITIATION OF
THE FORMAL INVESTIGATION PROCEDURE

4.1. On the background to the current procedure

(41)

First, France states that the IFP financing arrangements
two Commission
have formed the subject matter of
decisions finding that no State aid is involved within
the meaning of Article 87(1) of the Treaty.

(14) OJ L 195, 29.7.1980, p. 35. Directive repealed by Directive

2006/111/EC (OJ L 318, 17.11.2006, p. 17).

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(42)

Secondly, it recalls that the 2001 reorganisation resulted
in the conversion into a subsidiary of IFP’s commercial
activities in the field of refining and petrochemicals, these
having been previously carried on in part internally by
IFP’s industrial division and for the rest by Procatalyse, an
enterprise indirectly controlled by IFP. The aim of the
reorganisation was to refocus IFP’s activities on the
general interest mission entrusted to it by the State of
in the field of
supporting research and development
environment
hydrocarbons
technologies.

new energy

and

and

for

constitute notifications

(43) Against this background, France considers that the 2001
letters
the purposes of
Article 88(3) of the Treaty. The letter sent on 5 March
2001 contained an information memo, a completed noti­
fication form (15) and five technical annexes,
including
research agreement and the licensing
the industrial
agreements.
subsequent
also to the
meeting (16) and information exchange (17) and says it
received an acknowledgement of
from the
Commission dated 7 May 2001 (18).
It recalls having
asked the Commission to confirm that the reorganisation
plan did not
the
Commission’s analysis in its earlier decisions.

imply any calling into question of

receipt

France

refers

(44)

Consequently, France considers that letter D/52473 dated
19 June 2001, in which the Commission indicated that
IFP’s reorganisation plan as submitted was in keeping
with the conditions
laid down in its decision of
4 February 1998 on the renewal for the period 1998-
2002 of the parafiscal charge levied on certain petroleum
products, created a situation of legitimate expectation. It
recalls that, in that letter, the Commission took the view
that the reorganisation plan modified neither the nature
of IFP’s activities nor the position of French enterprises
vis-à-vis other Community enterprises as regards process
marketing activities and raised no objection to the draft
agreements, and in particular to the right of first refusal
of which it had nevertheless had cognisance during the
exchanges with France since 5 March 2001. In France’s
opinion, it could legitimately consider that the creation
of Axens and the signature of the agreements between
IFP and Axens would not lead to the existence of State
aid. France maintains that the creation of Axens and the
signature of the agreements between IFP and Axens took

(15) On p. 8 of the notification form, it is stated that ‘the French State
informs you by the present notification that IFP is considering
reorganising its activities within its group in the field of refining/
petrochemicals’ (l’Etat français vous informe par la présente notifi­
cation que l’IFP envisage de réorganiser ses activités au sein de son
groupe dans le domaine du raffinage/pétrochimie).

(16) A meeting between the Commission and France was held on 4 May

2001.

(17) The letter from France, dated 18 May 2001, contained further
information on the right of first refusal and on the liability of
imports to the charge introduced for the benefit of IFP.

(18) The acknowledgement of receipt states that

‘annexed hereto is,
moreover, an outline of
the measures envisaged in accordance
with the form prescribed for the notifications provided for in
Article 88(3) of the Treaty’ (en annexe, figure en outre une présen­
tation des mesures envisagées selon la forme prescrite pour les
notifications prévues à l’article 88-3 du traité).

place in accordance with the draft submitted to the
Commission in March 2001.

(45)

Regarding the changes introduced subsequently of which
the Commission was not informed, France provides the
following information. First, according to France,
the
100 % takeover of Prosernat and Axens by IFP at the
end of 2001 could not be attributed to a choice on
the part of IFP insofar as it was the deed of independent
players. France points out, moreover, that,
in its letter
D/52473 of 19 June 2001, the Commission considered
as a guarantee of non-discrimination the fact that IFP
holds at least the majority of the shares in the new
entity. Secondly, France maintains that, the agreements
between IFP and Prosernat being
to the
agreements between IFP and Axens, it did not deem it
necessary to forward them to the Commission. Lastly,
France felt
to the
Commission the agreement between IFP and Beicip-
Franlab insofar as it provided for total coverage of IFP’s
costs.

it was unnecessary to transmit

similar

(46)

France states that it informed the Commission of the
change in the method of financing IFP by letter dated
27 November 2002.

4.2. On IFP’s compliance with Directive 80/723/EEC

(47)

France considers that the principle of the separation of
accounts by activity, embodied in Article 1 of Directive
80/723/EEC, is respected. It points out in this connection
is organised along the lines of a
that
breakdown between five results centres, an ‘Information’
task and an ‘Exploratory Research’ item which makes it
possible to distinguish between IFP’s various activities.

IFP’s budget

(48)

France describes the method of classifying projects within
the results centres as follows:

(a) competency acquisition projects, often carried out in
are

research institutes,

collaboration with other
designed to seek out new ideas;

(b) industrial research projects are carried out by IFP
with or without the collaboration of third parties.
the ‘Exploration-Production’ results
In the case of
centre, they involve the search for solutions which
may lead to methodologies,
chemical
additives, equipment, processes and expertise. In the
case of the ‘Refining-Petrochemicals’ results centre,
they concern the development of processes and
products for
fuels and petro­
chemical
intermediates from all accessible carbon
sources;

the production of

software,

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(c)

test benches,

‘trade equipment’ projects concern the development
of
testing equipment, experimental
testing facilities and test loops, together with the im­
plementation
the
management of databases;

software

specific

and

of

activities’

(d) ‘support
comprise
projects
follow-up
post-programme
measures,
management of intellectual property rights.

quality
and

(49)

Lastly, France provides information on IFP’s analytical
accounting system, which allows an allocation of (non-
State-budgetary-allowance)
income and expenditure by
project within each results centre.

its own strategy and has it validated by its management
board, which is not composed solely of IFP represen­
tatives. Contracts between IFP and its
subsidiaries
respect the ordinary-law rules on regulated agreements,
hence the IFP representative does not take part in the
voting on matters pertaining to the said contracts. Each
subsidiary has its own committees and enjoys complete
to shareholder control,
managerial autonomy subject
which
reporting
IFP and its subsidiaries have
mechanisms.
hierarchically and geographically independent
financial
and accounting departments with different information
and management
subsidiaries
systems. Lastly,
decide freely on the products and services they market.
In this respect, Axens is free to accept or refuse the work
presented by IFP, and France gives several examples of
processes where Axens
research
requirements with other contractual relationships.

exercised
In addition,

supplements

standard

through

IFP’s

its

is

(50)

(51)

(52)

4.3. On the distinction between IFP and its
subsidiaries

France disputes the Commission’s analysis that IFP and
Axens constitute a single economic entity. It considers
that IFP and its subsidiaries are separate entities whose
tasks are different in nature.

4.4. On the existence of State aid

(54)

France considers that, pursuant to the first subparagraph
of point 2.4 of
the
the 1966 R & D framework,
financing of
IFP, a non-profit-making body, does not
constitute State aid.

First, France considers that IFP’s research activity is a
interest mission forming part of an approach
general
— recognised at national, Community and world level
— aimed at ensuring long-term security of supply in
hydrocarbons.

in Annex I
6 May
of

to this case. France recalls, moreover,

Secondly, it considers that the reference to the concept of
to the
linked enterprises, as
set out
Commission Recommendation
2003
concerning the definition of micro, small and medium-
sized enterprises (the ‘SME Recommendation’) (19), is not
relevant
the
Community case law according to which the fact that
the shares in a subsidiary are held by its
100 % of
parent company does not suffice to demonstrate the
existence of control by the latter. France points out,
furthermore,
exclusive
agreement is not a feature of an absence of autonomy,
as otherwise Article 81 of the Treaty, which refers to
enterprises,
such
would be otiose. Lastly, France considers
the
common image of IFP and Axens in the market neces­
sarily stems from the fact that Axens distributes products
resulting from the research conducted by IFP, and that
this common image must be distinguished from an
absence of autonomous behaviour.

between independent

agreements

existence

that

that

the

an

of

(55)

(56)

the

First, France points out that, according to the second
subparagraph of point 2.4 of
the 1996 R & D
‘where
framework,
results of publicly financed
R & D projects are made available to Community
industry on a non-discriminatory basis, the Commission
will assume that State aid within the meaning of
Article 92 (now 87) of the EC Treaty is not normally
involved’.

France indicates in this connection that IFP conducts a
great deal of research work the results of which are made
available to Community enterprises without discrim-
ination. Among the means used to ensure the accessi­
bility of the results of its activities are a scientific journal
and the drafting of articles, the presentation of work at
conferences, the publication and posting online of works,
membership of scientific associations and the estab­
lishment of partnerships with other
research centres
and doctoral training schemes.

(53)

Thirdly, France tenders evidence to demonstrate the
autonomy of IFP’s subsidiaries. Each subsidiary devises

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

(57)

France states that three quarters of the research budget of
the ‘Exploration-Production’ results centre is devoted to
fundamental research the results of which are dissem-
inated widely without discrimination. In the case of the
‘Refining-Petrochemicals’
the results of
much research are also disseminated without discrimi­
nation.

results centre,

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Official Journal of the European Union

26.2.2009

(58)

(59)

(60)

that

France

considers

the Commission’s
Secondly,
reasoning in its 1996 and 1998 decisions, according to
which ‘it has to be noted that, even though the IFP does
not always charge the real cost of research to customers,
it makes no distinction between the companies to which
it transfers the findings of research carried out on its own
behalf or on a collaborative basis’, is still valid.

field,

in the ‘Exploration-
It stresses in this connection that,
Production’
IFP conducts industrial research on
behalf of numerous industrial partners, either in the
in that of
form of
multi-client
industrial projects in which partici­
pation is unrestricted.

straightforward cooperation or

joint

In the case of the refining and petrochemicals market,
France considers that the payments made by Axens for
the work placed at its disposal by IFP are equivalent to
market terms and conditions. To this financial compen­
sation, France adds the expenditure incurred by Axens in
carrying out supplementary tasks needed for the exploit-
ation of the research work and the additional costs borne
by Axens for using technologies and products other than
those of
its
turnover devoted to research activities
is a strong
indicator of the absence of any competitive advantage
derived by Axens from the research work carried out
on its behalf by IFP. France provides evidence to show
that the amounts spent by Axens on its research activities
are much higher than the average for the sector.

In France’s view,

the high share of

IFP.

(64)

(65)

First, France considers that the financing by the State of
Axens’s industrial research work does not exceed the
ceilings laid down by the 1996 R & D framework. It
furnishes in this connection the amounts of expenditure
by IFP allocated to industrial research conducted with
Axens and of
returns paid by Axens.
[…] (**)

the financial

Secondly, France indicates that any aid to Axens would
have an incentive effect. It furnishes in this connection
statistics which show a progression both in the amount
of expenditure devoted by Axens to R & D by its R & D
staff and in the ratio of internal expenditure to turnover.
It furnishes, moreover, examples of Axens projects which
would not have seen the light of day without help from
It argues that all of Axens’s competitors, and in
IFP.
particular those in the USA, receive substantial State
support.

(66)

Lastly, France points to the strategic importance of State
aid to innovation and R & D, as recognised by the
Commission in the context of
the
Lisbon Strategy and as reflected in the State Aid Action
Plan.

the relaunch of

(61)

France states that, despite the right of first refusal enjoyed
by Axens, several research works carried out by the
‘Refining-Petrochemicals’
results centre benefit various
industrial partners from different countries.

(67)

(62)

France concludes, therefore, that the State intervention in
favour of IFP does not constitute State aid within the
meaning of Article 87(1) of the Treaty and that IFP’s
subsidiaries derive no advantage from their access to
the results of the research conducted by IFP on their
behalf.

(68)

4.5. On the compatibility of any State aid with the
Treaty

(63)

France indicates that, if the State intervention in favour of
IFP were to be interpreted as State aid within the
meaning of Article 87(1) of
the Treaty in favour of
Axens, such aid would in any case be compatible with
the common market. France provides evidence to show
that the aid can be considered compatible with the Treaty
under the exemption provided for in Article 87(3)(c).

5. COMMENTS FROM THIRD PARTIES

5.1. Content of the complaint behind the initiation
of the procedure

fearing negative commercial

The complainant,
reper­
cussions, does not want its identity to be divulged. It
believes its interests are directly threatened by the subsi­
dising by France of IFP and/or its subsidiary Axens. Since
it was created in 2001, Axens, a competitor of
the
complainant,
is alleged to have pursued an aggressive
commercial policy in relation to the process licences
developed entirely thanks to the R & D activities of its
parent, IFP.

in

these

activities

licensing

The complaint is centred on specific fields of activity of
IFP, namely refining technologies and catalysts, gas
and on
and petrochemicals production,
treatment
Axens’s
The
complainant considers that, in these fields, Axens is in
direct competition with other market operators despite
not having to cover its R & D costs insofar as it is the
exclusive distributor of the technologies developed by IFP
with the financial
the State. Moreover,
support of
according to the complainant, the IFP/Axens entity is in
a position to carry on R & D activities which would be
unprofitable for non-subsidised operators.

fields.

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Official Journal of the European Union

L 53/21

(69)

(70)

(71)

The complainant considers that State aid elements are
identifiable in the direct State subsidy for
the
IFP,
its commercial
creation and capitalisation by IFP of
IFP’s refining and
subsidiary Axens,
for
petrochemicals
which is Axens, and the exclusive licences which IFP
grants Axens for its technologies.

the exclusive distributor

the financing of

section,

the

complainant

the view that

takes
the activities of

current
The
financing of
IFP and Axens by the
State, which has not been notified to the Commission
and is not covered by any of the Commission’s earlier
decisions, constitutes unlawful State aid. It stresses in this
connection the factual differences between the findings of
the Commission’s earlier decisions and the current
situation in which IFP and Axens find themselves:

— Axens uses its name in connection with IFP’s tech­
nologies (as can be seen from Axens’s logo, which
incorporates that of IFP).

(72)

The resources granted by the French State to the
IFP/Axens entity in order to finance research in the
fields of refining, gas treatment and petrochemicals tech­
nologies constitute State resources. According to the
complainant’s estimates,
IFP’s R & D expenditure in
these fields comes to about EUR 100 million, whereas
Axens reimburses no more than half of these costs to its
parent company. The complainant accordingly estimates
the aid in favour of the IFP/Axens entity at EUR 50
million a year.

— the subsidiary Axens is a commercial entity,

(73)

— Axens has exclusive or preferential access to IFP’s

services and research results,

— IFP holds 100 % of Axens’s share capital,

that

from the fact

The competitive advantage stems, according to the
complainant,
the IFP/Axens entity
does not have to cover all of its R & D costs and that
it can,
in consequence, exert downward pressure on
market prices in the fields concerned. The complainant
considers that such an advantage introduces the risk of a
foreclosure effect
to the detriment of other market
operators.

— in the market

for

technologies, most operators,
including the complainant, are unsubsidised. The
subsidised activities of the IFP/Axens entity lead to
price distortion.

in the area of

The complainant thus considers that IFP departs signifi­
cantly from the model of a public non-profit-making
research establishment, as referred to in point 2.4 of
the 1996 R & D framework,
the
commercial activities of
its subsidiary Axens. On the
in its view IFP and Axens constitute a single
contrary,
in direct
economic entity which acts in the market
competition with other operators. According to the
complainant,
IFP and
Axens are to be considered a single economic entity
and hence an undertaking within the meaning of
Article 87(1) of the Treaty:

several elements

indicate that

(74) According to the complainant, the technologies market is
a worldwide, or at the very least, European market. The
State support for the IFP/Axens entity therefore affects
intra-Community trade.

(75)

Consequently, the complainant considers that the State
for the IFP/Axens entity constitutes State aid
support
within the meaning of Article 87(1) of the Treaty.

(76)

The complainant argues that, insofar as it is an activity
close to the market whose results are directly marketable,
the development of refining technologies is not covered
by the definition of pre-competitive activities contained
in the 1996 R & D framework. The aid granted to the
IFP/Axens entity is therefore operating aid incompatible
with the Treaty’s State aid rules.

— IFP holds 100 % of Axens’s share capital,

— IFP behaves as an active shareholder by taking part in

the definition of its subsidiaries’ strategy,

(77)

— the staff of Axens and IFP visit potential customers

together,

activities,

The complainant stresses that, even if the activities of the
IFP/Axens entity were to be considered pre-competitive
development
aid would exceed the
the
permissible ceiling laid down in the 1996 R & D
framework for such activities, which is 25 %, and could
also exceed the ceiling of 50 % laid down for industrial
research.

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Official Journal of the European Union

26.2.2009

(78)

research and development
Should it be found that
activities as defined in the 1996 R & D framework are
involved, the complainant considers that the incentive
effect of
the aid is questionable. According to the
complainant, the aid to the IFP/Axens entity dissuades
other market operators from investing in R & D in
these fields insofar as their revenues are affected by the
existence of State aid and are insufficient to offset their R
& D costs.

that is devoted to research expenditure is comparable to
the outlay expended by its competitors is further proof
that it derives no advantage from its relationship with
IFP.

(83)

Lastly, Axens stresses that it faces competition from very
powerful operators who are often actively supported by
the
their countries of origin.
Department of Energy devotes a budget of
several
hundred million dollars to project support.

In the United States,

(79)

The complainant concludes, therefore, that the State aid
in favour of the IFP/Axens entity is unlawful and incom­
patible with the common market.

(84)

5.2. Comments submitted by Axens

First, Axens states that it was set up in 2001 to bring
together in a single commercial entity IFP’s activities
relating to refining and petrochemicals processes and
the subsidiary relating to the production of
those of
catalysts.
the functions (financial,
It possesses all of
legal, human resources) needed to conduct its business
completely autonomously, and its day-to-day running is
carried out by its management under the responsibility of
its Chief Executive Officer. Only very few decisions are
taken as high as management board level, and its share­
holder allows
top management a great deal of
autonomy when it comes to commercial and industrial
decision-making. It therefore contests the Commission’s
analysis that IFP and Axens constitute a single economic
entity.

its

Secondly, Axens points out that the 2001 reorganisation
was carried out in accordance with the plan explicitly
approved by the Commission. It considers it could legit-
imately trust in the validity of this legal and financial
the questioning of which would seriously
framework,
hamper its development.

(86)

(80)

(81)

(82)

Thirdly, Axens argues that most operators in the refining
and petrochemicals technologies and catalysts markets
have recourse to a combination of internal and part­
nership research. Criterion, a subsidiary of Shell, has
access to the latter’s research, and ABB Lummus has
agreements with Chevron and Shell, UOP with Total
and other operators and Albermale with ExxonMobil.
Axens indicates that its collaboration with IFP is to be
seen in this context and has been structured transparently
through the three research and licensing agreements.
These are based, from the point of view of each of the
parties, on a
logic. Axens
considers that the fact that the portion of its turnover

commercial

traditional

5.3. Comments submitted by UOP

The registered office of UOP Limited is in the United
Kingdom. The company has two production sites, one
in the United Kingdom and one in Italy, and is active in
17 Member States.
It specialises in the design, engi­
neering, licensing and servicing of such processes as oil
conversion, clean fuel production, fuel desulphurisation
It also produces
and in petrochemicals technologies.
catalysts, molecular
other
and
specialised equipment.

adsorbents

filters,

(85) UOP and the IFP/Axens entity are competitors in the
fields of petroleum production and desulphurisation tech­
nologies, aromatics production and extraction tech­
nologies and catalysts for a wide range of clean fuel
production processes. UOP is in favour of initiating the
formal investigation procedure in respect of the aid paid
the Commission’s
to IFP and agrees with most of
conclusions.

so as

First, UOP has noticed a sharp increase in IFP’s activities
in recent years. IFP has thus restructured one licensing
activity which is relatively insignificant and open to all
to compete directly with private
enterprises,
operators in the process market. UOP points out that
Community case law requires that, where the State
decides to act like an economic operator,
it must act
under the same conditions as a private operator. UOP
considers in this respect that an operating deficit of more
than EUR 555 million over the past three years would be
unacceptable to a normal shareholder.

(87) Against this background, UOP has asked the Commission
to order France to suspend the State support for IFP in
accordance with Article 11 of Council Regulation (EC)
No 659/1999 of 22 March 1999 laying down detailed
rules
the EC
the application of Article 93 of
for
Treaty (20).

(20) OJ L 83, 27.3.1999, p. 1.

26.2.2009

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Official Journal of the European Union

L 53/23

(88)

(89)

Secondly, UOP considers that the fact that the IFP/Axens
entity does not have to cover all of its R & D expenditure
has enabled it not only to acquire a significant share of
the market in refining and petrochemicals technologies
but also to threaten its competitors’ profitability. It argues
that the proximity to the market and the low level of the
IFP/Axens entity’s R & D activities is evidence that the aid
has no incentive effect. Lastly,
it considers that any
benefit
to be derived from the aid would be largely
offset by the risk of crowding out private operators in
the relevant markets,
it being its view that private
operators will have to reduce their R & D expenditure
in the medium term in order to remain competitive with
a largely subsidised rival.

Thirdly, UOP shares the Commission’s analysis that IFP
and its subsidiary Axens constitute a single economic
entity. The capital structure, management, preferential
relations and degree of economic integration of IFP and
its subsidiary Axens all point to that conclusion. UOP
stresses in this respect that the economic integration of
the two entities is borne out by the fact that Axens is the
sole distributor of the technologies developed by IFP and
the main and potentially only recipient of IFP’s findings.
Such arrangements show, according to UOP, that IFP and
Axens are indubitably dependent on one another, work
in concert and pursue identical interests in the market.
UOP considers, moreover, that, as Axens’s only share­
holder, IFP is in a position to determine Axens’s short-
and medium-term strategy.

(90)

Fourthly, UOP considers, like the Commission, that, for
there to be no advantage to the IFP/Axens entity, IFP’s
budget devoted to R & D carried out in collaboration
with or on behalf of Axens would have to be financed by
revenue earned in the market.

(91)

Fifthly, UOP suggests that the Commission should bear
in mind the specificity of the market for process tech­
nology licences when it seeks to establish a corre­
spondence between the R & D activities of
the
IFP/Axens entity and the categories of research defined
in Annex I to the 1996 R & D framework. This speci­
ficity is due, in its opinion, to the fact that the IFP/Axens
entity and its competitors market, not a product or a
service, but a process. According to UOP, the fact that
the industry habitually uses the term ‘R & D’ to designate
the development of a marketable process must not make
the Commission lose sight of the fact that such develop­
ment is downstream of R & D activities as defined in the
1996 R & D framework. In this respect UOP argues that
R & D for the refining and petrochemicals processing
industries can be categorised according to three stages:

(a) a fundamental

research stage during which new
materials and process concepts are developed and
tested up to proof of principle (21) demonstration;

(b) a process and material development stage during
which the materials and process concepts discovered
are developed for commercial application;

(c) an application development stage during which tools
are built, enabling reproducible performance fore­
casting and materials manufacturing so as to offer
the product in a competitive context.

(92) UOP considers that stages (b) and (c) form an integral

part of commercial development.

(93)

Lastly, though it shares the Commission’s analysis on the
economic unity of IFP and its subsidiary Axens, UOP has
furnished certain additional information in the event of
the Commission’s concluding at the end of the formal
investigation procedure that
IFP and Axens constitute
two separate economic entities. According to UOP, the
process market proposes products which are not
comparable. Consequently, the only way to ensure that
Axens pays the market price for IFP’s results would be to
have recourse to a tendering procedure. UOP thus
considers that
first refusal constitutes in
itself an advantage in that, by granting Axens a right
of first refusal, IFP forgoes the opportunity of selling its
results via a tendering procedure to the highest bidder.

the right of

6. COMMENTS FROM FRANCE ON THE COMMENTS
FROM THIRD PARTIES

(94)

France’s comments concern UOP’s comments and the
complaint.

6.1. In response to UOP’s comments

(95)

First, France contests UOP’s assertion as to the existence
of a single entity in the form of IFP/Axens, pointing to
Axens’s autonomy from IFP and to the fact that IFP is a
teaching and documentation institute — a
research,
feature which distinguishes it
fundamentally from its
subsidiary Axens and from UOP Limited.

(21) Also known as ‘proof of concept’.

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Official Journal of the European Union

26.2.2009

(96)

Concerning Axens’s autonomy from IFP, France states
first that, according to established Community case law,
the ownership structure of the capital of a subsidiary is
not, by itself, a sufficient criterion for determining
whether that subsidiary may or may not be regarded as
enjoying economic autonomy from its parent company.
Despite being wholly owned by IFP, Axens is totally
independent
is
confirmed by several items of evidence:

in the market. This

independence

(a) Axens has an autonomous decision-making process
and a financial and human organisation of its own;

(b) Axens sets freely its commercial policy and its sales

targets and gross margins;

(c) Axens acts in the refining and petrochemicals market
in its own name and on its own behalf and has the
power to contract without IFP’s prior consent;

(d) Axens enjoys financial autonomy from IFP within the
limits of the reserved powers specified in its articles
of association and is not the sole distributor of IFP
technologies.

(97) As regards IFP’s nature as a non-profit-making research
institute, France reiterates that IFP is a research institute
whose primary purpose is to carry on research activities
and disseminate the results thereof through education,
publication or technology transfer, any profits being rein­
vested in their entirety in research or the dissemination
of its results.

(98)

(99)

Secondly, given that in accordance with the first subpara­
graph of point 2.4 of the 1996 R & D framework the
resources transferred by the State to IFP do not constitute
State aid, France contests UOP’s assertion that
those
resources (22) constitute operating aid.

Thirdly, according to UOP, almost all of
the public
subsidy paid to IFP is used to finance market-oriented
work and hence the 1996 R & D framework does not
apply. This claim is contested by France, which states
that
interest mission
focused on fundamental research and the exploitation
of its results as well as on teaching and the dissemination
of knowledge — activities which must not be confused

IFP fulfils above all a general

(22) According to UOP, this amount came to EUR 555 million over the
last three years, while according to France it seems to correspond to
the sums received by IFP by way of the budget allocation for the
years 2003, 2004 and 2005 (being in reality exactly EUR 507
million).

with the strictly commercial objectives pursued by private
operators such as UOP and Axens.

(100) Moreover, the research work which IFP carries out for
Axens under the industrial research agreement consists of
(a) technical feasibility studies and (b) industrial research.
IFP does not do any pre-competitive research work on
behalf of Axens, the fact being that the latter carries out
and finances the work on its own.
Inasmuch as the
financial schedules included with France’s comments of
February 2006 attest that IFP complies fully with the
provisions of Directive 80/723/EEC, France considers
that the budgetary allowance is indeed used to fulfil its
interest mission and to finance R & D work
general
within
1996
R & D framework.

meaning

the

the

of

(101) Fourthly, according to UOP,

the

the right of

importance of assessing the

first refusal
confers an advantage on Axens, which allegedly does
not pay the market price for such a right. France
stresses
economic
impact of the remuneration paid by Axens to IFP as a
whole. Besides dividends, the components of this overall
remuneration (consisting in the remuneration for the
right of
first refusal and the royalties paid under the
framework licensing and product licensing agreements)
were determined in 2001 according to an economic
logic. This logic is intended to ensure that Axens does
not derive any economic advantage from its relationship
with IFP and to guarantee a suitable, steady return from
the
year to year for IFP, sufficiently independent of
combination resulting from Axens’s sales at any given
time so as to avoid any risk to IFP from excessive
variations in resources.

(102) France maintains that it is only this overall remuneration,
total
actually borne by Axens, viewed against
turnover,
should be analysed in the light of
market conditions. Having regard to these elements, the
right of
first refusal does not create any competitive
advantage in favour of Axens or any distortion of
competition.

that

its

(103) Fifthly, France also contests

the assertion that

the
existence of alleged unlawful State aid in favour of the
IFP/Axens entity has caused loss or damage to compe­
titors and impaired the innovation dynamic. France
that UOP Limited is the only competitor
points out
submitted
among the many in existence
comments
stresses,
moreover,
that no proof has been furnished of such
alleged loss or damage.

to have
France

Commission.

the

to

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(104) Lastly, France considers that the innovation dynamic is
not impaired in the refining and petrochemicals market.
In this connection, in the process licensing and catalyst
market, market share analysis shows clear domination by
the UOP group. If there is any market power, it lies in
France’s view with UOP and not with Axens. France adds
that, if UOP’s market power has weakened, this can be
attributed to UOP’s own strategic errors, inter alia, in the
desulphurisation market,
in which UOP has ceased to
thereby missing out on a strong revenue-
invest,
generating activity.

6.2. In response to the anonymous complaint

(105) First, France reaffirms that

the reorganisation of

IFP’s
activities was indeed notified to the Commission. The
2001 letters, by which it informed the Commission of
reorganisation plan which led to IFP’s
the internal
commercial activities being split off into a subsidiary,
did constitute notifications within the meaning of
Article 88(3) of the Treaty.

(106) Secondly, France repeats the arguments advanced both in
its own comments (see Section 4.3) and in response to
the comments from UOP (see recitals 95 et seq.) which
contradict the assertion that IFP and Axens form a single
economic unit.

(107) Thirdly, France emphasises that the research carried out
results centre
by IFP at
benefits
from several
countries […] (**), and not just Axens as the complainant
claims.

the ‘Refining-Petrochemicals’
partners

industrial

various

(108) Fourthly, contrary to the complainant’s assertion that
over half of Axens’s income is generated by the sale of
process licences and the provision of related services,
France indicates that the share of Axens’s turnover in
2003, 2004 and 2005 accounted for by process
licensing came to 36 %, 38 % and 31 % respectively.

(109) Fifthly, France contests the complainant’s assertion that
Axens does not have any research facilities of its own.
On the contrary, Axens has its own human and material
resources with which to carry out its pre-competitive
type
development work with a view to pre-market
approval, namely: dimensioning software, process simu­
lation tools, catalyst and adsorbent evaluation apparatus,
and pre-industrial-extrapolation catalyst development and
step sequence simulation pilot plants. Axens’s
unit
resources have, moreover, according to France, enabled

it to finalise the development of products and processes
proposed by third parties other than IFP.

(110) Sixthly, France reaffirms that, through its mission and its
activities, IFP still possesses the characteristics of a non-
profit-making institution performing fully a general-
interest mission conferred by the State. This analysis is
borne out by the functioning and organisation of IFP and
its
its
completely autonomous
commercial
in
and independent. France considers therefore that,
accordance with the first subparagraph of point 2.4 of
the 1996 R & D framework, the financing of IFP, a non-
profit institution, does not constitute State aid.

IFP has ensured that

subsidiaries

subsidiaries

insofar as

are

(111) Seventhly, France refutes specifically the point that IFP’s
research activity ought to be seen as the mere develop­
ment of a technology process capable of being used
directly by commercial enterprises for their industrial
production. It provides on this point detailed information
concerning the development cycles of processes and
products.

(112) Eighthly, France refers to the comments transmitted
following the initiation of the procedure concerning the
complainant’s assertion that
the remuneration for the
research work carried out by IFP on behalf of Axens is
not in line with market conditions (see recital 60).

(113) Ninthly, France contests the assertion that the amount of
aid allegedly received by Axens came to EUR 50 million
for 2003, basing itself in this respect on the financial
schedules provided.

(114) Lastly, France considers

that, contrary to what

the
complainant asserts, Axens’s competitors very generally
benefit from (direct and indirect) State support for their
R & D work. For example,
the UOP group receives
funding for its internal R & D programmes from the
National Institute of Standards and Technologies (NIST).
It outsources, moreover, part of
its research through
partnerships with research institutes and laboratories or
with universities, which are themselves in receipt of
public funding. UOP thus collaborates with the Pacific
Northwest National Laboratory,
the Argonne National
Laboratory,
the Synchrotron Catalysis Consortium of
the University of Delaware, the College of Engineering
of the University of Illinois at Urbana Champaign, and
Sintef in Norway.

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7. ASSESSMENT

7.1. Existence of State aid

7.1.1. Identification of potential beneficiaries

(115)

In its 1996 and 1998 decisions, the Commission found
that the State aid granted for IFP’s R & D activities did
not fall within the scope of Article 87(1) of the Treaty
insofar as IFP was a non-commercial, non-profit-making
research organisation.

(116) However,

in,

that,

IFP was

inter alia,

in its decision to initiate the procedure the
Commission,
for the reasons set out in recital 37 of
this Decision, partly called this analysis into question. It
through its subsidiaries Axens,
found,
engaged in
Beicip-Franlab and Prosernat,
economic activities
for
refining and petrochemicals technologies,
the market
for oilfield operation consultancy services and the
contract development of oilfield software, and the
for gas treatment and sulphur recovery tech­
market
nologies (hereinafter called ‘the relevant markets’). Conse­
quently, it must be examined whether or not the public
subsidy paid to IFP amounts to State aid in the relevant
markets.

the market

respectively,

Article 1(2) of Commission Regulation (EC) No
772/2004 of 27 April 2004 on the application of
Article 81(3) of the Treaty to categories of technology
transfer agreements (25).

into account

elements which,

(119) Besides the criterion of capital structure, the Commission
taken
several
takes
together, confirm the Commission’s analysis that
IFP
in the eyes of customers and
and its subsidiaries are,
competitors in the relevant markets,
indistinguishable.
As the Court of Justice of the European Communities
‘in
stated in its judgment in Intermills/Commission (26),
spite of the fact that the three manufacturing companies
each has a legal personality separate from the former SA
Intermills, all those undertakings together form a single
group, at least as far as the aid granted by the Belgian
authorities is concerned. The Commission was therefore
justified in considering the entire group to be a single
“undertaking”
the application of
Article 92 of the Treaty’.

for the purposes of

(117)

considers
IFP and its

In order to establish the existence of State aid,
the
Commission has identified potential beneficiaries. The
Commission
competition
that,
subsidiaries Axens, Beicip-
standpoint,
Franlab and Prosernat
cannot be deemed distinct
economic operators. It bases this view primarily on the
direct holding by IFP of 100 % of Axens’s capital and
100 % of Beicip-Franlab’s capital and on the indirect
holding of 100 % of Prosernat’s capital.

from a

the exploitation in the market of

(120) As regards the tasks and activities of IFP and its subsi­
diaries, the Commission notes that, whereas the principal
object and the statutes of IFP differ from those of its
IFP’s
subsidiaries,
R & D results numbers among the priorities laid down
by the State in its contract of objectives with IFP and
forms part of IFP’s development strategy, the aim being
to ‘secure a financial return on its R & D expenditure,
thereby enhancing its research effort’ (obtenir un retour
financier sur ses dépenses de R & D, qui vient amplifier
son effort de recherce) while profiting from the oppor­
tunities afforded by the markets:

(118) Capital structure is commonly used by the Commission
in its competition analyses as a measure of enterprises’
independence. In this connection the Commission would
reiterate that, by taking into account the capital structure
criterion as specified in Article 3(3) of the Annex to the
SME Recommendation,
it is possible to eliminate from
the SME category groups of enterprises whose economic
power may exceed that of an SME. The SME Recommen­
dation states that enterprises are ‘linked’ where one
shareholders’ or
enterprise has
members’ voting rights in another enterprise. This recom­
mendation is also used in other Commission communi­
cations, including the Community guidelines on State aid
for rescuing and restructuring firms in difficulty (23), to
determine whether or not an enterprise is independent.
Capital structure is also referred to in Article 5(4)(b) of
Council Regulation (EC) No 139/2004 of 20 January
2004 on the control of concentrations between under­
takings
in

EC Merger Regulation’) (24)

a majority of

(‘the

and

the

[Axens], which is

— in the ‘Refining-Petrochemicals’ field, the contract of
objectives states that ‘It is IFP’s ambition, during the
to widen its field of activity and
current decade,
increase its market share so as to become a key
player at world level … [The aim is] to strengthen
the new business hub formed by IFP’s Industrial
Division and Procatalyse
to
benefit from the fillip provided by licence sales and
to make the most of IFP’s R & D potential in this
field’. (L’ambition de l’IFP, au cours de la décennie en
cours, est d’élargir son domaine d’intervention et
d’accroître ses parts de marchés pour devenir, au
plan mondial, un acteur
[Il
s’agit de] renforcer le nouveau pôle constitué par la
Direction Industrielle de l’IFP et Procatalyse [Axens],
destiné à bénéficier de l’effet d’entrainement associé
aux ventes de licences et à valoriser au mieux le
potentiel de R & D de l’IFP dans ce domaine),

incontournable.

(…)

(23) OJ C 244, 1.10.2004, p. 2, footnote 22.
(24) OJ L 24, 29.1.2004, p. 1.

(25) OJ L 123, 27.4.2004, p. 11.
(26) Judgment of the Court of Justice of 14 November 1984 in Case

323/82 (ECR 3809).

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— in the ‘Exploration-Production’

field,

and every possible

‘the best use
should be made, on a case-by-case basis, of “Group
competencies”,
in particular those of direct subsi­
diaries,
should be
harnessed from this arrangement in order to ensure
the most effective possible coverage of markets’ (il
convient, au cas par cas, d’utiliser au mieux les
‘compétences Groupe’, notamment celles des filiales
directes, et de tirer toutes les synergies possibles de ce
dispositif, pour assurer la couverture la plus efficace
possible des marchés) (27).

synergy

(121) On the question of effective control of the subsidiaries,
the Commission has taken account, first, of the presence
in the subsidiaries’ decision-taking
of
bodies and, secondly, of the decision-taking centres for
strategic planning and key decisions:

IFP managers

— Axens: as at 10 November 2005, of
its management board,

the nine
members of
also
six
belonged to IFP’s senior management, and five in
sat on IFP’s executive committee. The
particular
management board is alone empowered to adopt
Axens’s
and
financing plan, and any expenditure in excess of
EUR 762 000 has to be validated by it,

investment

budget,

annual

plan

management board does not participate in voting on
matters to do with the exclusive agreements. Notwith­
standing this, even if the IFP representative does not take
part
in the vote, other members of the management
board who are also senior IFP managers do take part.

(123) The Commission concedes that the exclusive agreements
do not in themselves constitute evidence of an absence of
autonomy on the part of
It notes,
however, that the agreements are essential to the subsi­
diaries’ economic activities.

the enterprises.

(124) The Commission also takes account of the fact that the
possibilities for collaborative research with other enter­
prises in the subsidiaries’
fields of activity are strictly
defined in the exclusive agreements. Thus,
IFP can
embark on a research project in the fields of activity of
the subsidiaries concerned only insofar as the latter do
not wish to carry out the project after exercising their
right of first refusal (28). Similarly, IFP has a right of first
refusal over all
the research work the subsidiaries
concerned may wish to carry out. It is only after IFP
has exercised its right of first refusal that the subsidiaries
concerned may propose the research project to other
enterprises (29).
these
restrictions to be evidence of strong economic inte­
gration between IFP and the subsidiaries concerned.

Commission

considers

The

— Beicip-Franlab: as at 1 January 2003, three of the
seven members of Beicip-Franlab’s supervisory board
belonged to IFP’s senior management. Under Beicip-
Franlab’s articles of association, the supervisory board
exercises ongoing supervision and control over the
executive board,

— Prosernat: as at 1 January 2003, three of the five
members of Prosernat’s management board also
belonged to IFP’s executive committee. Prosernat’s
management board decides on strategic plans,
the
annual budget,
the creation of new activities and
joint venture agreements.

(122) The Commission notes that, as regulated agreements, the
exclusive agreements are governed by specific rules
IFP’s
the
according

representative

to which

on

(125) The Commission has taken account, moreover, of the
for, among other

existence of assignment contracts
things, the provision of premises and staff:

— for Axens: premises, corporate catering, staff, admin­

istrative services,

— for Beicip-Franlab: liquidity, staff,

— for Prosernat: legal and financial services.

(126) On the question of how IFP and its subsidiaries are
perceived in the relevant markets,
the Commission
to IFP and the
considers that several elements point
subsidiaries concerned having a common presence and
a common image in the eyes of their customers and
competitors. Besides the words ‘IFP Group Technologies’
on Axens’s and Prosernat’s logos, there are direct links
between the Internet sites of the subsidiaries concerned
and the Internet site of IFP. Axens and Prosernat refer on

(27) Contract of objectives 2001-05, p. 3.

(28) […] (**).
(29) […] (**).

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Official Journal of the European Union

26.2.2009

their Internet sites to IFP’s R & D efforts in their fields of
activity (30). Beicip-Franlab’s Bahrain office calls itself ‘IFP
Middle East Consulting’. And IFP and Axens participate
jointly in various conferences (31). The Commission has
also noted several references to a single entity, IFP/Axens,
in advertisements and publications (32) and on the
Internet sites of players in the industry (33).

ment of oilfield software, and in the market
treatment and sulphur recovery technologies.

for gas

7.1.2. Determination of the selective advantage financed by

State resources

(127) Lastly, the Commission notes an overlap between the
fields of activity of
its subsidiaries
Axens, Beicip-Franlab and Prosernat, which heightens
the necessity of regarding the IFP group as a single
enterprise.

IFP and those of

(130)

it has been shown that
activities

IFP carries on
Insofar as
economic
subsidiaries Axens,
through its
Beicip-Franlab and Prosernat, the support provided by
the State for
fields of
activity is liable to be caught by Article 87(1) of the
Treaty.

IFP in the three subsidiaries’

(128)

senior

In conclusion, the objective of exploiting R & D results is
at the heart of IFP’s development strategy as set out in its
contract of objectives with the State. The holding of the
subsidiaries’ capital and the presence of
IFP
managers in the subsidiaries’ organs attest to a de jure
and de facto control by IFP of the subsidiaries concerned.
The exclusive agreements between IFP and the subsi­
diaries concerned in key areas of their activities bear
witness
the entities
involved. The common image and presence of IFP and
its subsidiaries in the relevant markets are further proof
of this. Consequently, the Commission considers that, in
the light of its decision-making practice and the case law
of the Court of Justice, the subsidiaries concerned are
indistinguishable, as economic operators in the relevant
markets, from their parent company IFP.

to the economic integration of

(131) The question the Commission must answer before
concluding that a competitive advantage exists is that
of whether the public financing of
IFP also benefits
IFP’s economic activities in the relevant markets. In this
connection the Commission sets out its interpretation of
the concept of aid where the same entity carries on both
economic and non-economic activities
in the new
Community framework for State aid for research and
innovation (34) of 2006, which
development
‘If
reflects the Commission’s position on the subject:
the same entity carries out activities of both economic
and non-economic nature, in order to avoid cross-subsi­
disation of the economic activity, the public funding of
under
the
fall
Article 87(1) of
the two kinds of
activities and their costs and funding can be clearly
separated. Evidence that the costs have been allocated
correctly can consist of annual financial statements of
the universities and research organisations’ (35).

activities will
if

the EC Treaty,

non-economic

and

not

(129)

In the light of the above, the Commission considers that
the beneficiaries of any State aid are the entities IFP,
Axens, Beicip-Franlab and Prosernat in respect of their
activities in the market for refining and petrochemicals
technologies,
in the market for consultancy services in
relation to oilfield operation and the contract develop­

(132)

(30) Extract

from Axens’s Internet site:
‘Axens is a refining, petro­
focused company offering
chemical and natural gas market
market-leading products including processes, catalysts, adsorbents
and equipment, backed by nearly fifty years of R & D and industrial
success’. Extract from Prosernat’s Internet site: ‘The association of all
the scientific skills and development know-how of Prosernat’s
mother company IFP, with Prosernat’s industrial experience brings
a unique opportunity to turn innovative ideas into an industrial
reality’.

(31) See,

for example, single IFP/Axens representative at

the 10th
Congress of the Société Française de Génie des Procédés (http://in­
pact.inp-toulouse.fr/SFGP/pageaccueil.html).

(32) See, for example,

‘Liquefin, developed and commercialised by IFP-
Axens’, in ‘New liquefaction process promises lower costs’, Oil &
‘IFP is the world’s second largest process
Gas Journal, 19.8.2002,
licensor in refining and petrochemicals (via its subsidiary Axens)
and is an internationally recognised center of excellence in
exploration and production’. www.tmcnet.com, 15.12.2005.
(33) See, for example, on the site www.topsoe.com, references to units
licensed by ‘IFP/Axens’; reference to ‘IFP (Axens)’ on the site of
Nexant, a consultancy firm in the energy sector (http://nexant.ec­
next.com/coms2/summary_0255-3019_ITM); see also the presen­
tation of the GTL Eni-IFP/Axens project at http://gcceu-conference.e­
pu.ntua.gr

is

IFP’s

accounts

any cross-subsidisation of

In other words, the Commission must determine whether
there
economic
activities through the financing by the State of its non-
economic activities. To this end, the Commission has
examined IFP’s
to identify the
amount of any State subsidy earmarked for commercial
activities. IFP and the subsidiaries concerned are distinct
legal entities and their accounts are separate. The
Commission considers that, if there is any subsidisation
it results from the level of the
of economic activities,
remunerations paid by the subsidiaries concerned to
the parent company and is reflected in IFP’s accounts.

in order

(133) First,

the Commission notes

is
organised, by type of activity, around seven results
centres, which allows effective accounting separation of
the activities of R & D, training, knowledge dissemination
and management of IFP’s portfolio.

that

IFP’s budget

(34) OJ C 323, 30.12.2006, p. 1.
(35) Point 3.1.1, first subparagraph.

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Official Journal of the European Union

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(134)

that

the Commission considers

the
In this context,
accounts which are relevant
to its examination are
those of the ‘Refining-Petrochemicals’ results centre for
activities in the field of refining and petrochemicals tech­
nologies and for activities in the field of sulphur recovery
technologies, and those of the ‘Exploration-Production’
results centre for activities
in the field of oilfield
operation consultancy services and the contract develop­
ment of oilfield software and for activities in the field of
technologies. The
gas
the market
treatment
Commission considers
the public financing of
that
projects carried out under the heading of ‘Exploratory
Research’ does not fall within the scope of its examin-
ation insofar as such projects consist of
fundamental
research within the meaning of Annex I to the 1996
R & D framework, are high risk and are not aimed at
a specific industry.

for

(138) Fifthly, the Commission notes that the cost of horizontal
projects carried out within the results centres on the
segments ‘trade equipment’ and ‘support activities’
is
also passed on at
the level of each project either
directly or in proportion to the total expenses of the
segment
to which it belongs (competency acquisition
or industrial research).

(139) Lastly, the Commission takes note of the fact that the
incidental assignments mentioned in recital 125 form the
subject matter of agreements between IFP and the subsi­
diaries concerned. These services are invoiced by IFP on a
full-cost basis
centres
and charged to the
concerned.

results

(135) Secondly, the Commission considers that the system of
analytical accounts implemented within IFP effectively
allows an allocation of (non-State-budgetary-allowance)
income and expenditure within each results centre.
It
notes in this connection that IFP’s analytical accounting
is based on the concept of project. Projects are grouped
by results centre. Within each results centre, projects are
listed by segment or type. The allocation of income and
expenditure in each results centre is done project by
IFP’s
project. The Commission notes, moreover,
budget and annual accounts are subject to independent
external scrutiny by two auditors.

that

inasmuch as

their own revenues

(136) Thirdly, the Commission notes that the results centres
have
the State
budgetary allowance is not analytically allocated to
them. This may result in an accounting deficit between
the income and expenditure allocated to them. The
centres’ own revenues
for
services rendered,
licence fees and dividends paid by
subsidiaries.

remunerations

comprise

(137) Fourthly,

and leasing) but

the costs
the Commission observes that all
incurred by IFP on a given project are entered in the
accounts, including not only expenses directly chargeable
to the project (project-specific purchases of supplies and
small movable equipment, contracted-out services, travel,
also
documentation, maintenance
indirect expenses (staff wages and social security contri­
butions, the amortisation of fixed tangible and intangible
assets, overheads). Indirect expenses are charged to the
project in proportion to the number of man hours on
the basis of an hourly rate calculated according to the
staff category concerned (engineers, technicians, etc.). The
that
Commission considers
this charging method is
objective and relevant
from an accounting point of
view in the light of the activities concerned.

(140) The Commission is therefore able to conclude that the
expenses
and
‘Exploration-Production’ results centres effectively reflect
the totality of the costs of IFP’s activities in the relevant
markets.

‘Refining-Petrochemicals’

the

of

and

‘Exploration-Production’

(141) Nevertheless, the Commission takes note of the fact that
there is no exact correspondence between the ‘Refining-
Petrochemicals’
results
centres, on the one hand, and the fields of activity of
the subsidiaries concerned, on the other. In other words,
to use
research
agreements, the results centres group together activities
not only in the subsidiaries’ exclusive fields but also in
non-exclusive fields.

terminology employed in the

the

(142) The ‘Refining-Petrochemicals’ results centre encompasses
IFP’s R & D activities in the field of sulphur recovery
technologies, the results of which are exploited by the
subsidiary Prosernat, in the field of the technologies of
and
refining, petrochemicals, GTL (gas
vegetable oil esters for the production of diesel fuels,
the results of which are exploited by the subsidiary
Axens, and in the field of CTL (coal to liquid), biomass
(excluding vegetable oil esters for the production of diesel
fuels) and hydrogen production, the results of which are
exploited in collaboration with other industrial partners.

to liquid)

(143) The ‘Exploration-Production’ results centre covers IFP’s
R & D work in the field of oilfield operation consultancy
and the
services
contract development of oilfield
the results of which are exploited by the
software,
subsidiary Beicip-Franlab,
in the field of gas treatment
technologies, the results of which are exploited by the
subsidiary Prosernat, and in the field of CO2 recovery
and hydrogen transport,
results of which are
exploited in collaboration with other industrial partners.

the

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(144) The Commission takes into consideration the fact that
several projects carried out within the ‘Refining-Petro­
chemicals’ and ‘Exploration-Production’
results centres
on the ‘competency acquisition’ segment count as funda­
mental research within the meaning of Annex I to the
1996 R & D framework and have their results widely
disseminated among Community enterprises without dis­
crimination. These projects have as their objective the
emergence of new ideas through well-upstream creative
research and the development of competencies. France
has submitted to the Commission a list of projects
carried out on these segments together with project
descriptions. The Commission takes note, moreover, of
the fact that IFP disseminates the results of this work
tools, such as its own scientific
using a number of
journal Oil & Gas Science and Technology, which is freely
accessible online, the organisation of and participation in
conferences, the publication of works, partnerships with
other research centres and doctoral sponsorships.

and

remuneration received

the Commission considers that

(145) Bearing in mind the elements set out in recitals 133 to
IFP’s system of
139,
analytical accounts makes it possible to trace all costs
incurred by
from its
economic activities. The Commission would observe,
however, that,
in the light of the current organisation
of IFP’s accounts, the distinction between economic and
non-economic activities necessitates a close analysis of
the results centres’ accounts, project by project.
It
IFP must
considers,
organise and publish its accounts in such a way as to
distinguish more clearly,
in accordance with the prin­
ciples laid down by Directive 2006/111/EC, between its
economic and its non-economic activities, for example
by grouping its economic activities within one and the
same results centre.

the future,

therefore,

that,

for

(146) Following its examination of the accounts of IFP’s results centres, the Commission is able to establish
the amount of IFP’s R & D project costs and of IFP’s own resources in the exclusive fields of activity
of the subsidiaries Axens and Prosernat, namely the technologies of refining, petrochemicals, GTL and
vegetable oil esters for the production of diesel fuels, and the technologies of gas treatment and
sulphur recovery:

Table 1

(EUR)

2003

2004

2005

2006

[…] (**)

[…] (**)

[…] (**)

(149)

Expenditure

Own resources

Accounting deficit

[…] (**)

[…] (**)

[…] (**)

(147)

Inasmuch as these data point to an accounting deficit,
IFP’s commercial activities in the areas of
the tech­
nologies of refining, petrochemicals, GTL and vegetable
oil esters for the production of diesel fuels and of the
technologies of gas treatment and sulphur recovery are
fully financed out of own resources and hence
not
from IFP’s State funding. This constitutes a
benefit
selective advantage financed by State resources.

(148) The combined deficit for the period 2003-06 amounts
therefore, for the two relevant markets, to [less than EUR
50 million] (**). This amount is, however, well below the
amount cited by UOP.

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

in the

and its

software

activities

deserve
that

IFP’s
field of oilfield operation
consultancy services and the contract development of
oilfield
The
special mention.
the development agreement
Commission notes
between IFP
as
subsidiary Beicip-Franlab,
modified by the amendment signed on 16 December
2005 and applicable from 1 January 2005, provides
that Beicip-Franlab is to reimburse IFP for all the costs,
plus legal interest, of work carried out by the latter in
Beicip-Franlab’s field of activity,
including research into
algorithms, models and methodologies. The Commission
has checked the remunerations paid by Beicip-Franlab to
IFP in 2003 and 2004 and found that they broadly cover
the cost of work done by IFP in its subsidiary’s exclusive
domain.

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(150) The Commission is therefore able to conclude that the
work of IFP and Beicip-Franlab is financed entirely out of
income earned in the market
for oilfield operation
consultancy services and the contract development of
oilfield software. In this market, IFP and Beicip-Franlab
therefore do not enjoy a competitive advantage.

(151)

7.1.3. Conclusion on the existence of aid

In conclusion, certain of IFP’s activities fall outside the
scope of its non-economic activities insofar as they give
rise to commercial exploitation by its subsidiaries. The
Commission has come to the conclusion that the subsid-
iaries concerned cannot be considered autonomous from
their parent company insofar as their activities form part
of IFP’s development strategy, IFP exercises not only de
jure but also de facto control, exclusive agreements bear
witness to strong economic integration, and IFP and the
subsidiaries concerned have a common image in the eyes
of operators in the relevant sectors.

(152) Moreover, IFP benefits, for its commercial activities with
the exception of the field of activity of its subsidiary
Beicip-Franlab,
financing, which
constitutes a selective advantage insofar as it is granted
to only one enterprise. This financing is, furthermore,
imputable to the State.

from partial public

(153) The Commission considers that, in the fields of activity
the

the other criteria for

of Axens and Prosernat,
existence of aid are also fulfilled.

(154) The Commission considers further that any contribution
in the fields of activity of Axens and
to activities
Prosernat strengthens the competitive position of
IFP
and its subsidiaries and potentially involves a distortion
of competition.

IFP and Axens, the
(155) Regarding the field of activity of
the information commu­
Commission takes note of
in its
nicated by France and reproduced by Axens
to show the high amount,
comments,
in the
compared,
sector, of the additional research costs financed by the
subsidiary Axens out of its own resources. Nevertheless,
the Commission considers that an absence of advantage
cannot be deduced from this high amount insofar as the
analysis of IFP’s accounts clearly shows an accounting

intended
inter alia, with other enterprises

deficit between costs and resources in Axens’s field of
activity.

(156) Regarding the field of activity of IFP and Prosernat, the
Commission takes note of France’s comments to the
effect that collaboration in most projects carried on in
the field of oilfield research and exploration is open
without discrimination to numerous industrial partners.
Nevertheless,
the exclusive
agreements between IFP and Prosernat, and hence any
collaboration with other industrial partners is strictly
regulated and limited. The consequence for Prosernat is
a selective advantage financed by State resources.

some projects

fall under

(157) Furthermore, this distortion of competition is liable to
have an impact on intra-Community trade insofar as the
fields of activity of the subsidiaries concerned constitute
competitive markets at world level. The market
for
refining and petrochemicals technologies is a worldwide
market open to competition since the 1950s. The main
competitors of IFP and Axens in this market are UOP,
Chevron, Lummus, Shell, ExxonMobil, Haldor Topsoe
for gas treatment
and ConocoPhillips.
In the market
and sulphur recovery technologies,
IFP and Prosernat
compete with such gas treatment equipment suppliers
as KCC, KPS, SIIRTEC-NIGI, Hanover Maloney, Frames,
TDE and GPS, with such gas sweetening technology
licensees as UOP, ExxonMobil, Shell Global Solutions,
BASF, Eneos and Huntsman, and with such sulphur
specialists as Jacobs, Black & Veath Pritchard, Lurgi,
Parsons, Technip-KTI, SIIRTEC-NIGI, CBI and TPA.

(158) Consequently,

the Commission refutes

the argument
advanced by France to the effect
the
elements necessary for classifying the State support for
IFP and its subsidiaries Axens and
the activities of
of
State
Prosernat
Article 87(1) of the Treaty are present.

the meaning

that not all

aid within

as

(159) Lastly,

that

the Commission would point out

the
question of the existence of additional State aid within
the meaning of Article 87(1) of the Treaty, resulting from
the new EPIC status and a potential unlimited State
guarantee for IFP stemming from that status (36), is the
subject of a separate investigation in another proceeding
(NN 11/08). This separate investigation is made possible,
inter alia, by the relatively recent nature of the new EPIC
status compared with the set of measures examined by
the present Decision.

(36) See

the

initiation Decision of 29.11.2007, Unlimited State

guarantee for La Poste (C 56/2007).

L 53/32

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7.2. Lawfulness of the aid

(160) The Commission has shown that IFP and its subsidiaries
Axens and Prosernat enjoy a selective advantage financed
by State resources. This advantage stems from the non-
coverage by their own resources of R & D activities in
the fields of activity of Axens and Prosernat. The non-
coverage of IFP’s expenditure in the fields of activity of
Axens and Prosernat is the result of intra-group transfer
mechanisms as established by the exclusive agreements
between IFP and Axens, on the one hand, and IFP and
Prosernat, on the other. The Commission considers,
therefore, that the existence of the aid has come about
as a result of
the existence of
the concomitance of
commercial subsidiaries and the signature of exclusive
agreements between those subsidiaries and the parent
company, insofar as those agreements do not guarantee
total coverage of the costs of work carried out by IFP on
behalf of Axens and Prosernat. As a reminder,
the
took effect on
agreements between IFP and Axens
1 January 2001 and those between IFP and Prosernat
on 1 January 2002.

(161) The Commission takes note of the comments submitted
by France and summarised in Section 4.1. It understands
that France is of the opinion that it notified the main
thrust of the structural and contractual changes to the
Commission in 2001. Nevertheless, in the Commission’s
opinion the growth in IFP’s commercial activity since
2001 through its subsidiaries is such that it significantly
affects any previous economic and legal analysis. Hence it
is adhering to its assessment, as set out in point 3.2 of
the decision to initiate the procedure, as regards the
unlawfulness of the aid, according to which the aid at
issue must be considered unlawful as from the date of
expiry of the validity of its 1998 decision, i.e. as from
1 January 2003.

(162) The Commission takes note of

the comments from
France and Axens concerning the situation of legitimate
expectation on the part of the beneficiaries. Nevertheless,
in the light of the elements that follow and insofar as the
Commission concludes that the aid granted to IFP and its
subsidiaries is compatible with the common market, it is
not necessary for the Commission to rule on the matter.

7.3. Request for a suspensive order

(163) The Commission has not acceded to a request from UOP
take a decision ordering France to suspend
that
payment of any unlawful aid. First of all,
the State
support granted to IFP constitutes the main source of

it

financing for activities other than the economic activities
of IFP and its subsidiaries Axens and Prosernat, such as
training, fundamental research, collaborative R & D and
the dissemination of R & D findings, which the
Commission considers in principle to be non-economic
and which account for more than 90 % of the State
support granted to IFP. Secondly, the Commission took
the view that such a decision was irrelevant insofar as it
was reasonable to anticipate the compatibility of at least
part of the aid.

7.4. Basis for examining the compatibility of the aid

(164) Before examining the research stages provided for in the
1996 R & D framework,
the Commission must
determine whether IFP’s State-aided activities do in fact
come under the heading of research and development. In
this connection,
the Commission would refer to the
Frascati Manual (37), which gives definitions of R & D
and classifications of its constituent activities.

(165) The Frascati Manual provides criteria for distinguishing
R & D from related scientific, technological and industrial
activities. The basic criterion proposed by the Manual is
the existence, in the case of R & D, of an appreciable
element of novelty and the resolution of scientific and/or
technological uncertainty.

(166) There are a number of supplementary criteria in the form
of the objectives of projects, the unknown nature of the
phenomena, structures or relationships on which projects
are based, the novel application of knowledge or tech­
niques already acquired, the likelihood that projects will
in new (extended or deeper) understanding of
result
phenomena,
relationships or manipulative principles
likely to be of interest to more than one organisation,
the patentability of results, the type of staff working on
projects, the methods used, the general nature of the
findings or results of a project and, where applicable,
the more natural classification of the project in other
fields of activity.

(167) Lastly,

‘If

the Frascati Manual states that

the primary
objective is to make further technical improvements on
the product or process, then the work comes within the
definition of R & D. If, on the other hand, the product,
process or approach is substantially set and the primary
objective is to develop markets, to do pre-production
planning or
to get a production or control system
working smoothly, the work is no longer R & D’.

(37) Published in 2002 by the Organisation for Economic Cooperation

and Development.

26.2.2009

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(168) The Commission notes that the activities carried on by
IFP in collaboration with its subsidiary Axens concern the
development of new processes
and new products
(catalysts and adsorbents) for the lowest-cost and eco-
inter­
friendly production of
mediates from all accessible carbon sources.
It notes
that
the activities carried on by IFP in collaboration
with its subsidiary Prosernat concern the development
of new processes
for natural gas
and equipment
treatment and sulphur recovery.

fuels and petrochemical

(169)

In this context,
the novelty of projects lies in the
component parts, their relationships and/or the charac­
teristics of the target processes or products. On each
project, sticking points are identified. By way of illus­
tration, IFP has carried out a project aimed at developing
a new process for producing high-octane paraffin bases
from heavier
currently treated,
making it possible to tackle the problem of reducing
the aromatics content of the petrol pool.

than those

charges

(170) The Commission takes into account, moreover, the fact
that the State-supported work takes place prior to type
approval of the processes and products. It notes that the
results of the projects carried out are wide in scope and
patented, that the staff employed on the projects consists
mainly of research workers and technicians and that the
methods are based on experimentation,
interpretation
the Commission observes that
and modelling. Lastly,
activities of
carried on by other
type
operators in the sector are usually classified as research
activities (38).

same

the

(171)

(172)

the Commission cannot

In conclusion,
the
complainant’s argument that the activities to which the
present proceeding relates cannot be classed as R & D.
The Commission considers, on the contrary,
the
activities carried on by IFP in collaboration with its subsi­
diaries do fall under the heading of R & D.

accept

that

Inasmuch as what is at issue is State aid for R & D work,
the rules applicable for the purposes of examining its
compatibility are the rules on State aid for research
the aid, which
and development. To the extent
stems from the existence of commercial subsidiaries
agreements
with which
concluded
between 1 January 2001 and 1 January 2003,
is
considered unlawful as from 1 January 2003, the rules
applicable for the purposes of examining its compatibility
are those of the 1996 R & D framework.

exclusive

that

IFP

7.5. Compatibility of the aid

7.5.1. Research stages

(173) Annex I to the 1996 R & D framework provides a
research and pre-competitive

industrial

definition of
development activity:

(a)

investigation ‘aimed at

industrial research consists of planned research or
the acquisition of
critical
new knowledge,
such
knowledge may be useful
in developing new
products, processes or services or in bringing about
a
in existing products,
processes or services’;

the objective being that

improvement

significant

(b) pre-competitive development activity is aimed at ‘the
shaping of the results of industrial research into a
plan, arrangement or design for new, altered or
improved products, processes or services, whether
they are intended to be sold or used, including the
creation of an initial prototype which could not be
the
used commercially. This may also include
conceptual
other
products, processes or services and initial demon­
stration projects or pilot projects, provided that
such projects cannot be converted or used for
industrial applications or commercial exploitation. It
does not
include the routine or periodic changes
made to products, production lines, manufacturing
processes, existing services and other operations in
progress,
such changes may represent
improvements’.

formulation

even if

design

and

of

(174)

In this context, the Commission has examined the work
cycle and allocation resulting from the industrial research
agreement between IFP and its subsidiary Axens and the
complete lists of and explanatory notes to projects
carried out between 2003 and 2006 supplied by France:

(175)

IFP conducts research work. The work seeks to examine
the feasibility of a synthesis route and corresponds to
feasibility studies preparatory to industrial
research
work within the meaning of the 1996 R & D framework:

(a)

for a catalyst, samples based on small quantities (of
the order of a gram), often in powder form, are
prepared and tested with a view to studying the
chemical reactions. This stage leads to the description
of a procedure for preparing a catalyst
sample
presenting a desired activity or selectivity;

(38) See

in this

connection Sintef’s website: http://www.sintef.no/

default.aspx?id = 490

(b) for a technology or a process, feasibility is established
from digital simulations, paper studies of models and
experimentation with concepts.

L 53/34

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Official Journal of the European Union

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(176) Next, a preliminary examination is made of the patent
situation in order to ascertain the innovativeness of the
research. At the end of this examination, IFP presents a
scientific and technical dossier to its subsidiary, which
exercises its right of first refusal.

(a)

the

industrial

representative of

for a catalyst, a product test batch is produced at a
scale
chain by
adapting the operating procedures resulting from
the industrial research work. This adaptation may
give rise to raw material changes for cost, hygiene,
safety or environmental reasons. The prototypes are
tested on a reference charge and modified to achieve
to
the desired performance. Tests are carried out
catalyst’s
supplement
the
this stage is the choice of
performance. Only at
analysers and equipment decided on;

the mapping

of

(b) for a process, a risk analysis study is conducted;
industrial models of processes or combinations of
processes are produced and a process white paper
detailing the management of events is drawn up.

(179) A committee of experts is appointed to decide on and
validate the product or process type approval stages. It is
not until after type approval, which makes it possible to
verify whether environmental and safety constraints have
been effectively taken into account, that the decision is
taken to market or industrially launch (40) the process
and/or product. The products and processes resulting
from the research work are thus not marketed until
after they have been type approved nor are they indus­
trially launched before that stage.

(180) The Commission considers that

this work cannot be
equated with routine operations on the industrial chain
inasmuch as it lies outside the scope of industrial exploi­
tation. It concludes that it comes under the heading of
pre-competitive development activity within the meaning
of the 1996 R & D framework. It notes that, in any case,
the cost of the work is borne fully by the subsidiary
Axens out of its own resources.

(181) Regarding the work carried out by IFP in collaboration
with its subsidiary Prosernat, the Commission observes
that the work cycle and allocation between IFP and its
subsidiary Prosernat are governed by an industrial
research agreement which, applied to gas treatment and
sulphur recovery technologies, follows the same pattern
as the industrial research agreement between IFP and its
subsidiary Axens. This analysis is confirmed by an exa­
mination of the complete lists of and explanatory notes
to projects carried out between 2003 and 2006 supplied
by France.

(40) The industrial launch is marked by the first commercial unit built
under a third party process sub-licence or the first commercial
charge of product used.

the

the dossier,

(177) When Axens wishes to carry on the research on the basis
of
IFP performs industrial research work
‘aimed at acquiring the new knowledge or bringing
improvements needed to develop new
about
processes, products and technologies or improve those
which already exist’ (visant à acquérir les connaissances
nouvelles ou les perfectionnements, permettant la mise
au point de nouveaux procédés, produits et technologies
ou le perfectionnement de ceux qui existent déjà) (39).
The work consists in studying new synthesis routes or
their improvement, on a scale unrelated to the industrial
scale. The Commission considers that it is aimed at valid-
ating concepts and that it comes under the heading of
the 1996
research within the meaning of
industrial
R & D framework:

(a)

for a catalyst, this stage covers experimentation into
new synthesis routes. The formulation defined during
the research work is tested on samples of the order
of a kilogram, the change of scale generating most of
the time differences in structure and properties. A
summary and detailed analyses are produced of the
thus obtained and the
effluent
effects of inhibitors and poisons are studied;

from the catalyst

(b) for a process, the industrial research work seeks to
the
the
the
is constructed by

study the basic elements of
the technologies,
implementing
for
appropriate
catalyst
and the dimensioning elements of
reaction system. A digital model
mapping the performance generated.

conditions

(178) Once the industrial research work is completed, a catalyst
or process dossier is delivered by IFP to its subsidiary. At
this stage, Axens may decide to proceed with develop­
ment by conducting pre-competitive development work
in order to prepare for industrialisation. The work during
this stage covers testing and consolidation of the results
of the work done during the stage described in recital
177 on prototypes representing the industrial chain:

(39) Article 1-22 of the industrial research agreement.

26.2.2009

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Official Journal of the European Union

L 53/35

(182)

by

that

financed

resources

the Commission considers

the
In conclusion,
activities
do indeed
State
correspond to the research stages defined in Annex I to
the 1996 R & D framework. It notes that, in any case,
the activities closest to the market, namely the activities
of pre-competitive development and commercial devel­
opment, are financed entirely by the subsidiaries out of
their own resources, from income earned in the markets,
and that the public financing concerns only the industrial
research stages. The Commission cannot therefore accept
UOP’s argument
the State aid for the economic
activities of
and
subsidiaries Axens
IFP
Prosernat constitutes operating aid.

that

and

its

7.5.2. Eligible costs

(183) Annex II to the 1996 R & D framework specifies the
costs which may be taken into account in calculating the
intensity of aid for research and development:

— personnel costs (researchers,

technicians and other
supporting staff employed solely on the research
activity),

— costs of

instruments,

equipment, and land and
premises used solely and on a continual basis
(except where
the
research activity,

transferred commercially)

for

— cost of consultancy and equivalent services used
including the
etc.

exclusively for the research activity,
research,
bought from outside sources,

technical knowledge

and patents,

— additional overheads incurred directly as a result of

the research activity,

— other operating expenses (e.g. costs of materials,
supplies and similar products) incurred directly as a
result of the research activity.

(184) Annex II to the 1996 R & D framework states, moreover,
that, where they are generated by other activities as well
— in particular other R & D activities — costs must be
broken down between the subsidised R & D activity and
other activities.

(185) The Commission notes,

that

the costs directly
first,
chargeable to projects relate to sub-contracting, travel,
insurance and documentation, and supplies and small
equipment. They correspond respectively to the cost of
consultancy and equivalent services, additional overheads
and other operating expenses. The Commission observes
that these costs are incurred directly and exclusively as a
result of the research activities.

the

amortisation of

(186) The Commission notes, secondly, that the other costs
chargeable to projects relate to expenditure on research
personnel,
and
intangible assets and other overheads and correspond
respectively to personnel costs, the costs of instruments,
equipment, and land and premises, and additional
overheads. These costs are incurred directly as a result
of the research activities and are broken down between
the different research projects in proportion to the time
spent by the research personnel on each project.

fixed tangible

(187) The costs of horizontal R & D projects relating to the
methods and equipment used in other R & D projects
may be equated with additional overheads
incurred
directly as a result of the research activities. The costs
of these horizontal projects are allocated in proportion to
the costs of each R & D project. The Commission
considers that the allocation methods used are appro­
priate.

(188) The Commission concludes that the project costs are in
conformity with the eligible costs set out in Annex II to
the 1996 R & D framework.

7.5.3. Intensity of the aid

(189) Pursuant to point 5.4 of the 1996 R & D framework, the
maximum permissible aid intensity for technical feasi­
bility studies preparatory to industrial research projects
is 75 %. Pursuant to point 5.3 of the framework, the
industrial
aid
maximum permissible
research projects is 50 %. Pursuant to point 5.5 of the
framework, the maximum permissible aid intensity for
pre-competitive development projects is 25 %. Pursuant
in cases of activity
to point 5.9 of
spanning industrial research and pre-competitive develop­
ment activities, the maximum permissible aid intensity
must not exceed the weighted average of the permissible
aid intensities applicable to the two types of research.

the framework,

intensity

for

L 53/36

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Official Journal of the European Union

26.2.2009

(190) The Commission notes, first, that IFP financed out of its own resources, thanks to the remunerations
paid by its subsidiaries and without any financial intervention by the State, more than 50 % of the
costs of its technical feasibility studies and industrial research work between 2003 and 2006. The
Commission notes that the permissible aid intensity may be higher than 50 % if it takes into account
feasibility studies that qualifies for aid of an intensity of 75 %. The
the part of the technical
Commission has drawn up the following table on the basis of
lists detailing the
annual costs by project and by research stage and on the basis of the statement of IFP’s resources.
In performing this exercise, the Commission has followed a conservative approach by including all
costs falling under, directly or indirectly (41), exclusive fields of activity of Axens and Prosernat and
excluding all proceeds other than those paid by Axens and Prosernat (42).

the project

Table 2

2003

2004

2005

2006

Annual number of projects carried out (1)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

Area of activity IFP/Axens

Area of activity IFP/
Prosernat

Total

48

54

55

68

Area of activity IFP/Axens

Area of activity IFP/
Prosernat

Annual cost of technical feasibility studies (EUR)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

Total

5 759 184

4 032 859

4 392 411

7 393 767

Area of activity IFP/Axens

Area of activity IFP/
Prosernat

Annual cost of industrial research work (EUR)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

Total

40 180 231

48 536 142

38 183 597

49 007 913

Amount

Amount

Intensity

Maximum permissible
intensity (2)

Own resources (EUR)

[…] (**)

[…] (**)

[…] (**)

[…] (**)

Annual State aid (EUR)

18 958 910

19 243 217

8 952 630

11 280 522

41 %

53 %

37 %

52 %

21 %

53 %

20 %

53 %

(1) Some projects are multiannual. In the interests of exhaustiveness, ‘number of projects’ means the number of projects under

way in any one year. Amounts are shown non-cumulatively for a given year.

(2) Weighted average of the permissible aid intensities for industrial research and feasibility studies, in accordance with point 5.9

of the 1996 R & D framework.

(41) Including the costs of horizontal projects, see recital 138.
(42) Own resources consist of dividends, royalties and other proceeds such as the income from patents filed by IFP. The

Commission has taken into account in its examination only remuneration paid by Axens and Prosernat.

26.2.2009

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Official Journal of the European Union

L 53/37

(191) The Commission notes, secondly, that the share of the
financing from own resources of the research activities of
IFP and its subsidiaries may be higher if allowance is
made for
the pre-competitive development activities
which potentially qualify for aid of an intensity of
25 %. This is because the pre-competitive development
activities are financed fully by the subsidiaries Axens and
Prosernat out of
their own resources without any
financial intervention either by the State or by IFP.

(192) Thirdly,

the Commission has checked on compliance
with the permissible intensities by research stage on the
basis of the annual lists of projects carried out between
2003 and 2006. For subsequent years, France will have
to submit an annual report to the Commission so that
the latter may satisfy itself that the aid intensities by
research stage and by project are complied with. The
report will have to cover all projects carried out in the
fields of activity of Axens and Prosernat, giving their
costs by research stage and the amounts of public
financing and of own resources allocated by IFP and its
subsidiaries. The Commission considers that the aid rate
must remain below 50 % in order to ensure compliance
with the permissible intensities.

(193) Lastly, the Commission observes that compliance with
the intensities depends to a large extent on the amount
of own resources available to IFP for its projects in the
fields concerned. These own resources consist mainly in
the remunerations paid by the subsidiaries Axens and
Prosernat to IFP. The Commission considers, therefore,
that a clause must be inserted in the exclusive agreements
governing such remuneration so as to ensure that a
minimum variable remuneration, covering at least 25 %
of the costs of feasibility studies preparatory to industrial
research activities, 50 % of the costs of industrial research
the costs of pre-
and, where appropriate, 75 % of
competitive development activities, carried out by IFP
in the subsidiaries’
is paid to the
parent company (43).

fields of activity,

(194)

In conclusion, the Commission considers that the aid
intensities permitted by the 1996 R & D framework
are complied with provided the conditions laid down
in recitals 192 and 193 are satisfied.

7.5.4. Cumulation

(195) The provisions of the 1996 R & D framework on cumu­
the framework) are
in point 5.12 of

lation (set out

(43) These percentages correspond respectively to aid intensities of 75 %
of the costs of feasibility studies preparatory to industrial research
activities, 50 % of the costs of industrial research and 25 % of the
costs of pre-competitive development activities.

complied with. The Commission has calculated the
total amount of public financing irrespective of its origin.

7.5.5. Incentive effect

(196) First, the Commission takes note of the fact that the
research activities of IFP and its subsidiaries are guided
by a logic, initiated by the State, of ensuring the long-
term security of energy supplies. Hydrocarbons are of
strategic importance to the present-day economies of
the Member States, owing in particular to their prepon­
derance in transport and chemicals. The activities of IFP
and its subsidiaries are to be seen against the threefold
increasing energy demand primarily
background of
driven by increased mobility and trade,
the steady
exhaustion of oil and gas reserves, and mastery of
greenhouse gas emissions. The Commission notes that
the research conducted by IFP and its
subsidiaries
focuses in particular on the following priority areas:

(a) renewing reserves and increasing production of oil
and gas. The aim is not only to increase exploration
success and deposit recovery rates but also to allow
the exploitation of unconventional resources (ultra-
deep offshore, extra-heavy crudes, asphalt
sands,
the major
etc.). By way of
actions in this area is the development of a process
for gases with a high H2S and CO2 content;

illustration, one of

(b) designing clean, high-efficiency refining processes.
The aim here is to optimise the production of fuels
and petrochemical bases while reducing the impact of
the refining and petrochemicals industries on the en­
vironment. Moreover, the exploitation of unconven­
tional deposits necessitates
the development of
conversion technologies. This priority area includes
hydrocracking research;

(c) developing innovative fuels and engine technologies
in
and
consumption. The use of high-hydrogen gaseous
fuels is one of the main avenues being pursued;

emissions

vehicle

reduce

order

to

(d) diversifying

energy

the
production. One priority is
synthetic
fuels
(biomass, gas or carbon).

from various

sources

used

in fuel
the production of
sources

energy

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Official Journal of the European Union

26.2.2009

(197) The Commission notes that IFP’s research programmes
are scrutinised by technical committees the composition
and procedures of which are prescribed by the Minister
responsible and which ensure effective follow-up of the
above priorities.

(201) Fifthly,

the Commission notes that

the proportion of
turnover accounted for by R & D expenditure is particul-
arly high. In Prosernat’s field of activity, it came to 9 % in
2006. In Axens’s field of activity, that same year it came
to 13 %, a much higher figure than for the sector as a
whole. For four reference companies in Axens’s area of
business, the proportion of turnover accounted for by R
& D expenditure varied from 2,3 % to 10 % (44).

(198) Secondly, the Commission has regard to the fact that the
including
development of new energy technologies,
biofuels
the
Community’s priorities in relation to research, energy
policy and environmental policy.

recovery, numbers

among

and

gas

thanks to State
the Commission notes that,
(199) Thirdly,
IFP and its subsidiaries have been able to
support,
conduct
research activities which would
additional
otherwise not have been pursued owing to the techno­
logical risk or the highly uncertain return on investment.
In particular, in the field of refining and petrochemicals
technologies, the considerable risk associated with the
first industrial units means that enterprises operating in
this market must be highly selective when it comes to
choosing R & D projects. By way of illustration, IFP and
Axens have been able to carry out the following research
projects: new catalysts and technologies in the middle
distillate
efficient
adsorbent and technology for the production of para­
xylene; a new process in the LNG field based on the
use of new concepts and technologies from the re-
frigeration field; and a new, cleaner and more efficient
process for the production of biodiesel by esterification
of vegetable oils.

hydroprocessing

a more

field;

(200) Fourthly, the Commission notes a favourable trend since
2002 in various indicators of the R & D effort by IFP and
its subsidiaries Axens and Prosernat. The expenditure and
staff allocated to R & D by IFP and its subsidiaries Axens
in the subsidiaries’ exclusive fields of
and Prosernat
activity increased over the period 2003-06 despite the
amount of State aid being reduced by 41 %:

(202) Sixthly, the Commission takes into consideration the fact
in the fields of
that IFP and its subsidiaries are faced,
their research, with various constantly
application of
and regulations depending on the
evolving
rules
geographic area concerned.
In particular, since 2000,
the refining sector has had to meet increasingly severe
environmental standards. To the scientific and techno­
logical risks peculiar to R & D projects, there are thus
added significant regulatory risks. Moreover, the results
of the research carried out by IFP and its subsidiaries are
to protect owing to the large number of
difficult
countries in which they are exploited and the diversity
of patent laws applicable there.

(203) Seventhly,

of

units

refining

contrary

petrochemical

the State support

to what UOP maintains,

the
Commission considers that
for IFP
and its subsidiary Axens is not, by virtue either of its
nature or its scale, liable to impair the dynamic of the
refining technologies market. First of all, the Commission
notes that supply in this market is highly differentiated,
while the number of customers is limited. A world
in
or
round-up
operation in 2005 thus shows that there were seven
types of process. Moreover, customers choose a tech­
nology in the light of various criteria, some of which,
such as the cost of the associated installation and the
profitability of the investment, while they are regarded
as critical, are completely exogenous
to the aided
research projects. Lastly, the Commission observes that
certain competitors of
IFP and Axens have a strong
competitive position which should enable them to
maintain their R & D plans in this market. UOP thus
has a world market share corresponding to 57 % in value
terms of existing licensed refining units, whereas the
share held by IFP and Axens comes to 7 %.

Table 3

IFP/Axens

IFP/Prosernat

[…] (**)

[…] (**)

[…] (**)

[…] (**)

Progression of the
indicators over the
period 2003-06

Expenditure
allocated to R & D
in the exclusive field

Staff allocated to
R & D in the
exclusive field

(204) Lastly, the Commission notes that the European Union’s
trading partners also devote substantial budget resources
to financing research into energy. Thus,
the US
Department of Energy had a budget of USD 5 794
billion in 2005 — a budget which has been growing
steadily for the past 15 years. The Department subsidises
numerous research programmes, including in the field of
biodiesels. The Commission takes note of the fact that

(44) Source: Yahoo! Finance.

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the competitors of IFP and Axens also enjoy substantial
State support. This is the case with UOP, which receives
funding from the National
Institute of Standards and
Technology for its research into catalysts (45). UOP also
through its
State
benefits
numerous partnerships with research institutes
and
universities.

from indirect

support

(205)

In conclusion, the Commission considers that the aid for
IFP and its subsidiaries Axens and Prosernat has an
incentive effect having regard to the strategic nature of
the research carried out, the qualitative and quantitative
progress made in the research effort and the risks and
difficulties inherent in the sectors of activity concerned. It
impair the
considers further that
takes note,
innovation dynamic in the markets.
moreover, of the support granted by other countries to
IFP’s competitors.

the aid should not
It

(206) The annual report that is to be submitted by France to
the Commission until the exclusive agreements between
IFP and its subsidiaries Axens and Prosernat expire will
have to show that the aid still has an incentive effect.

7.6. Conclusion

(207)

all

the

above

light of

considerations,

In the
the
Commission concludes that the aid granted to IFP and
its subsidiaries Axens et Prosernat is in keeping with the
provisions of the 1996 R & D framework, subject to
compliance with the conditions set
forth in recitals
192, 193 and 206,

HAS ADOPTED THIS DECISION:

The aid is compatible with the common market within the
to the

2.
meaning of Article 87(3)(c) of
conditions laid down in Articles 3 to 6 of this Decision.

the Treaty subject

Article 3

1.
This Decision shall be valid until the end of the exclusive
agreements in force on the date of this Decision between IFP
and its subsidiaries Axens and Prosernat (hereinafter called ‘the
exclusive agreements’).

Any prolongation or

2.
agreements must be notified to the Commission.

amendment of

the

exclusive

Article 4

IFP shall organise and publish its accounts in such a way
1.
as to distinguish clearly between its economic and its non-
economic activities.

Until

the date of expiry of

the exclusive agreements,
2.
financial
France shall submit to the Commission an annual
report
the latter might verify the amount of
public funds allocated to IFP’s activities in the exclusive fields
of activity of Axens and Prosernat.

in order that

Article 5

Until

the date of expiry of

the exclusive agreements,
1.
to the Commission a detailed annual
France shall submit
report on the projects carried out by IFP in the exclusive
specifying, by
fields of activity of Axens and Prosernat,
project,
the amount of public
the costs by research stage,
funds allocated and the incentive effect of the aid.

Article 1

The measure which France has implemented for the Institut
Français du Pétrole (IFP) and its subsidiary Beicip-Franlab does
not constitute aid within the meaning of Article 87(1) of the
Treaty.

2.
France shall notify individually to the Commission any aid
of an amount in excess of the thresholds laid down in the 2006
Community framework for State aid for research and develop­
ment and innovation.

Article 2

1.
The measure which France has implemented for IFP and
its subsidiaries Axens and Prosernat constitutes aid within the
meaning of Article 87(1) of the Treaty.

(45) Source: UOP and NIST press releases.

The exclusive agreements shall be amended so as to provide for
payment by Axens and Prosernat of a minimum remuneration
to IFP, covering at least 25 % of the costs of feasibility studies
preparatory to industrial research work, 50 % of the costs of
industrial research and 75 % of the costs of precompetitive
development by IFP in the fields covered by the exclusive
agreements.

Article 6

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France shall inform the Commission within two months from the date of notification of this Decision of the
measures it has taken to comply herewith.

Article 7

This Decision is addressed to the French Republic.

Article 8

Done at Brussels, 16 July 2008.

For the Commission

Neelie KROES
Member of the Commission