CELEX: 51978PC0175
Language: en
Date: 1978-05-02
Title: DRAFT COMMISSION DECISION establishing Community rules for aids and interventions by Member States in favour of the iron and steel industry (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (78) 175
Vol. 1978/0058
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concernant l'ouverture au public des archives historiques de la Communauté économique
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
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In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                    COM(78)175 final.
                                                    Brussels , 2 Kay 19 78 •
                      DRAFT COMMISSION DECISION
       establishing Community rules for aids and interventions
      "by Member States in favour of the iron and steel industry
             ( submitted to the Council by the Commission)
 COU(78 ) 175 final .
 ---pagebreak---          COMUTTTTY THOLES FOR AIDS AND ITFTSRVEUTIONS 3Y MBBR STATES II'T FAVOUR
                              OF THE IRON ArTD STEEL IFDUSTRY
                                    .1
                                   EXPLANATORY '1/TEM3RANIXJM . ;                      . ■ '   .
1 • Introduction     '
       The characteristics of the crisis facing the steel industry are well known .
       The adverse conjunctural situation has affected the industry throughout
       the world "but the Community industry has "been amongst the most seriously
  ■ affected as a result of its loss of compet itiveness , which is due to -
   ■ certain structural weaknesses and more particularly to the existence of
       many plants using obsolete equipment and techniques , and of more' modern-'
       plants which have frequently not reached optimal capacity levels , as well •
                                ■<            .                              -
       as to the unfavourable location of many plants ..
                                       '        '''      s        -
    .' The Commission has already taken aotion to improve the market situation
       in the short term "by the introduction of minimum prices for certain pro­
       ducts and "in other cases of guidelines for prices and deliveries within "
    . the Community as well, as by action to check the adverse Effects on the
       Community price level of" imports from third countries . These - short-term
       measures cannot however resolve the deep-seated structural problems and
       the Commission has therefore also.- taken steps to prepare a detailed
       restructuring plan for the industry , a task on which it is currently
       engaged , and to promote its restructuring by Community aids to investment ,
       pursuant to Article 54 of the ECS C . Treaty . It has further sought to',
       mitigate the effects of the restructuring on the industry 's workers by
       expanding its reconversion activities pursuant to Article 5 6 .           '
               i            ,                               .              '       .      .  -
       It is vital that the implementation of the . Community' s restructuring ,
       policy should not be impeded by measures taken by Member States indivi­
       dually . Equally , however , the Community is not itself in a position to
       meet all the industry 's requirements for assistance . . As a counterpart to
       the initiatives taken by the Commission a framework must now be developed- '
       within which national measures will- reinforce rather than frustrate action
       taken at . Community level .                                                  •
                 ,     '      ;          ,          ; .             '. •       "
                                                                         ι
 ---pagebreak---      The draft Decision of the Commission which would establish such a Commu­
    nity framework for Member States' aids and interventions in favour of the
    steel industry , is therefore an integral part of the industrial, restructu­
    ring policy which is being elaborated by the Community .
2 . The necessity for a Decision under Article 95 . 1
1 ) The gravity of the crisis in the steel industry is such that virtually
    all community undertakings are making losses and have been doing so for
    some time . Despite the Commission 's efforts to strengthen price levels
    within the Community the finances of steel undertakings are bound to '
    remain under pressure in the years     ahead .
    Because of the considerable importance of the industry in the Community 's
    economy   as a producer and an employer , Member States will therefore in­
    creasingly find themselves obliged to intervene to support the industry
    both to enable it to survive the crisis and to promote its restructuring .
    These national aids and interventions will be in the common interest ,    -
    provided that they contribute to the realisation of Community objectives .
2 ) Thfe ECSC Treaty 's provisions on national aids and interventions do not
    offer the Commission the necessary flexibility in its appraisals of such
    measures . Article 4 ( c ) prohibits specific aids and subsidies without any
    possibility of derogation except in the rare case where an action by a
    Member State damages its own steel industry . The Commission is then em­
    powered by virtue of the second subparagraph of Article 67 ( 2 ), subject
    of certain conditions , to authorize aids in these circumstances . The
    other provisions of Article 67 concern actions having an appreciable
    effect on competition and taken under the Member States reserved powers
    ( i.e. their general economic , industrial , regional , social and 'other
    policies ). This article empowers the Commission , after consulting- the
    Consultative Committee and the Council , to make recommendations to in­
    dividual Member States in certain circumstances : those in which an action
    is liable to provoke a serious disequilibrium or in which it allows spe­
    cial benefits to or imposes special charges on steel undertakings in
    comparison with the other industries in the same country .
 ---pagebreak--- 3) While the Commission is prepared to use these powers of recommendation
      where necessary and appropriate it does not consider that tney consui-
   / tute an instrument sufficiently comprehensive and flexible to meet the
      requirements of the present situation . Recourse to Article 95 is re­
      quired in order to "enable the Commission to ensure that actions taken
      under reserved powers are compatible with, the common interest and to
    . authorize aids and subsidies that would otherwise be prohibited oy
 ,. Article 4 ( c ) of the Treaty .
4) The draft Decision , of course , only applies to aids and interventions in
      favour of steel undertakings and in respect of those of their activities
      which are subject to the rules of the ECSC Treaty . Aids whose purpose is
      to facilitate conversion to products to which the Treaty of Rome applies
      are not subject to this Decision .      ■                 -             ,
                 1                      .                               i        ,
3 . The principles of the draft Decision ( Article l )                      ,
      The objective of the draft decision is , as already indicated , to provide
      a framework ensuring that national aids and interventions will be compa­
      tible with the Community 's overall policies for restructuring the steel
      industry and that they do not distort competition to an extent contrary
      to the common interest , while at the same time offering Member States the
      necessary flexibility to cope with a variety of circumstances .
      The present legal framework of the Treaty does not afford the flexibility
      required for these objectives to be attained . It is therefore necessary
      by means of a Community instrument to create new rules providing, on the
      one hand , for the supervision' and control of aids and interventions in
      favour of the steel industry , where these are financed from national
      sources and , on the other hand , for the necessary Community appreciation
      of such action as Member States may take within their reserved powers
      and which may have similar effects on competition to aids and inter­
      ventions .
                              '             1                       ■
      The ,draft decision thus, makes provision for all aids and interventions ,
      not merely for those that are specific to steel . It should be noted in
      particular that the terms of Article 1 are such that its. provisions
      apply to :                                  ■ ,
 ---pagebreak---   ( i ) aids' and interventions for regional '^unoses .
         The Commission recognizes the importance of regional aids and
         interventions for the regional development of the Community .
     ' Equally , howev-er , it would question whether such aids and inter­
         ventions are always in the real interest of the regions concerned
         when they are accorded to industries in difficulties ; certainly
         there is a strong possibility that they could , in the short term ,
  -      be at the expense of other regions where the industry is located '
         and whose problems may be even greater . This latter possibility
         is of ^articular significance in the case of the steel industry
         much of whose production is located in aided regions ( the Mezzo-
         giorno , Scotland , Wales , Lorraine , Wallonia , the Saar ). In the
         case of an industry , such as steel , which suffers from an excess
         of productive capacity , it would clearly be unacceptable for
         Member States to have' complete discretion to use' their regional
         aids systems to support increases in the capacity of certain plants ,
         which , were they not located in aided regions , would be subject to
         control by the Commission . The draft Decision nevertheless provides
         that , in its appraisals of aids and interventions , the Commission
         will take full account of regional considerations .
( ii ) aids and intervention? in favour of undertakings in Publ\c ownership .
                                 »
         In the present circumstances of the steel industry , it is extremely
       'unlikely that a private entrepreneur would be willing , or . indeed
         able , to provide finance to this sector , without some inducement
          in the form of aid or intervention by a Member State . In the case
         of public undertakings , however , the provision of such finance , on
         commercial or relatively commercial terms , may • be an alternative
         to the . grant of aids or subsidies . To this extent , therefore , it
          is evident that the provision of such finance must be supervised
         by the Community .                                        _
         A failure to submit the financial relationship of the' state with its
       ■ public steel undertakings to the control provided for in the decision
         would render the latter ineffective and inequitable since certain
         Member States would in effect be permitted to bypass its provisions .
 ---pagebreak---      ( iii ) aid s arid interventions granted not only "by central governments cut
             also by local or regional authorities and "by r?arastatal organisations
             or institutions .         .                     _
             The judgment of the Court of Justice in case .78 /7 6 oonfirms that the
             terms employed in Article 1 of the Decision , that is "aids and inter­
             ventions ... financed or provided by Member States or through State
             resources ", are general and apply to all measures of this kind whether
             financed by the State itself, or by local authorities or parastatal
             institutions . As in the cases of regional aids and interventions
             and of publicly-owned undertakings , this general applicability to
             all public authorities of the draft Decision is essential if the
                         ■                       *
             Decision is to be fully effective and not to discriminate against
             the steel industry in some Member States , since the degree to which
             aids and interventions are administered by central Governments varies
             betyfeen Member States .                  <                         ■ .
4 . The main provisions of the draft Decision
    Article 2                                  r
    This article concerns aids and interventions in support of investment by
    the steel industry .           . ■       ■       "                         .
    Aids and interventions would be restricted to investment programmes , or
    projects forming part of such programmes , which have been notified to the
    Commission as required by Decision no 22-66 of the High Authority , as
    amended by Decision no 2237/73 (ECSC ) of the Commission. These Decisions
    unless modified in the future , require undertakings to notify to the
    Commission :                                                                     <
      (0         investment programmes for steel furnaces or for convertors for
            steel production } and                                         . •
    ( ii) any other investment programmes concerning new plant or replacement
            or conversion work whose estimated total cost exceeds 5 million units
            of account .
    The bulk of programmes which do not meet either criterion involves
 ---pagebreak---     programmes of routine replacement and. maintenance and should not benefit
    from aids or interventions . The Commission considers that as a general
   principle , aids and interventions should not tie used to support routine
    investment of the kind that would in any case be carried out "by the un­
   dertaking concerned . -
   The .Commission would examine each aid or intervention proposal on the
   basis of the Decision 's objectives set out in Article 1 ( l ) &nd of the
   conformity of the investment pro gramma with the General Objectives for
   steel , talcing account of any reasoned opinion issued by it on the pro­
   gramme in question . The amount and intensity of aid or intervention would
   moreover have to be justified by sectoral or regional considerations .
  (The aids ceilings contained in the coordination solution for general
   regional , aids systems would of course have to be respected .)
   Article 3                -
   This article authorises aids and interventions to compensate undertakings
• for the social and other costs incurred by them in respect of the total
   or partial . closure of steel plant ;   - ....
. The Commission would monitor the effects of this general authorization
   through a reporting procedure under which Member States would inform it
   twice a year after the event of any decisions taken .
  Article 4
                   '                                ■    .   /          '
   This article concerns aids and interventions granted over a period of
  time to enable undertakings or plants which are not competitive to main­
  tain production or to reduce , it in an orderly manner . Aids and inter­
  ventions of this type are necessary if a drastic rundown of the steel
   industry , with very adverse effects on employment , is to be ayoided . The
  objective of these aids and interventions must be to ensure an orderly
  adjustment of productive capacity to demand for the industry 's products ,
  both in global terms and for individual products .
                                                                             .
  Aids -and interventions of this kind should therefore not be such as
   simply, to preserve existing structures , which would entail particularly-
   serious distortions of competition , but should only be given subject to
  the necessary restructuring being undertaken and should be limited to
  that which is necessary to enable the restructuring to be carried out .
  The restructuring must be compatible with the General Objectives for Steel .
 ---pagebreak---                                         - 7 -
    The   criteria set out in this article are based, on these considerations .
    In view of the importance of these aids and interventions for employment
    the Commission will take particular account of regional problems in its
    appraisals of plans for aids and interventions under this article .-
    Article 5       v                                          ■        .
    This article provides for the extreme case in which a Member Staxe has
    to intervene on an emergency basis to rescue an undertaking whose insol­
    vency is imminent . Aids and interventions for this purpose are , as in the
    case of those provided for in Article 4 » likely to have particularly ad­
    verse effects on competition by preventing the disappearance of the least
    competitive capacity in circumstances where capacity has to be reduced in
    aggregate .
    The article therefore provides that such aids and interventions should
    be limited to cases where they are required in order^to cope with acute
    social problems and that they should be a first step towards a more de–
  ; finitive _ solution _ to the undertaking 's problems . This solution would in
    general involve either the closure of the enterprise or its restructuring .
    In addition , in order to avoid distortions of competition subsequent to
    the rescue , the intensity of aids and interventions should be as low as
    possible . The article therefore provides that action should normally con­
    sist of a guarantee or of a loan at a commercial        rate of Interest .
    Article 6
    The first paragraph of this article establishes a procedure for examining
    those aids and interventions on which the Commission must take , position
    prior tO' their implementation . This procedure is essentially the same as
    that provided for in Article 93 of the EEC Treaty .
,   It will be noted that the Commission is required to state its position
    as rapidly as possible having regard to the urgency of each case . This
                .... especially
    provision is included/for the case when emergency measures have "to be
    taken pursuant to Article 5 . .
    The second paragraph empowers the Commission to require 'repayment of
    aids or interventions put into effect contrary to the provisions of the
                                   ■  ■       '                       ■   - •/• ■
 ---pagebreak--- Decision ; this applies to the failure to respect either the criteria or
the procedures of the draft Decision . ■ '      ,
Article 7
This - article institutes similar procedures and criteria for all aids and
interventions which Member States might wish to introduce •
             ' but which do not meet the particular provisions of the draft
Decision .                                                              <
Article 8
Thi& article provides for regular consultations between the Commission
and the Member States ori the operation of the Decision and on individual
aid and intervention plans .
Article 9
This article provides for the draft Decision to be in force for a period
of about three years . At the end of this period it may be appropriate to '
extend its validity or to amend it in the light of experience and of the
progress achieved in restructuring the industry .
 ---pagebreak---                                        DRAFT
                              COMMISSION DECISION   \
establishing Community rules for aids and interventions "by Member States
in favour of the iron and steel industry          .
■yhe Commission of the European Communities ,         '
Having regard to the Treaty establishing the European Coal and Steel
Community , and in particular Articles 2 to 5 » 4-6 , 54 »       67 ^0 "*'^le
first and second paragraphs of - Article 95 thereof ,             .
                          • *  ' '                         ί ■
whereas »*•••••••••
Having consulted "the Consultative Committee and with the unanimous* assent
of the Council ,
                                             \                 •      •
                                                        1
HAS ADOPTED THIS DECISION:
                                       1
                                                                              4
 ---pagebreak--- Article 1
1 . The orderly functioning of the common market requires that the adjustment
      of the steel industry 's capacity to prospective demand is mad^ in an or­
      derly manner and that the industry 's competitiveness is restored "by the
      extension, modernisation and rationalisation of those plants offering ■
      the best prospects of viability and the closure of other plants .
2 . Aids and interventions in favour of the steel industry , financed or pro­
  ' vided by Member States or through State resources in any form whatsoever ,
      may be considered compatible with the orderly functioning of the common
   . market if they satisfy the provisions of this Decision and if they do not
      affect competition and trade between' Member States to an extent contrary
      to the common interest . Such aids and interventions shall only be put in­
      to effect in accordance with the procedures established herein .
       ■ ' .
Article 2             '
                        ■'    .<         , '                         . ■ " '■ . «
                                                                                -
1 . Aids and interventions in support of . investment in the steel industry
      may be considered compatible withx the orderly functioning of the common
      market if they meet the following criteria , that is to say
      - the Commission has received prior notification of the investment pro­
         gramme concerned as required by High Authority Decision No 22-66 of
                                               \
         16 November 1976 on information to be furnished by undertakings about
         their investments ( l ), as amended by Commission Decision No 2237/73
       ; (ECSC ) ( 2) or by any subsequent Decision;
 ; - the amount and intensity of aid or intervention in any form whatsoever
    ... are justified either by the importance of the restructuring effort in-
       evolved or by the structural problems of the region where the invest­
         ment is to be undertaken said are" limited to that which is necessary for
         this purpose ;
      - the investment programme conforms to the General Objectives for steel ,
         having regard to any reasoned opinion that the Commission may have
         issued on the' investment' programme concerned .
  1 ) OJ No 219 , 29.11.1966 , i>. 3728/66
  2) OJ No L 299 , 17.8.1973 , p. 28
 ---pagebreak---                                          - 3 -
2 . The net grant equivalent of aids and interventions shall be calculated
      ■ in the manner set out in the Commission' S' Communication to the Council
        of 23 Julie 1971 on General Regional Aids Systems ( l ) subject to any amend­
        ments subsequently made to this method of calculation .      ,
Article 3
1 . Aids and interventions to defray the costs resulting from the partial or
        total closure of steel plants may be considered compatible with the or­
        derly functioning of the common market .
2 . The costs eligible for such aids and , interventions shall be the following
     . - Payments to workers made redundant or retired before legal retirement
          age , where such payments are not to be met by contributions pursuant ,
          to Article 56 (0 ( ° ) or ( 2) (b ) of the Treaty ;
        - payments due to third parties in respect of the termination of con­
   (      tracts , in particular for the supply of raw materials ;
        - expenditure incurred for the redevelopment of the site of closed steel
       *
          plant for alternative industrial use .
3 . Member States shall , with effect from                        submit six-monthly
 ; .'reports to the Commission on aid or intervention decided upon in the
        course of the previous six months . These reports shall contain the
        following information on each closure :                    -
        - an identification of the undertaking or plant closed ;
        – the amount and precise nature of eligible expenditure due to the
          closure ;
        – the amount , nature and other particulars of the aid or intervention .
( 1 ) OJ No C 111 , 4.II.I97I ..
                                                                         ./
 ---pagebreak--- Article 4'
1., Aids and interventions to facilitate the continued operation of certain
     undertakings or plants may be considered compatible with, the drderly
     functioning of the common market if they meet the following criteria ,
  V that is to say     /
   . - they form an integral part of a restructuring programme designed to
       assist the production unit in question to become competitive and able
       to operate without aid , the said restructuring programme being compa­
       tible with the General Objectives for steel ;
     - they are of limited duration or progressively reduoed at a sufficient
       rate for them to be eliminated within a reasonable period , having re­
       gard to the restructuring programme undertaken ;
     - ihey are limited in intensity and amount to that which is absolutely
       necessary in order to enable continued operation during the period of
       the restructuring ; and   .   '
     - they do not , in the case of support tariffs , appreciably affect compe­
       tition on the transport , market concerned .                     -
2 . In its examination of ^ach proposal the Commission shall take account of
     the problems facing the production unit or units in question and the re­
     gion or regions concerned .
Article 5
Emergency aid and intervention intended as a temporary solution for the
rescue of an undertaking pending a definitive solution to the problems of
the undertaking concerned may be considered compatible with the orderly
functioning of the common market only in cases where they are required in
order to cope with acute social problems . Other than in exceptional and
fully justified cases , such measures shall be in the form of a state guaran­
tee or of a loan at a commercial rate of interest .
Article 6                          v
1 . The Commission shall be informedf in sufficient time * to enable it to sub–
     mit its comments , of any plans to grant or alter aids and interventions
     pursuant to Articles 2 , 4 a-nd 5 « The Member State concerned shall only
     put its proposed measures into effect with the approval of and subject to
 ---pagebreak---      any conditions laid down by "the Commission . The Commission shall make its -
   • views known as soon as possible having regard to the urgency of the case .
     If , after giving notice to the parties concerned to submit their comments ,
     the Commission finds that the aid or intervention is incompatible with
     the provisions of this Decision , it shall inform the Member State concerned
     of its deoision . When a period of two months from the date of receipt of
     the notification of the plan in question has expired without the Commis­
     sion having initiated the procedure herein provided for or otherwise having
     made its views known, ^he measures may be put into effect , provided that
     the Member State has given prior notice to /the Commission of its intention
     so to do *
2 . Where a Member State has put into effect aids or interventions contrary ,
     to the provisions of this Decision , the Commission may by means of a de­
     cision addressed to that State require the repayment or other withdraiiial
                        I
     of the aid or intervention m question .
Article 7
1 . All plans proposed by Member States which involve an action within the
     meaning of Article 67 ( l ) of the Treaty shall be notified to the Commis­
     sion in sufficient time to enable it ta submit its comments thereon . The
     proposed plans shall only be put into effect with the approval of and
     subject to any conditions laid down by the Commission .
2 . The Commission shall evaluate such plans in' the light not only of
     Article 67 ( 2) and ( 3) of the Treaty, but also of the general objectives
     and , as appropriate , of the particular provisions of this Decision /
3 « When a period of two months from the date of receipt of the notification
     of the plari in question has expired without the Commission having initia­
     ted the procedure provided for in paragraph 4 or otherwise having made
     its views known , the measures in question may be put into effect , pro­
     vided that the Member State has given prior notice to the Commission of
     its intention to do BO . '     "                                             •
4- Where the Commission reaches a negative opinion on the plans in question,
     it may , after consultating the Consultative Committee and the Council ,
     address the necessary recommendation' to the Member State concerned .
 ---pagebreak--- Article 8
The Commission shall prepare regular reports on the operation of this Deci­
sion for discussion with experts from the Member States . It may also seek
the views of these experts in the oase of the more important aid and inter­
vention plans notified to it before taking a position on these plans .
Article 9
This Decision shall apply until 30 June 1981 .
Article 10
This Decision shall be binding in its entirety and direotly applicable in
all Member States .
Done at                           . 1978
                                              For the Commission