CELEX: 51986PC0531
Language: en
Date: 1986-10-17
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON AID TO SHIPBUILDING

No C 281 / 4                                  Official Journal of the European Communities                                  7.11.86
                                                                     II
                                                            (Preparatory Acts)
                                                       COMMISSION
                                         Proposal for a Council Directive on aid to shipbuilding
                                                          (COM(86) 531 final/2)
                                     (submitted by the Comission to the Council on 2 October 1986)
                                                              (86/C 281/05)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,                                 using advanced technology; whereas it contributes also
                                                                         to the maintenance of employment in a number of
Having regard to the Treaty establishing the European                    regions, including some which are already suffering a
Economic Community, and in particular Articles                           high rate of unemployment; whereas this is also true of
92 (3) (d) and 113 thereof,                                              ship conversion and ship repair;
Having regard to the proposal from the Commission,
Having regard to the opinion of the European Par-
liament,                                                                 Whereas it is now clear that the sector is suffering from
                                                                         a fundamental structural crisis, rather than a cyclical
                                                                         problem of demand, in which it would be short-sighted
Having regard to the Opinion of the Economic and                         to continue to respond to the aggravation of the crisis by
Social Committee,                                                        multiplying the volume of operating aids which tend to
                                                                         increase the segregation of the internal market and
Whereas Council Directive 81/363/EEC of 28 April                         constitute a continuing drain on the scarce budgetary
1981 on aid to shipbuilding ('), as last amended by                      resources of the Member States without inducing any
Directive 85/2/EEC (2), will expire on 31 December                       lasting improvement in the competitiveness of the
1986;                                                                    Comunity's shipbuilding industry;
Whereas, although progress has been made in the
structural adaptation of the Community's shipbuilding
industry since the adoption of Directive 81/363/EEC
(the Fifth Directive) the world crisis in shipbuilding                   Whereas, in view of the cost differences which exist for
continues to deepen together with the imbalance between                  most categories of ship in comparison to shipyards in
shipbuilding capacity and demand, causing prices to fall                 some third country, the immediate abolition of aid to the
to a level which is often below the fixed cost of                        sector may not be possible in view of the need to
European shipyards; whereas the price problem has been                   encourage restructuring in many yards; whereas, a
aggravated by the development of very cost-competitive                   tighter and more selective aid policy is nevertheless
capacity in third countries particularly in the production               necessary in order to support the present trend in
of standardized vessels in series;                                       production towards more technologically advanced ships
                                                                         and in order to ensure fair and uniform conditions for
Whereas the recovery in demand envisaged in the Fifth                    intra-Community competition; whereas such a policy
Directive has not taken place, given that the demand                     constitutes the most appropriate approach in terms of
outlook for shipbuilding is not encouraging and in view                  ensuring the maintenance of a sufficient level of activity
of the fact that any resumption in demand is likely to                   in European shipyards and thereby the survival of an
lead immediately to an expansion of production facilities                efficient and competitive European shipbuilding industry;
in certain third countries;
Whereas a competitive shipbuilding industry is of vital
interest to the Community and contributes to its
economic and social development by providing a sub-                      Whereas these considerations call for a differentiated
stantial market for a range of industries, including those               approach with regard to the various types of aid
                                                                         presently granted by Member States; whereas a level of
(') OJ No L 137, 23. 5. 1981, p. 39.                                     production aid which is geared towards supporting
(a) O J N o L 2 , 3. 1. 1985, p. 13.                                     production where the Community's cost disadvantage is
 ---pagebreak---  7.11.86                                 Official Journal of the European Communities                                 No C 281 / 5
 lowest and where there is a real possibility of restoring           HAS ADOPTED THIS DIRECTIVE:
 long-term competitiveness seems to offer the most
 appropriate approach in response to the abovementioned                                       CHAPTER I
 objectives of improving competitiveness and reducing
 intra-Community distortions in trade; whereas this level                                      GENERAL
 of aid should be attained by means of a common
 maximum ceiling to be revised periodically after consul-                                       Article 1
 tation with the Member States and on the basis of an
                                                                     For the purposes of         this   Directive the   following
 independent study which takes due account of the
                                                                    definitions shall apply:
 expected long-term development of the shipbuilding
 industry so as to ensure both the optimal activity levels           (a)   'shipbuilding':
 justifiable on economic grounds and the continuation of
 structural adjustment; whereas it is necessary, in order to              means the building in the Community of              the
 avoid discrimination, to make all forms of operating aid                following metal-hulled sea-going vessels:
 subject to the common maximum ceiling, including loss                   — merchant ships for the carriage of passengers
 compensation and such aid as is granted indirectly                           and/or cargo, of not less than 100 gross tonnes,
 through third persons; whereas, in order to permit all
                                                                         — fishing vessels of not less than 100 gross tonnes,
 Member States to compete equally at this level of
production aid and in view of the persistent structural                  — dredgers or ships for other work at sea of not
disparities of yards in the different Member States, it                       less than 100 gross tonnes, excluding drilling
 may be necessary to authorize restructuring aid to enable                    platforms,
desireable structural changes to be carried out provided
                                                                         — tugs of not less than 365 kW;
that they do not lead to increases in capacity; whereas
although it is proposed to treat ship conversion in the             (b) 'ship conversion':
same way as shipbuilding, it is not appropriate to permit
aid to the ship-repair sector in view of the continuing                  means the conversion in the Community of metal-
overcapacity in this sector, except for closure and                      hulled sea-going vessels of not less than 1 000 gross
research and development aid;                                            registered tonnes on condition that conversion
                                                                         operations entail radical alterations to the cargo
                                                                         plan, the hull or the propulsion system or the
                                                                         passenger accomodations;
                                                                    (c) 'ship repair':
                                                                         means the repair of vessels as referred to under (a);
                                                                    (d) 'aid':
                                                                         means State aid within the meaning of Articles 92
                                                                         and 93 of the Treaty, including not only aid granted
Whereas the restructuring process in Spain and Portugal
                                                                         by the State itself but also that granted by regional
is less advanced than elsewhere in the Community and
                                                                         or local authorities and any aid elements contained
the immediate application of the common maximum
                                                                         in the financing measures taken by Member States in
ceiling for production aid may cause some difficulties in
                                                                         respect of the shipbuilding or ship repair under-
these countries, a certain transitional period should be
                                                                         takings which they directly or indirectly control and
allowed to gradually enable them, after a further period
                                                                         which do not count as the provision of risk capital
of restructuring, to comply with the common maximum
                                                                         according to standard company practice in a market
aid ceiling;
                                                                         economy.
                                                                         Such aid may be considered compatible with the
                                                                         common market provided that it complies with the
                                                                         criteria for derogation contained in this Directive.
                                                                                                Article 2
                                                                    No aids granted pursuant to this Directive may be
                                                                    conditional upon discriminatory practice as to products
Whereas in order to ensure full transparency which is a             originating in other Member States.
vital element in assuring the proper functioning of a
Community aid system both in respect of operational                                             Article 3
aids and burden-sharing with regard to restructuring                                       Aid to shipowners
efforts it will be necessary to strengthen the notification
rules, including notification of aid to ship owners for the         1.     All aids in any form whatsoever, including credit
acquisition of ships or for ship conversion, together with          facilities and tax concessions of a specific character,
the a posteriori reporting obligations of Member States as          granted to shipowners or other third parties for the
regards actual aid payments and the achievement of                  acquisition of new ships or ship conversion are covered
restructuring objectives,                                           by this Directive.
 ---pagebreak--- No C 281/6                               Official Journal of the European Communities                                   7.11.86
2.    Aid schemes as referred to in paragraph 1 shall      be       must be given to the Commission, which shall adopt a
subject to the notification rules set forth in Article     10       position withing 30 days following notification. Such
and their application subject to the rules set forth        in      proposals may not be implemented before the
Article 4 and the monitoring procedures laid down           in      Commission has given its agreement. By its decision in
Article 11.                                                         such cases the Commission shall ensure that the planned
                                                                    aid does not affect trading conditions to an extent
3.    Aid granted by a Member State to its shipowners or            contrary to the common interest.
other third parties in that State for the acquisition of new
ships or ship conversion may not lead to distortions of             6.    Aid in the form of credit facilities for the building
competition between national shipyards and shipyards in             or conversion of vessels complying with the O E C D
other Member States in the placing of contracts.                    Council resolution of 3 August 1981 (Understanding on
                                                                    export credits for ships) or with any agreement replacing
4.    These provisions shall be entirely without prejudice          the resolution shall not be counted within the
to any future Community rules on aid to shipowners.                 abovementioned aid ceiling. Such aid may be considered
                                                                    compatible with the common market.
                        CHAPTER II
                                                                    7.     Aid related to shipbuilding and ship conversion
                                                                    granted as development assistance to a developing
                     OPERATING AID
                                                                    country shall not be subject to the abovementioned
                                                                    ceiling. It may be deemed compatible with the common
                          Article 4                                 market if it complies with the terms laid down for that
                                                                    purpose by the OECD Working Group 6 in its
              Contract-related production aid                       agreement concerning the interpretation of Articles 6, 7
                                                                    and 8 of the OECD Understanding referred to in
1.    Production aid in favour of shipbuilding and ship             paragraph 6 or with any later addendum or corrigendum
conversion may be considered compatible with the                    to the said agreement. Prior notification of any such
common market provided that the total amount of aid                 individual aid proposal must be given to the Commission.
granted in support of any individual construction                   The Commission shall verify the particular development
contract does not exceed in net grant equivalent a                  content of the proposed aid and that it falls within the
common maximum ceiling expressed as a percentage of                 scope of the abovementioned agreement.
the contract value.
2.    The common maximum aid ceiling shall be fixed by                                         Article 5
the Commission with reference to the prevailing                                          Other Operating Aid
difference between the cost structures of the most
competitive Community yards and the prices charged by
its main international competitors with particular regard           1.    Aids to facilitate the continued operation of
to the market segments in which the Community yards                 shipbuilding and ship conversion undertakings, including
remain relatively most competitive.                                 loss compensation, rescue aid and all other type of
                                                                    operating aid not directly supporting particular re-
                                                                    structuring measures covered in Chapter III, may be
3.    The aid ceiling shall be reviewed at reasonable               deemed compatible with the common market provided
intervals, which shall not exceed 12 months. In its review          that such aid together with production aid allocated
of the common maximum aid ceiling the Commission                    directly to individual shipbuilding and ship conversion
shall also take into account undue concentrations of                contracts in accordance with Article 4 (4) does not
shipbuilding activities in specific market segments to an           exceed the same common maximum aid ceiling as that
extent contrary to Community interests.                             referred to in Article 4 (1), (2) and (3), expressed as a
                                                                    percentage of the aid recipient's annual turnover in
4.    The maximum aid ceiling shall apply not only to all           merchant shipbuilding and ship conversion.
forms of production aid — whether under sectoral or
general or regional aid schemes — granted directly to
the yards but also to the aid covered by Article 3 in so            2.     It shall be incumbent on the aid recipient to furnish
far as it is employed for shipbuilding or ship conversion           evidence of the source of its turnover from, on the one
in Community yards.                                                 hand, merchant shipbuilding and ship conversion and, on
                                                                    the other, its other activities, if any, and, if some of the
                                                                    aid is intended to offset losses or expenditure arising
5.    The combined effect of aid under the various aid              from the restructuring measures referred to in Chapter
schemes applied must in no case exceed the aid ceiling              III, to identify and specify those measures.
fixed according to paragraph 2. The granting of aid in
individual cases shall necessitate no prior notification to
and authorisation from the Commission. However,                     3.     The granting of aid as referred to in paragraph 1
where the aid proposal is in competition with a tender              must always be notified to and authorized by the
from a yard in another Member State prior notification              Commission before being put into effect.
 ---pagebreak--- 7.11.86                                  Official Journal of the European Communities                               No C 281/7
                         CHAPTER III                                                           Article 8
                                                                                 Aid for research and development
                       Restructuring Aid
                                                                    1.    Aid to defray expenditure by shipbuilding and ship
                           Article 6                                repair undertakings for research and development
                                                                    projects may be considered compatible with the orderly
                        Investment aid
                                                                    functioning of the common market.
1.    Investment aid, whether specific or not specific,
                                                                    2.    The eligible costs shall be only those directly
may not be granted for the creation of new shipyards or
                                                                    related to research and development, excluding those
for investment in existing yards if such aid would be
                                                                    related to industrial application and commercial
likely to increase the Member State's building capacity.
                                                                    exploitation of the results.
2.    Other investment aids to the shipbuilding sector
may be deemed compatible with the orderly functioning                                       CHAPTER IV
of the common market provided that:
                                                                                     SPAIN AND PORTUGAL
— the amount and intensity of such aids are justified by
    the extent of the restructuring effort involved;
                                                                                              Article 9
— they are limited to covering expenditure directly
                                                                    1.    Chapter II shall apply in Spain and Portugal only
    related to the investment.
                                                                    after 31 December 1989.
3.    In its examination of aids as referred to in
                                                                    2.    Until then operating aid for shipbuilding and ship
paragraphs 1 and 2 the Commission shall take account of
                                                                    conversion in these two Member States may be
the extent of the contribution of the investment
                                                                    considered compatible with the common market
programme concerned to such Community objectives for
                                                                    provided that:
the sector as innovation, specialization, working
conditions, health, safety and the environment.
                                                                    — the aid recipient is engaged in the implementation of
                                                                        a systematic and specific restructuring programme,
                           Article 7                                    including capacity reductions, which can be
                                                                        considered capable of allowing it after 31 December
                       Aid for closures                                 1989 to operate competitively under the provisions
                                                                        laid down in Chapter II;
1.    Aid to defray the normal costs resulting from the
partial and total closure of shipbuilding or ship repair            — the aids are being progressively reduced.
yards may be considered compatible with the orderly
functioning of the common market provided that the
capacity reduction resulting from such aid is of a                                          CHAPTER V
genuine and irreversible nature.
                                                                                   MONITORING PROCEDURE
2.    The costs eligible for such aid shall be:
                                                                                              Article 10
— payment to workers made redundant or retired
    before legal retirement age;                                    Subject to the specific provisions of this Directive,
                                                                    Articles 92 and 93 of the Treaty shall be fully applicable
— payment to workers for vocational retraining;                     to shipbuilding, ship conversion and ship repair.
— expenditure incurred for the redevelopment of the
                                                                    In accordance with Article 93 (3) of the Treaty, Member
    yard, its buildings, installations and infrastructure for
                                                                    States' aid plans, as referred to in this Directive, shall be
    industrial use other than that specified in Article
                                                                    notified to and agreed by the Commission before they
    1 (a), (b) and (c).
                                                                    are put into effect. In addition, individual applications in
                                                                    favour of shipbuilding, ship conversion and ship repair of
3.    The amount and intensity of aid must be justified             already approved general or regional aid schemes must
by the extent of the restructuring effort involved,                 be notified to and obtain the agreement of the
account being taken of the structural problems of the               Commission before being put to effect. The same shall
region concerned and in case of conversion to other                 apply to each individual award under aid schemes in the
industrial activities full consideration being given to the         cases referred to in Article 4 (5) and (7) or where
Community legislation and codes applicable to the new               specifically provided for by the Commission in its
sector concerned.                                                   approval of the aid scheme.
 ---pagebreak--- No C 2 81 / 8                           Official Journal of the European Communities                                     7.11.86
                          Article 11                               2.     On the basis of the information communicated to it
                                                                   the Commission shall, at regular intervals, draw up an
1.     For the Commission's          monitoring of       the       overall report to serve as basis for discussion with
implementation of the aid rules contained in Chapters II           national experts. This report shall state inter alia the level
and III Member States shall supply the Commission for              of contract-related aid and other operating aid granted
its exclusive use with:                                            in each Member State during the period in question, and
— current reports on each shipbuilding and ship                    both the total volume of restructuring aid awarded and
     conversion contract at the time of ordering and               the progress made towards the attainment of the re-
     completion containing details of the financial                structuring objectives in each Member State during the
     contract support, in accordance with the form set out         same period.
     in the attached schedule 1;
— six-monthly reports — to be provided by 1 Sep-                                           CHAPTER VI
     tember and 1 March in respect of the preceding half
     calendar years — on aid granted to shipowners, in                                 FINAL PROVISIONS
     accordance with the form set out in the attached
     schedule 2;                                                                             Article 12
— yearly reports giving details of the annual results of
                                                                   1.     This Directive shall apply until 31 December 1991.
     and total financial support granted to each individual
     national shipyard which has received aid, in
                                                                   2.     Two years after the notification of this Directive,
     accordance with the form set out in the attached
                                                                   the Commission shall report to the Council on its
     schedule 3;
                                                                   operation and propose any necessary adjustments to the
— yearly reports on the attainment of the      restructuring       rules.
    objectives as regards undertakings         which have
    received aid according to Articles 6,      7 and 9, in                                   Article 13
     accordance with the form set out in       the attached
    schedule 4.                                                    This Directive is addressed to the Member States.
 ---pagebreak--- 7. 11. 86                         Official Journal of the European Communities                                                                                                                                                                                                                                                                                                                           No C 281/9
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 ---pagebreak--- N o C 281/12                               Official J o u r n a l of the E u r o p e a n C o m m u n i t i e s                              7. 1 1 . 8 6
                                                                     Schedule 4
EUROPEAN E C O N O M I C C O M M U N I T Y
                            REPORT O F M E R C H A N T SHIPYARD FACILITIES A N D EMPLOYMENT
                                            (See notes on reverse side for completing the form)
Section 1: Facilities and Date                          Company
  1. Berth/dock/pad                 2. Current use                         3. Size                                    4. Capacity
Section 2: Merchant orderbook and date
  5. Berth No                 6. Ship No                    7. Shiptype                      8. CGT                         9. Production Status
 10. Total new orders ....                                19              Number                               CGT
 11. Total completions                                    19              Number                               CGT
Section 3: Shipbuilding employment and date
 12. By activity                                                19. By occupation                              direct       indirect       total
 13. Merchant                                                   20. Manual
 14. Offshore .                                                 21. Staff
 15. Naval                                                      22. Total merchant
                                                                23. Sub-contractors
 16. Repair
 17. Other                                                      24. Total redundancies
 18. Total                                                      25. Total Recruitment
 26. Average hours per employee per annum
 27. Average overtime rate                                        % p.a.   28. Average absenteeism rate                                       % p.a.
 29. Total hours lost due to industrial disputes per annum
Contact for enquiries                                                          Date
Position                                                                       Signature