CELEX: 51990PC0248
Language: en
Date: 1990-06-20
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON AID TO SHIPBUILDING

No C 223/4                            Official Journal of the European Communities                                  7. 9. 90
                                                             II
                                                      (Preparatory Acts)
                                                COMMISSION
                                  Proposal for a Council Directive on aid to shipbuilding
                                                     COM(90) 248 final
                                      (Submitted by the Commission on 20 July 1990)
                                                       (90/C 223/04)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,                          the world's most important shipbuilding nations on a
                                                                  rapid phasing-out both of all direct and indirect state
                                                                  support measures to shipbuilding, conversion and ship
Having regard to the Treaty establishing the European             repair and of other obstacles to reestablishing normal
Economic Community, and in particular Articles 92 (3)             and fair competition conditions inside the sector;
(d) and 113 thereof,
Having regard to the proposal from the Commission,                Whereas a competitive shipbuilding industry is of vital
                                                                  interest to the Community and contributes to its
                                                                  economic and social development by providing a
Having regard       to  the   opinion   of  the   European        substantial market for a range of industries, including
Parliament,                                                       those using advanced technology; whereas it contributes
                                                                  also to the maintenance of employment in a number of
                                                                  regions, including some which are already suffering a
Having regard to the opinion of the Economic and
                                                                  high rate of unemployment; whereas this is also true of
Social Committee,                                                 ship conversion and ship repair;
Whereas Council Directive 87/167/EEC of 26 January
1987 on aid to shipbuilding (') will expire on
                                                                  Whereas, a complete abolition of aid to the sector is still
31 December 1990;
                                                                  not possible in view of the present market situation and
                                                                  in view of the need to encourage restructuring in many
Whereas the aid policy laid down in that Directive has in         yards; whereas a tight and selective aid policy should be
general met the objectives set out at its introduction;           continued in order to support the present trend in
                                                                  production towards more technologically-advanced ships
                                                                  and in order to ensure fair and uniform conditions for
Whereas, although since 1989 there have been significant
                                                                  intra-Community competition; whereas such a policy
improvements in the world market for shipbuilding, a
                                                                  constitutes the most appropriate approach in terms of
satisfatory equilibrium between supply and demand has
                                                                  ensuring the maintenance of a sufficient level of activity
still not been established and the price improvements
                                                                  in European shipyards and thereby the survival of an
which have taken place are still insufficient in the overall
                                                                  efficient and competitive European shipbuilding industry;
context to restore a normal market situation within the
sector, allowing prices to reflect full production costs
and a reasonable return on invested capital;
                                                                  Whereas the basic aid policy laid down in the prevailing
Whereas, however, according to the forecasts of ship-             Directive 87/167/EEC, differentiating between on the
building associations and reputable international market          one hand production aid based on a common maximum
analysts all over the world the positive trend towards a          aid ceiling and on the other hand restructuring aid
normalization of the market is likely to continue during          supporting the desirable structural charges to be carried
the coming years;                                                 out, remains the most appropriate way of assuring
                                                                  long-term competitiveness to the industry;
Whereas parallel to this market amelioration interna-
tional efforts are being carried out inside the framework
of the OECD to reach a multilateral agreement between             Whereas, although it is proposed to treat ship conversion
                                                                  in the same way as shipbuilding, aid to the ship-repair
(«) OJ No L 69, 12. 3. 1987, p. 55.                               sector in view of the continuing overcapacity in this
 ---pagebreak--- 7. 9. 90                              Official Journal of the European Communities                               No C 223/5
sector should not be permitted, except for investments,          (a) 'shipbuilding':
closure and research and development aid;
                                                                     means the building in the Community              of  the
Whereas there is every reason for the sake of trans-                 following metal-hulled sea-going vessels:
parency and equity to continue to include in the present
aid policy indirect aid granted to shipbuilding through
investment aid to shipowners for the building and
conversion of ships;                                                 — merchant ships for the carriage of passengers
                                                                          and/or cargo, of not less than 100 GRT,
                                                                     — fishing vessels of not less than 100 GRT,
Whereas the reduced level of aid acceptable for small
specialized vessels, for which the competition is mainly             — dredgers or ships for other work at sea of not
inter-European, should be applied based on experience                     less than 100 GRT excluding drilling platforms,
to the largest possible section of this market;
                                                                     — tugs of not less than 365 kW;
Whereas, since increased efficiency is a principal
objective pursued by this Directive, the principle of aid        (b) 'ship conversion':
degressivity is a basic one which should be fully
guaranteed;
                                                                     means the conversion in the Community of metal-
                                                                     hulled sea-going vessels, as defined in (a), of not less
Whereas it is of vital importance for the restoration of a           than 1 000 GRT, on condition that conversion oper-
healthy shipbuilding industry in the long term that the              ations entail radical alterations to the cargo plan, the
Community together with other main shipbuilding                      hull or the propulsion system or the passenger
nations effectively ensures that structural contractions             accommodation;
obtained inside its territory through the application of its
aid policy remains irreversible as long as an adequate
balance between supply and demand has not been
achieved;                                                       (c) 'ship repair':
Whereas the transitional period accorded to Spain and                means the repair of the vessels referred to in (a);
Portugal will expire on 31 December 1990;
Whereas the efficiency of and the confidence in the             (d) 'aid':
present aid policy can only be obtained by close and
timely monitoring by the Commission of the implemen-
tation by Member States of the aid rules; whereas                    means State aid within the meaning of Articles 92
therefore the compliance by Member States with their                 and 93 of the Treaty, including not only aid granted
reporting obligations, on which such a monitoring                    by the State itself but also that granted by regional
system is based, should be secured by providing for the              or local authorities and any aid elements contained
suspension of all outstanding payments of aid already                in the financing measures taken by Member States in
approved until all due reports have been received by the             respect of the shipbuilding or ship repair under-
Commission; whereas this possibility must also apply to              takings which they directly or indirectly control and
the non-transmission reports relating to aid schemes                 which do not count as the provision of risk capital
which have already been authorized,                                  according to standard company practice in a market
                                                                     economy.
HAS ADOPTED THIS DIRECTIVE:
                                                                     Such aid may be considered compatible with the
                                                                     common market provided that it complies with the
                                                                     criteria for derogation contained in this Directive;
                        CHAPTER 1
                         GENERAL
                                                                (e) 'contract value before aid':
                          Article 1
For the purpose of this Directive the following defi-                means the price laid down in the contract plus any
nitions shall apply:                                                 aid granted directly to the shipyard.
 ---pagebreak--- No C 223/6                              Official Journal of the European Communities                                   7. 9. 90
                          Article 2                               The criteria for setting the ceiling set out in the first
                                                                  subparagraph shall be without prejudice to the
No aid granted pursuant to this Directive may be con-             amendments necessary to comply with international obli-
ditional upon discriminatory practices as to products             gations entered into by the Community.
originating in other Member States.
                                                                  However, the Commission shall pay particular regard to
                                                                  ensure that the aid for the building of small specialized
                          Article 3
                                                                  vessels, a market segment normally served by small
                     Aid to shipowners                            yards, in particular small ships of a contract price of less
                                                                  than 10 million ECU, and for which the competition is
 1.   All forms of aid to shipowners or to third parties          mainly inter-European, is kept at the lowest possible
which are available as aid for the building or conversion         level, nevertheless allowing for the particular situation in
of ships shall be subject to the notification rules in            Greece.
Article 9.
                                                                  3.    The ceiling will be progressively reduced. For this
This aid shall include credit facilities, guarantees and tax
                                                                  reason the ceiling shall be reviewed every 12 months, or
concessions granted to shipowners or third parties for
                                                                  sooner if warranted by exceptional circumstances. In its
the purposes referred to in the first subparagraph.
                                                                  review of the ceiling, the Commission shall also ensure
                                                                  that there are no undue concentrations of shipbuilding
                                                                  activities in specific market segments to an extent
2.    The grant equivalent of the aid shall be subject in         contrary to Community interests.
full to the rules set out in Article 4 and the monitoring
procedures laid down in Article 10, where the aid is
actually used for the building or conversion of ships in          The aid ceiling applicable to a contract shall be that in
Community shipyards.                                              force at the date of signature of the final contract.
                                                                  However, this rule shall not apply in respect of any ship
                                                                  delivered more than three years from the date of signing
3.    Aid granted by a Member State to its shipowners      or     of the final contract. In such cases the ceiling applicable
to third parties in that State for the building            or     to that contract shall be that in force three years before
conversion of ships may not lead to distortions            of     the date of delivery of the ship.
competition between national shipyards and shipyards       in
other Member States in the placing of orders.
                                                                  4.    The ceiling shall apply not only to all forms of
                                                                  production aid — whether under sectoral, general or
4.    These provisions shall be without prejudice to any          regional aid schemes — granted directly to the yards but
future Community rules on aid to shipowners.                      also to the aid covered by Article 3 (2).
                                                                  5.    The combined effect of aid under the various aid
                        CHAPTER II                                schemes applied shall in no case exceed the ceiling fixed
                                                                  according to paragraph 2; the grant of aid in individual
                     OPERATING AID
                                                                  cases shall not necessitate prior notification to, or auth-
                                                                  orization from, the Commission.
                          Article 4
              Contract-related production aid                     However, where there is competition between yards in
                                                                  different Member States for a particular contract, the
 1.   Production aid in favour of shipbuilding and ship           Commission shall require prior notification of the
conversion may be considered compatible with the                  relevant aid proposals at the request of any Member
common market provided that the total amount of aid               State. In such cases, the Commission shall adopt a
granted in support of any individual contract does not            position within 30 days of notification; such proposals
exceed, in grant equivalent, a common maximum ceiling             may not be implemented before the Commission has
expressed as a percentage of the contract value before            given its authorization. By its decision in such cases the
aid, hereinafter referred to as the ceiling.                      Commission shall ensure that the planned aid does not
                                                                  affect trading conditions to an extent contrary to the
                                                                  common interest.
2.    The ceiling shall be fixed by the Commission with
reference to the prevailing difference between the cost
structures of the most competitive Community yards and            6.    Aid in the form of credit facilities for the building
the prices charged by their main international com-               or conversion of vessels complying with the OECD
petitors, with particular regard to the market segments in        Council resolution of 3 August 1981 (Understanding on
which the Community yards remain relatively most                  export credits for ships) or with any agreement replacing
competitive.                                                      the resolution shall not be counted within the ceiling.
 ---pagebreak---  7. 9. 90                               Official Journal of the European Communities                             No C 223/7
 Such aid may be considered compatible with the                    Such aid may not be granted for ship repair unless linked
 common market provided that it complies with the                  to a restructuring plan which results in an overall
 abovementioned resolution or any agreements which                 reduction in the ship repair capacity of the Member State
 replace it.                                                       concerned. In this context the Commission may take into
                                                                   account capacity reductions carried out in the
                                                                   immediately preceding years.
 7.    Aid related to shipbuilding and ship conversion
 granted as development assistance to a developing
 country shall not be subject to the ceiling. It may be
 deemed compatible with the common market it if                    2.    Paragraph 1 shall not apply to the opening of a
 complies with the terms laid down for that purpose by             new shipyard in a Member State which otherwise would
 OECD Working Party No 6 in its Agreement                          have no shipbuilding facilities or to investments in a
 concerning the interpretation of Articles 6 to 8 of the           Member State's only existing yard, provided that the
 Understanding referred to in paragraph 6 of this Article          effect of the yard in question on the Community market
 or with any later addendum or corrigendum to the said             is minimal.
 Agreement.
 Prior notification of any such individual aid proposal            3.    In accordance with paragraph 1, investment aid
 must be given to the Commission. The Commission shall             may be deemed compatible with the common market
verify the particular development content of the                   provided that:
 proposed aid and satisfy itself that it falls within the
 scope of the Agreement referred to in the preceding
 subparagraph.                                                    — the amount and intensity of such aid are justified by
                                                                       the extent of the restructuring involved,
                           Article 5                              — it is limited to supporting expenditure directly related
                                                                       to the investment.
                     Other operating aid
 1.    Aid to facilitate the continued operation of ship-
 building and ship conversion companies, including loss           4.     In examining the aid referred to in paragraphs 1
 compensation, rescue aid and all other type of operating         and 3, the Commission shall take account of the extent
 aid not directly supporting particular restructuring             of the contribution of the investment programme
 measures covered in Chapter III, may be deemed                   concerned to such Community objectives for the sector
compatible with the common market provided that such              as innovation, specialization, working conditions, health,
aid together with production aid allocated directly to            safety and environment.
 individual shipbuilding and ship conversion contracts in
 accordance with Article 4 (4) does not exceed the ceiling
expressed as a percentage of the aid recipient's annual
turnover in shipbuilding and ship conversion.                                                Article 7
                                                                                         Aid for closures
2.     It shall be incumbent on the Member States to
                                                                   1.    Aid to defray the normal costs resulting from the
furnish evidence of the extent to which the turnover and
                                                                  partial or total closure of shipbuilding or ship repair
losses of the recipient of the aid result, on the one hand,
                                                                  yards may be considered compatible with the common
from shipbuilding and ship conversion and, on the other,
                                                                  market provided that the capacity reduction resulting
from its other activities, if any, and, if some of the aid is
                                                                  from such aid is of a genuine and irreversible nature.
intended to offset losses or expenditure arising from the
restructuring measures referred to in Chapter III, to
identify and specify those measures.
                                                                  In order to establish the irreversible nature of aided
                                                                  closures the Member State concerned shall ensure that
                                                                  the closed shipbuilding and ship repair facilities remain
                         CHAPTER III
                                                                  closed for a period of not less than 5 years.
                  RESTRUCTURING AID
                           Article 6                              Within this five-year period the closed site may not be
                                                                  used for activities in anticipation of a return to ship-
                        Investment aid                            building after the expiry of the five-year period.
1.     Investment aid, whether specific or non-specific,
may not be granted for the creation of new shipyards or
for investment in existing yards if such aid would be             If after a period of five years a Member State wishes to
likely to increase the Member States' shipbuilding                reopen a closed shipbuilding or ship repair facility, it
capacity.                                                         must obtain the Commission's prior approval.
 ---pagebreak--- No C 223/8                               Official Journal of the European Communities                                   7. 9. 90
The Commission's decision will be taken with reference                                     CHAPTER IV
both to the currently existing worldwide balance between                           MONITORING PROCEDURE
supply and demand and to whether aid is being granted
for reopening the facilities.
                                                                                             Article 9
                                                                    1.    In addition to the provisions of Articles 92 and 93
                                                                   of the Treaty, aid to shipbuilding, ship conversion and
2.     The costs eligible for such aid are, in particular:         ship repair undertakings covered by this Directive shall
                                                                   be subject to the special notification rules provided for in
                                                                   paragraph 2.
— payments to workers made redundant or retired
     before legal retirement age,                                  2.    The following shall be notified to the Commission
— counselling services to workers made or to be made               in advance by the Member States and authorized by the
     redundant or retired before legal retirement age              Commission before they are put into effect:
     including payments made by yards to facilitate the
     creation of small undertakings,                               (a) any aid scheme — new or existing — or any
                                                                        amendment of an existing scheme covered by this
— payments to workers for vocational retraining,
                                                                        Directive;
— expenditure incurred for the redevelopment of the
     yard, its buildings, installations and infrastructure for
                                                                   (b) any decision to apply any general or regional aid
     use other than that specified in Article 1 (a), (b) and
                                                                        scheme to the undertakings covered by this
     (c),                                                               Directive;
— in the event of total closure of a yard, the residual
     book value of its installations (ignoring that portion
                                                                   (c) any individual application of aid schemes in the cases
     of any revaluation since 1 January 1982 which
                                                                        referred to in the second subparagraph of Article 4
     exceeds the national inflation rate).
                                                                        (5) or when specifically provided for by the
                                                                        Commission in its approval of the aid scheme
                                                                        concerned.
3.     The amount and intensity of aid must be justified
by the extent of the restructuring involved, account being                                  Article 10
taken of the structural problems of the region concerned
and, in the case of conversion to other industrial ac-              1.    For the Commission's monitoring of the implemen-
tivities, of the Community legislation and rules applicable        tation of  the aid rules contained in Chapters II and III,
to the new sector concerned.                                       Member      States shall supply the Commission for its
                                                                   exclusive  use with:
                                                                   — current reports on each shipbuilding and ship
                            Article 8                                  conversion contract at the time of ordering and
                                                                       completion containing details of the financial
              Aid for research and development
                                                                       contract support, in accordance with the form set out
1.     Aid to defray expenditure by shipbuilding and ship              in the annexed Schedule 1,
repair undertakings for research and development
projects may be considered compatible with the common              — six-monthly reports — to be provided by 1 October
market.                                                                and 1 April in respect of the preceding half calendar
                                                                       years — on aid granted to shipowners, in accordance
                                                                       with the form set out in the annexed Schedule 2,
2.     For the purposes of this Directive, the eligible costs
shall be only those relating to fundamental research,              — yearly reports giving details of the annual results of,
basic industrial research and applied research and devel-              and total financial support granted to, each indi-
opment, all as defined by the Commission in Annex I to                 vidual national shipyard which has received aid, in
the Community framework for State aids for research                    accordance with the form set out in the annexed
and development ('), excluding those related to industrial             Schedule 3,
application and commercial exploitation of the results.
                                                                   — yearly reports on the attainment of the restructuring
                                                                       objectives as regards the undertakings which have
                                                                       received aid according to Articles 6 and 7, in
                                                                       accordance with the form set out in the annexed
(') OJ No C 83, 11. 4. 1986, p. 2.                                     Schedule 4.
 ---pagebreak--- 7. 9. 90                             Official Journal of the European Communities                         No C 223/9
2.    On the basis of the information communicated to it       the Commission may, after having given due notice,
in accordance with Article 9 and paragraph 1 of this           require that that Member State suspends all outstanding
Article, the Commission shall draw up an annual overall        payments of already approved aid until such time as all
report to serve as a basis for discussion with national        due reports have been received by the Commission.
experts. This report shall state inter alia the level of
contract-related aid and other operating aid granted in
each Member State during the period in question, and                                   Article 11
both the total volume of restructuring aid awarded and
the progress made towards the attainment of the restruc-       This Directive shall apply from 1 January 1991 to 31
turing objectives in each Member State during the same         December 1992.
period.
                                                                                       Article 12
3.    If a Member State does not fully conform with its
reporting obligations as laid down in the first paragraph,     This Directive is addressed to the Member States.