(1)

A meeting was held in Brussels on 21 May 1996 between France and the Commission concerning the situation of certain economic sectors in Corsica, including the fisheries sector. The Commission learned during this meeting that public aid had been granted to the sector without it having been notified to permit its examination in accordance with Article 93 (now Article 88) of the Treaty.

(2)

By letter dated 14 June 1996, the Commission asked France to provide details of this aid.

(3)

By letter dated 7 July 1996, France informed the Commission that it had asked the authorities in Corsica to forward the information requested. Since the Commission did not receive this information, a first reminder was sent on 12 September 1996.

(4)

Subsequently, by letter dated 17 December 1996, France sent certain information concerning the aid in question. The aid was entered in the register of unnotified aid under number NN 11/97 on 6 January 1997.

(5)

Having found that it did not have all the information necessary to examine the aid scheme, the Commission requested additional information by letter dated 24 April 1997. Documentation was sent by letters dated 3 December 1997 and 11 August 1998.

(6)

The Commission then made a new request for further information by letter dated 11 February 1999. A meeting was then held at the Commission on 22 February 2000 with representatives of the authorities of Corsica. Following this meeting, the Commission again sent France a list of the information it needed to analyse the aid measures. After a further two reminders, a large part of the information required arrived by letter dated 11 April 2001.

(7)

In addition, the Commission was informed of Report No 1077 of the French National Assembly drawn up in the name of the Committee of Inquiry into the use of public funds and the management of public services in Corsica (1) (hereinafter referred to as the report of the National Assembly). The report, published in 1998, describes the aid granted to the fisheries and aquaculture sector in 1997 (see point I.C.1.b of the report).

(8)

The Commission informed France by letter dated 30 October 2001 of its decision to initiate the formal investigation procedure provided for in Article 88(2) of the Treaty against the following aid measures implemented in Corsica:

(9)

By the same decision, the Commission informed France that it had decided to regard as being compatible with the common market aid for converting and equipping vessels where the work carried out did not result in any increase in the power of the vessel and aid for shore facilities for fishermen.

(10)

By this decision, the Commission also requested France to provide it with the information necessary for examining the aid for aquaculture.

(11)

By letter dated 21 December 2001, France submitted comments concerning the aid regarding which the formal investigation procedure had been initiated and provided information on the aid for aquaculture.

(12)

The decision to initiate the procedure was published in the Official Journal of the European Communities (2). The Commission called on the interested parties to submit their comments on the aid in question. The Commission received no comments following publication of the decision.

(13)

The aid measures covered by this Decision are those for which the formal investigation procedure was initiated and those for which the Commission enjoined France to provide information. This decision therefore concerns the following four types of aid:

(14)

The aid for the fishing fleet was instituted by the Assembly of Corsica, which, on 29 March 1985, adopted Decision 85/10a ‘on aid for the modernisation of the fleet’. This Decision was amended on several occasions: Decision 90/99 of 30 November 1990, Decision 91/1032 of 19 December 1991, Decision 93/25 of 23 February 1993, Decision 95/16 of 9 March 1995, Decision 95/79 of 11 September 1995 and Decision 97/36 of 11 April 1997. France stressed that the most recent of those Decisions (97/36) was not amended until the end of the programming period covered by the single programming document (SPD) concerning Structural Fund measures in force at the time, i.e. until 31 December 1999. As regards the aid for aquaculture, France stated that the regional authorities in Corsica applied Community legislation directly, in accordance with the Aid Guide published by the Corsican Economic Development Agency (ADEC). The part of the Guide relating to fisheries and aquaculture, describing the aid that may be granted, was sent to the Commission.

(15)

The aid dates back to 1985. Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (3) does not lay down any limitation period for the examination of unlawful aid within the meaning of Article 1(f) thereof, i.e. aid implemented before the Commission is able to reach a conclusion about its compatibility with the common market. However, Article 15 of that Regulation stipulates that the powers of the Commission to recover aid is subject to a limitation period of 10 years, that the limitation period begins on the day on which the aid is awarded to the beneficiary and that that limitation period is interrupted by any action taken by the Commission. Consequently, the Commission considers that it is pointless to examine the aid covered by the limitation, i.e. aid granted more than ten years before any measure taken by the Commission concerning it.

(16)

The Commission considers that the limitation period was interrupted by its request for information sent to France on 14 June 1996. Accordingly, the limitation applies to aid granted to beneficiaries before 14 June 1986. The limitation therefore applies, in particular, to aid granted before 14 June 1986 by the Region of Corsica but paid to beneficiaries only in subsequent years, after the eligible investments had actually been made. Consequently, the Commission takes into account, in the analysis below, aid granted by decisions taken between 14 June 1986 and 31 December 1999.

(17)

Decision 85/10a of 1985 laid down that aid could be granted for the purchase of vessels of less than 18 metres intended for fishing from Corsica if the vessels concerned, except where special derogation was granted, were built in France. The subsidy was 20 % of the purchase price, with an additional subsidy of 10 % where it was the first purchase of a new vessel and a further 10 % where the vessel was built in Corsica. In addition, with the aim of encouraging Corsican shipyards using traditional timber-construction methods, the subsidy could be increased by 20 % of the purchase price with a special contribution from the specific funding available for the promotion of the timber sector. The contribution from the shipowner had to be at least 10 %.

(18)

Decision 90/99 amended the aid rates, increasing the basic rate from 20 % to 30 % and reducing the additional aid of 20 % for timber construction to 5 %.

(19)

Decision 95/16 amended the aid rates as follows: the basic rate remained at 30 % and it was laid down that the eligible investment could include the purchase of the hull, equipment and 80 lengths of net (6 400 metres). The aid for a first purchase remained at 10 % and the specific aid where the vessel was built in Corsica was reduced from 10 % to 5 %, still with an additional 5 % in the case of timber construction. The requirement for the vessel to be built in France was abolished.

(20)

Decision 95/79 restricted aid for the purchase of nets to the first purchase of a vessel by the applicant. The subsidy of 5 % where the vessel was timber-built in a Corsican shipyard was also abolished.

(21)

Decision 97/36 did not make any substantial change to the provisions described above. It continued to stipulate that the contribution from the shipowner had to be at least 10 %.

(22)

Decision 85/10a of 1985 laid down that the conversion of vessels of less than 18 metres at a cost of at least 25 000 French francs (FRF) was eligible for aid where the aim was to make a significant improvement to fishing potential (winches, net winches, echo sounders, gantries, navigation equipment, net rollers, etc.) and allow the refrigerated storage of fish or improve the energy efficiency of the means of propulsion (diesel engine of a capacity suited to the size of the vessel, adjustable pitch propeller, nozzles, etc.).

(23)

A subsidy of 15 % could be granted for the cost of this equipment. Decision 93/25 increased this to 30 % of the cost of the investment.

(24)

Decision 95/79 did not change the rate of aid but specified that, if the owner of the vessel applied for Community aid, the grant from the Corsican authorities would be calculated in accordance with the aid rates provided for in the relevant Community rules. The minimum cost above which investment is eligible was lowered to FRF 20 000. Decision 95/79 also laid down that, if the application for aid for converting or equipping a vessel was submitted for the first purchase of a new or second-hand vessel by a fisherman, the first 80 lengths of net could receive a 30 % subsidy.

(25)

Decision 85/10a of 1985 laid down that a grant of 10 % could be paid for the purchase of a second-hand vessel at a price of at least FRF 50 000. An additional subsidy of 5 % could be paid for a first purchase. The purchaser had to contribute at least 15 % of the cost of the vessel.

(26)

Decision 91/1032 increased the basic rate from 10 % to 15 %. Decision 95/16 increased the rate to 20 % for vessels less than 20 years old.

(27)

Aid for aquaculture was laid down in the 1994 planning agreement between the national and regional governments and in the single programming document for Community aid under Objective 1. The rules on the Financial Instrument for Fisheries Guidance (FIFG) were applied for the implementation of projects part-financed by the Community.

(28)

Aid for collective or private investments. Collective investments cover the promotion of fishery products, market research and technical support for aquaculture undertakings. Investments in undertakings are intended to make aquaculture undertakings more competitive with a view to increasing the quality of products on the market. These investments are connected with compliance with health standards and improving the conditions for product marketing: packaging equipment, storage facilities, service vessels, computer equipment, ice-making machines, refrigerated vans, etc.

(29)

The maximum rate of aid was 25 % of the investment in order to take account of possible financing by the FIFG.

(30)

The Commission based its decision to open the formal investigation procedure on the various versions of the Guidelines for the examination of State aid to fisheries and aquaculture (hereinafter referred to as the Guidelines). According to point 3.4 of the 2001 Guidelines (4), currently in force, unlawful aid must be examined in the light of the Guidelines applicable when it is granted. In 1986 and 1987, the Guidelines applicable were those published in 1985 (5). Subsequently, the Guidelines applicable were the following: those published in 1988 (6) for aid granted from 1 January 1989, those published in 1992 (7) for aid granted from 1 July 1992, those published in 1994 (8) for aid granted from 1 January 1995 and those published in 1997 (9) for aid granted from 1 January 1997.

(31)

The Commission also referred to the successive Council Regulations concerning Community structural measures in the fisheries and aquaculture sector, to which these Guidelines constantly refer, in particular as regards eligible investments and permissible aid rates. These regulations are as follows: Council Regulation (EEC) No 2908/83 of 4 October 1983 on a common measure for restructuring, modernising and developing the fishing industry and for developing aquaculture (10), Council Regulation (EEC) No 4028/86 of 18 December 1986 on Community measures to improve and adapt structures in the fisheries and aquaculture sector (11), Council Regulation (EC) No 3699/93 of 21 December 1993 laying down the criteria and arrangements regarding Community structural assistance in the fisheries and aquaculture sector and the processing and marketing of its products (12) and Council Regulation (EC) No 2468/98 of 3 November 1998 laying down the criteria and arrangements regarding Community structural assistance in the fisheries and aquaculture sector and the processing and marketing of its products (13).

(32)

The Commission expressed doubts on the compatibility of these aid measures for two reasons.

(33)

Firstly, based on the Guidelines, the Commission pointed out that aid for the purchase of new vessels was compatible with the common market if granted for investments contributing to achievement of the objectives of the multiannual guidance programme for the fishing fleet (MAGP), which sets out a number of requirements and a list of the means necessary for their fulfilment, in particular adjustment of the capacity of the fishing fleet of each Member State in line with the fishery resources to which it has access. However, France did not achieve the objective set out in MAGP III (14), in force from 1992 to 1996. It accordingly had to stop granting aid for the construction and modernisation of fishing vessels as from 1 January 1997. Subsequently, by letter dated 28 October 1998, the Commission told France that it could restart granting investment aid on certain conditions. In its letter dated 30 October 2001 informing France of its decision to initiate the formal investigation procedure, the Commission assumed that the aid granted from 1 January 1997 to 28 October 1998 infringed the Guidelines applicable over that period.

(34)

Secondly, the Commission noted that, given the possible aid rates and the possibility of cumulation with aid under other schemes, the aid had exceeded the maximum permissible rate.

(35)

The Commission expressed doubts regarding the compatibility of the aid granted from 1 January 1997 to 28 October 1998 for converting and equipping vessels where the work carried out resulted in an increase in the vessel’s engine capacity since, in the same way as for aid for purchasing vessels, aid of this kind did not contribute to achieving the objectives of the MAGP.

(36)

The Commission expressed doubts regarding the compatibility of some of the aid granted for purchasing second-hand vessels from 1 January 1989 because the Decision of the Assembly of Corsica provided for the possibility of granting such aid for purchasing vessels without any maximum age limit although the 1988 Guidelines, applicable at that time, prohibited aid for vessels more than 15 years old, reduced to 10 years by the 1992 Guidelines, applicable from 1 July 1992, and the subsequent Guidelines.

(37)

In addition, the Commission informed France that the 1998 Guidelines and subsequent Guidelines stipulated that aid for purchasing second-hand vessels could be granted only in the event of first purchases by young fishermen or possibly the acquisition of part-ownership or the replacement of a vessel following total loss. It also pointed out that, given the possible aid rates and the possibility of cumulation with aid under other schemes, the aid might have exceeded the maximum permissible rate.

(38)

In its reply, France gave a detailed explanation of the reasons why the aid granted had not, in fact, exceeded the permissible rates, including where there had been cumulation with aid from other sources, in particular Community aid. In support of its arguments, it enclosed a copy of the Aid Guide drafted by ADEC.

(39)

France also explained that the age requirements for vessels for the purposes of aid for purchasing second-hand vessels, as laid down in the Guidelines, had been included in the Guide and had been respected.

(40)

France also forwarded to the Commission, along with its comments following the opening of the formal investigation procedure, information on aid granted for aquaculture required by the ‘injunction to provide information’ contained in the Commission letter dated 30 October 2001.

(41)

The aid measures in question confer a financial advantage on a category of undertakings carrying out a specific activity, i.e. fishing or aquaculture. The resources necessary for implementing these measures are public resources. Since the products of the beneficiary undertakings are sold on the Community market, the measures strengthen the position of those undertakings, both on the French market compared with undertakings from other Member States wanting to introduce their own products onto that market and on the market of the other Member States compared with undertakings selling their products on those markets. Consequently, these measures distort or threaten to distort competition. They constitute State aid within the meaning of Article 87(1) of the Treaty.

(42)

These measures can be considered compatible with the common market only if eligible for one of the derogations provided for in the Treaty. Since this aid benefits undertakings in the fisheries and aquaculture sector, to be able to benefit from the derogation provided for, they must correspond to one of the exceptions provided for by the Guidelines (the various versions of these which have been applicable since 1986 are listed in recital 30).

(43)

In its comments, France explained that the maximum aid rates had been respected. The Commission notes that the Aid Guide drafted by ADEC states that the maximum rate must not exceed the rate provided for in the Regulation on structural measures financed from the FIFG. This aid is, in this respect, therefore compatible with the common market, subject to what is stated below.

(44)

There remains, however, the problem of aid granted over the period from 1 January 1997 to 28 October 1998 in view of the obligation on France to stop paying aid for constructing or modernising vessels under the rules of the common fisheries policy, which was lifted by letter dated 28 October 1998 (15). In its letter dated 30 October 2001 informing France of the opening of the formal investigation procedure, the Commission assumed that aid had been granted during this period. This hypothesis was based on two factors: firstly, the fact that, according to France’s letter dated 11 April 2001, Assembly of Corsica Decision 97/36 had not been amended, which meant that the Decision had been applied continuously from the date of its adoption until the end of 1999 and, secondly, the fact that the report of the National Assembly expressly stated that aid had actually been granted for constructing vessels in 1997 (point I.C.1.b of the report).

(45)

It would be useful to quote an extract from the report of the National Assembly:

‘…. — aid for fisheries and aquaculture:

(46)

France made no comment regarding the assumption made in the Commission’s letter dated 30 October 2001, neither stating, for example, that application of Decision 97/36 had been suspended nor that no aid had been granted during the period concerned. It is therefore safe to assume that aid was actually granted during that period.

(47)

The successive versions of the Guidelines consistently stipulated that aid for purchasing new vessels was compatible with the common market if it was granted for investments that contributed to achieving the objectives of the MAGP (16). More specifically, for aid granted from 1 January 1997 to 28 October 1998, to which the 1997 Guidelines applied, point 2.2.3.1 of those Guidelines laid down that ‘Aid for the construction of new fishing vessels may be deemed to be compatible with the common market subject to the requirements of Articles 7 and 10 and Annex III (paragraph 1.3) of Regulation (EC) No 3699/93 […].’

(48)

Article 10(1) of Regulation (EC) No 3699/93 lays down that ‘Member States may take such measures to promote the construction of fishing vessels as comply with the global annual intermediate objectives and the final objectives by segment under their multiannual guidance programme within the stated time limits. Member States shall, when forwarding any pertinent aid proposal, inform the Commission of provisions taken to ensure that this condition is complied with.’ Under that provision, the Commission reminded France by letter dated 4 July 1997, that ‘it must therefore stop granting aid for construction or modernisation as from 1 January 1997’.

(49)

By letter dated 8 August 1997, France replied, indicating in particular that: ‘At the beginning of 1996, the intermediate objectives of MAGP II not having been achieved by 31 December 1995, the French authorities had already taken the necessary steps to freeze investment projects resulting in increased fleet capacity. In addition, in July 1996, in order to accelerate the reduction in the fishing fleet, a plan for the withdrawal of fishing vessels from the fleet was implemented…, the plan provided for the withdrawal from the fleet of between 10 000 kW and 15 000 kW. Therefore, at the beginning of 1997, France thought it would be able to fulfil its objectives under MAGP III. Consequently, authorisation was given for limited volumes of investment, accompanied by national aid, essentially in cases where there was an urgent need to replace vessels or fit new engines… However, the full effects of the withdrawal measures were seen only at the end of the first half of 1997…’.

(50)

In fact, it was only in the second half of 1998 that France was able to achieve the objectives of the MAGP. By letter dated 28 October 1998, the Commission informed France that ‘following our meeting of 21 October 1998, our previous meetings and the clarifications contained in your letters dated 5 and 22 October 1998, I have the pleasure to announce that the Directorate-General for Fisheries can accept a resumption of investments such as you envisage, i.e, in a very measured manner, giving priority to young fishermen, without increasing capacity and in compliance with the objectives of the MAGP’.

(51)

It can be seen from this exchange of correspondence that France was perfectly aware that it was not achieving the intermediate objectives of MAGP III and that, despite this, aid for purchasing new vessels was authorised. The requirements laid down in Article 10 of Regulation (EC) No 3699/93 was not therefore fulfilled. Consequently, under point 2.2.3.1 of the 1997 Guidelines, the aid granted during that period for purchasing new vessels was incompatible with the common market.

(52)

The opening of the formal investigation procedure concerned aids for converting and equipping vessels granted during the period from 1 January 1997 to 28 October 1998 where the work carried out increased the power of the vessel, because, as in the case of the aid for purchasing new vessels, such aid did not contribute to achieving the objectives of the MAGP.

(53)

The report of the National Assembly (point I.C.1.b) refers to aid for modernising vessels. As well as stating that ten fishing vessels had been built, the report also said that ‘… 38 vessels have undergone various types of alterations and re-equipping…’. It is therefore clear that aid for modernising vessels was granted during the period.

(54)

The successive Decisions adopted by the authorities of the Region of Corsica expressly stipulated that aid could be granted for fitting ‘an engine of a capacity suited to the size of the vessel’. This appears to indicate that aid for modernising vessels could be granted for purchasing a more powerful engine. In addition, as in the case of aid for purchasing vessels, France made no comment regarding the assumption made in the Commission’s letter dated 30 October 2001 that aid for purchasing an engine more powerful than an existing engine was granted during the period. It is therefore safe to assume that aid for modernising vessels was actually granted in certain cases where the work carried out resulted in increased engine power.

(55)

As in the case of aid for construction, point 2.2.3.2 of the 1997 Guidelines stipulates that ‘Aid for the modernisation of commissioned vessels may be deemed compatible with the common market subject to the requirements of Articles 7 and 10 of, and Annex III (paragraph 1.4) to, Regulation (EC) No 3699/93 [… ]’. Article 10(2), of Regulation (EC) No 3699/93 lays down that ‘Member States may take measures to promote the modernisation of fishing vessels. Such measures shall be subject to the conditions referred to in paragraph 1 (construction of vessels) where investments are likely to result in an increase in fishing effort’.

(56)

The requirement laid down in Article 10 of Regulation (EC) No 3699/93 was not therefore fulfilled. Consequently, under point 2.2.3.2 of the 1997 Guidelines, aid granted during that period for modernising vessels, where modernisation resulted in increased power, was incompatible with the common market.

(57)

As already indicated in recital 39, France provided information showing that the age requirement had actually been respected. The doubts expressed on this subject by the Commission in opening the formal investigation procedure have therefore been dispelled. The same holds for the maximum possible rate of aid.

(58)

In addition, with regard to the requirement to restrict such aid to first purchases by young fishermen and the replacement of vessels following total loss, France also indicated in its reply dated 21 December 2001 that this aid was granted in accordance with the Community provisions in force. Consequently, this aid can be deemed to be compatible with the common market.

(59)

In accordance with the successive versions of the Guidelines, aid for aquaculture is compatible with the common market where the requirements laid down in the Regulation on Community structural measures in the fisheries sector are fulfilled.

(60)

As France indicated in its letter dated 21 December 2001, the Aid Guide took account of those requirements, stipulating in particular that the maximum authorised aid rate must take account of aid from other sources.

(61)

Accordingly, the aid granted for aquaculture can be deemed to be compatible with the common market.

(62)

The following State aid implemented in the Region of Corsica in France by Decision of the Assembly of Corsica 85/10a of 29 March 1985, as amended by Decision 90/99 of 30 November 1990, Decision 91/1032 of 19 December 1991, Decision 93/25 of 23 February 1993, Decision 95/16 of 9 March 1995, Decision 95/79 of 11 September 1995 and Decision 97/36 of 11 April 1997 is incompatible with the common market:

(63)

In accordance with Article 14 of Regulation (EC) No 659/1999, France must recover the aid concerned.

(64)

The following aid is compatible with the common market:

(1)

By letter dated 21 June 2000, France informed the Commission of the compensation measures it had adopted for fishermen and fish farmers affected by the oil pollution caused by the wreck of the Erika in the Bay of Biscay on 12 December 1999 and the extraordinarily violent storms of 27 and 28 December 1999. At the Commission’s request, further information was provided by letters dated 28 November 2000, 6 April 2001 and 13 August 2001. Because they were implemented before the Commission could decide whether they were compatible with common market rules, these measures were registered as a non-notified aid scheme, under the number NN 80/2000.

(2)

By letter dated 11 December 2001, the Commission notified France of its decision to consider certain of the planned measures compatible with the common market and to initiate the formal investigation procedure provided for in Article 88(2) of the Treaty in respect of the others. France made known its response by letter dated 5 March 2002.

(3)

The Commission Decision to initiate the formal investigation procedure was published in the Official Journal of the European Communities (1). The Commission invited interested parties to submit their comments. The Commission received no comments.

(4)

The formal investigation procedure was initiated in respect of the following measures:

(5)

For the record, the Commission would point out that the measures that had been deemed compatible with the common market, about which France was informed in a letter of 11 December 2001, concerned the undertakings located in the Atlantic coast departments from Finistère to Gironde, and were the following:

(6)

This measure was aimed at two categories of fish farmers: those whose stocks and equipment were damaged by the storm in December 1999 and who received aid for rebuilding stocks, and those who suffered damage by pollution from oil from the Erika and received an advance on compensation to be paid by the IOPCF.

(7)

It was a targeted measure determined by the situation of the undertakings concerned. It was applied for one, two or three months, depending on the scale of damage suffered by the undertakings concerned. During that period, the undertakings concerned were totally exempted from social security charges.

(8)

Applications were examined by the compensation units set up in each of the departments concerned under the authority of the prefect, with the participation of the administrations concerned, professional organisations, banks and insurance companies. The list of beneficiaries was drawn up by the Directorate for Sea Fishing and Sea-based Fish Farming at the proposal of the departments’ prefects. It concerned 1 476 undertakings. The total value of the exemptions was EUR 0.87 million.

(9)

This measure was applied to the same undertakings as those referred to in recitals 6 to 8. It consisted in paying, under individual debt adjustment plans, part of the interest falling due in 2000, 2001 and 2002 for medium and long-term loans and operational consolidation loans. The purpose of these measures stated by France in its letter of 13 August 2001 was to reduce the financial pressure on undertakings affected by the storm and/or the oil pollution.

(10)

Application files had to be submitted by 1 April 2000. They were evaluated by the departments’ maritime affairs directorates and presented to the compensation unit. The amount of the aid was determined according to criteria defined locally. The compensation units had to consider the scale of activity actually lost in the 1999/2000 winter, the debt situation and vulnerability of the undertaking, the operating revenue for the last two financial years, any external revenue to the undertaking over the same period, and the viability of the undertaking. The undertakings’ creditors (banks and suppliers) were asked to make a particular effort. The amount of the aid could not exceed FRF 48 000 (EUR 7 317), except where the compensation unit judged the situation particularly critical and raised the ceiling to FRF 62 000 (EUR 9 451).

(11)

The individual debt adjustment plans drawn up under this procedure were the basis for an agreement approved by all the parties and identifying the contribution of each party to its implementation. The decision to award the aid was taken by the department prefect. The total amount of the aid was approximately FRF 8 million (EUR 1,2 million) for 1 083 undertakings.

(12)

In addition to the above measures — both those for which the formal investigation procedure was initiated and those which the Commission has already approved — the Minister for agriculture, fisheries and aquaculture decided to apply additional measures to assist these undertakings, in order, as France has stated, to deal with the difficulties facing the fisheries and aquaculture sector as a result of the cumulative effects of the storm and oil pollution, and take account of the damage suffered by undertakings in the sector because of the deterioration of the market.

(13)

As France stated in its letter of 21 June 2000, i.e. before the formal investigation procedure was initiated, an exemption from State fees for fish farming concessions in public sea waters and water intake authorisations to supply parcels situated on private property was granted for the year 2000.

(14)

In its letter of 5 March 2002, in which it gave its comments on the initiation of the procedure, France stated that this measure was part of the additional relief measures for all fish farmers in mainland France and the overseas departments.

(15)

In response to a request from the Commission, France confirmed in its letter of 24 September 2002 that this exemption had been extended to all marine fish farmers by a decision of 12 September 2000.

(16)

The total value of the exemption was EUR 3,81 million.

(17)

The Minister for Agriculture and Fisheries decided (decisions issued in circulars of 15 April 2000 and 13 July 2000) to grant all undertakings in the sector a 50 % reduction in social security contributions for the period 15 April 2000 to 15 July 2000 for fish farmers and 15 April 2000 to 15 October 2000 for fishermen.

(18)

This reduction applied to employers’ and employees’ contributions for all fishermen and fish farmers in mainland France and the overseas departments.

(19)

The procedures for applying the reduction varied according to whether the contributions were paid to the ENIM (Etablissement National des Invalides de la Marine) or the MSA (Mutualité Sociale Agricole).

(20)

The rate of reduction of contributions to the ENIM was 50 % for both employees’ and employers’ contributions. However, in the case of certain vessels for which the share payment system is not applied, the part of the employers’ contributions taken over was increased to 75 %. France explained this different rate by the fact that in the case of share payment there is a close financial solidarity between the owners and the crew in the face of difficulties encountered in the course of fishing activities, particularly as regards reduced turnover, whereas in the case of industrial ship owners where this type of payment does not exist, the owners bear the greater part of economic difficulties.

(21)

The procedures for the reduction of the contributions owed to the MSA for fish farmers covered by this scheme were defined in a circular issued by the Ministry of agriculture and fisheries on 25 April 2000. 50 % of the contributions payable by fish farmers and heads of undertakings were paid for them for three twelfths of the contributions required for 1999 and for the contributions due from them for their employees for the last three months of 1999.

(22)

The total value of these exemptions was FRF 119 million (EUR 18,2 million).

(23)

The measures described in sections A and B were adopted in response to the pollution caused by the wreck of the petrol tanker Erika on 12 December 1999 and the violent storm of 26 and 27 December 1999.

(24)

They were analysed in the light of Article 87(2)(b) of the Treaty, which states that aid is compatible with the common market if it is granted ‘to make good the damage caused by natural disasters or exceptional occurrences.’ The pollution following the shipwreck of the Erika can be described as an exceptional occurrence within the meaning of this Article. Equally, the extreme and unaccustomed violence of the storm of 26 and 27 December 1999 qualifies it to be described as a natural disaster.

(25)

The Commission’s role in this context is to establish whether there was over-compensation for the damage caused by these events.

(26)

The measures for which the formal investigation procedure was initiated are the exemption from social security contributions for the first quarter of 2000 (or an average quarter), the reduction in financial charges and the exemption from State fees.

(27)

The social security contributions exemption measure was applied after examination by the compensation unit of the situation of each undertaking that might qualify for it. The duration of the exemption was graded, from one to three months, depending on the damage suffered. This exemption measure was additional to other measures (application of the agricultural disaster scheme, aid for rebuilding equipment and stock and advances on compensation to be paid by the IOPCF). On the basis of the information provided, the Commission did not feel able to confirm that this exemption from social security contributions had not, overall, involved compensation over and above the damage suffered.

(28)

The reduction of financial charges was also additional to the other measures adopted. Here too, the Commission could not be sure that this measure had not provided compensation over and above the damage suffered.

(29)

The exemption from State fees was also additional to the other measures adopted. Also, according to the information available to the Commission, all fish farmers in the six departments concerned appeared to have benefited from this measure. France did not state the reasons why this measure had been extended to all those working in the sector in these departments. Therefore the Commission again could not be sure that, overall, the exemption from State fees had not provided compensation over and above the damage suffered.

(30)

Since the Commission could not establish that there had not been over-compensation for the damage suffered, these measures could not be declared compatible with the common market under Article 87(2)(b) of the Treaty.

(31)

As unnotified aid, these measures were analysed in the light of the Guidelines on the examination of State aid to fisheries and aquaculture (2), adopted in 1997 and in force at the time of the measures (hereinafter the 1997 Guidelines). Since the aid concerned was operating aid, the Commission applied the third indent of the fourth subparagraph of point 1.2 of the 1997 Guidelines, which states as a general principle that operating aid is incompatible with the common market. It found that on the basis of the information available it still had doubts about the compatibility of the measures with the common market.

(32)

According to France, the additional relief measures for all fish farmers and fishermen in mainland France and the overseas departments were adopted to compensate for the adverse economic impact on the sector of the deterioration of the market caused by the poor image of fisheries and aquaculture products following the pollution caused by the wreck of the Erika.

(33)

Social security contributions were reduced for the period 15 April to 15 July 2000.

(34)

According to France, the deterioration of the market led to a fall in retail sales (9 % by volume and 5 % by weight) of shellfish in the first half of 2000. The storm also had a negative impact on the economic situation of the entire shellfish industry as Charente-Maritime plays a key role in the marketing of oysters in France.

(35)

However, France gave no information on the link between the amount of economic damage which it stated that the oil pollution had caused to all shellfish producers and the amount represented by the exemption from social security contributions over the period in question. The Commission was not therefore able to establish that the exemption measure corresponded in value to the damage suffered and did not over-compensate.

(36)

Since the measure had the characteristics of operating aid, the Commission found, on the basis of the third indent of the fourth subparagraph of point 1.2 of the 1997 Guidelines that, on the basis of the information at its disposal, there were doubts as to the compatibility of the measure with the common market.

(37)

Social security contributions were reduced for the period from 15 April to 15 October 2000.

(38)

According to France there was a general downturn in the market for fisheries products, with a sustained fall in demand because of consumers’ concerns about the health implications of the oil pollution.

(39)

Various retail sales statistics on fisheries products were provided by France in justification of this relief measure. The Commission took note of this information. However, in its letter informing France that the formal investigation procedure was being initiated, the Commission pointed out that other information indicated that during the first quarter of 2000 the value of auction sales rose by 3 % against the previous year and market withdrawals were less than 1,5 % of the quantities landed for all the main species, which was equivalent to the withdrawal rate in the same period in 1999. Furthermore, the exemption measure was applied to all French fisheries undertakings, included those established in the overseas departments.

(40)

Moreover, the Commission had taken note of information distributed by Agence France-Presse and in the newspapers according to which the reductions in social security contributions were intended to compensate the rise in oil prices which had already been registered for several months.

(41)

In view of all this information, the Commission found that France had not provided information establishing that the measure was compensation for the economic impact on undertakings of the deterioration of the market in fisheries and aquaculture products. Since the measure had the characteristics of operating aid, the Commission found, on the basis of the third indent of the fourth subparagraph of point 1.2 of the 1997 Guidelines that, on the basis of the information at its disposal, there were serious doubts as to the compatibility of the measure with the common market.

(42)

France stated that the purpose of the reductions in financial charges granted under debt adjustment plans was to help the most vulnerable undertakings to deal with an exceptional situation associated with the natural disasters, and not to cover losses. Only the most vulnerable undertakings were eligible for this measure.

(43)

France stated that the procedure put in place for the reduction of social security contributions and financial charges was precisely to avoid over-compensation for damage suffered. The compensation units set up in the departments affected evaluated the overall economic situation of each undertaking and validated the amounts granted in line with the damage suffered.

(44)

France found that relief restricted to the fish farmers affected by the storm and the oil pollution was inadequate. The overall situation of the industry appeared sufficiently worrying to justify intervention for the industry as a whole. The media impact of the oil pollution on public opinion damaged the consumer image of fisheries and aquaculture products, and particularly farmed shellfish, whatever their origin. A study carried out for the Office national interprofessionnel des produits de la mer et de l’aquaculture (National Inter-trade Board for Sea and Fish-Farming Products - Ofimer), estimated that shellfish farming turnover fell by FRF 51 million (EUR 7,77 million) over a four-month period from 17 December 1999 to 16 April 2000.

(45)

General measures were adopted to deal with this situation: a general reduction of social security contributions and exemption from State fees. The aid value of the social security contribution reductions was EUR 3,35 million. The value of the State fees exemption was EUR 3,81 million. The total amount was thus less than the EUR 7,77 million fall in turnover estimated by the study carried out for Ofimer.

(46)

France contests the Commission’s grounds for initiating the formal investigation procedure. It states that the shock of the Erika oil pollution, and media coverage of its alleged or suspected consequences badly damaged the image of fisheries and aquaculture products; not a single sector or area escaped this effect.

(47)

France further states that the relief period (15 April to 15 October 2000) in fact relates to fishing activity in the first six months of the year, since social security contributions actually relate to the activity of the three previous months. This lag made it possible to take into consideration the exact activity of fishermen when the greatest difficulties were experienced, i.e. over the six months following the two disasters of December 1999. France therefore considers that the Commission’s analysis should not have referred to the Ofimer Flash Eco memo on the economy of 16 February 2001.

(48)

It also considers that the Commission should not have referred to the Ofimer memo on the economy for January to April 2000 since it was based on estimates and a large part of the data for March and April was estimated. The discrepancies found by the Commission were not the result of different evaluations but of the normal statistical gap between raw instantaneous data and its definitive validation. The Commission should therefore have confined its analysis to the data in the memo of 6 April 2001 sent to the Commission by the France as part of the investigation of this case, this data being definitive for the period in question.

(49)

France also states that Ofimer’s monthly summaries indicate that the quantities landed over the first six months were stable in relation to the same period in 1999, although there were downturns, sometimes large-scale, over short periods which appear to correspond to the periods of greatest media coverage. However, during this period withdrawals increased by 28 % as against 1999, particularly during the first three months of the year (January: + 92 %, February: + 66 %, March: + 35 %). For some species the level of withdrawals was extremely high (Norway lobsters: + 175 %, monkfish: + 161 %, spider crab: × 5), which is evidence of the psychological impact of the oil pollution on consumer behaviour.

(50)

During the first half of 2000, since the quantities landed were relatively stable but there was a very substantial increase in the quantities withdrawn, the quantities sold decreased. The consumption of fresh fisheries and aquaculture products fell by 7 % (6 % for fish, 9 % for shellfish and 6,5 % for crustaceans, particularly shrimps).

(51)

Prices fell by 6 % against January 1999 and this decline persisted for the species essential to undertakings’ equilibrium. It was found that of the 49 important species monitored by Ofimer, prices fell for 34 species in January 2000, 26 in February 2000 and 21 in March 2000. Similarly, a constant decline was recorded for all the main species fished over the entire period.

(52)

France further states that consumers could not easily distinguish the origin of fisheries and aquaculture products and disaffection with those products was manifested irrespective of the production area. The suspicion generated by the oil pollution therefore affected products both from the mainland and from the overseas departments without differentiation. According to France, the customs data for the overseas departments shows that their products also suffered the effects of the oil pollution and there was therefore no reason to exclude them from the support provided by the Government.

(53)

Lastly, France commented that the Commission had given little credit to the press articles submitted for illustrative purposes and yet had made much of the views journalists had garnered at trade fairs. It submitted with its comments a number of articles and additional documents showing the media hype that surrounded this event and the climate of suspicion that gave rise to consumer disaffection with fisheries and aquaculture products. It also refuted the Commission’s suggestion in its letter notifying initiation of the formal investigation procedure that the reduction in social security contributions was really intended to compensate for the increase in fuel prices, which had already been registered for several months.

(54)

Article 87(1) of the Treaty stipulates that ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.’

(55)

The various measures that are the subject of this Decision (reductions in social security contributions and financial charges, exemption from State fees) are measures that favour undertakings engaging in a certain activity, namely aquaculture or fisheries. These undertakings are relieved of certain charges which they would normally have to bear.

(56)

The measures entailed a loss of State resources, either directly (reduction in financial charges and exemption from State fees) or indirectly, since the State had to compensate the losses borne by the body levying the social security contributions. These measures therefore constitute State aid within the meaning of Article 87(1) of the Treaty.

(57)

Furthermore, since the products of the beneficiary undertakings are sold on the Community market, the measures adopted by France reinforce the position of those undertakings both on the French market in relation to undertakings from other Member States wishing to introduce their own products (fisheries and aquaculture products or other competing food products) on that market and on the markets of other Member States in relation to the undertakings active on those markets (for the same products). The measures therefore distort or threaten to distort competition and may affect trade between the Member States.

(58)

Such measures are in principle prohibited under Article 87(1) of the Treaty. They may only be deemed compatible with the common market if they qualify for one of the derogations provided for in the Treaty. The aid to aquaculture and fisheries undertakings must be analysed in the light of the 1997 Guidelines, as was done in the course of the preliminary investigation.

(59)

The Commission initiated the formal investigation procedure for certain measures adopted to assist fish farmers after the events of December 1999 because it had not been able to establish that overall, with the cumulative effect of the different aid measures, including those which it had already approved, there had not been over-compensation for the damage suffered.

(60)

The formal investigation procedure related to the following aid measures:

(61)

Going by the additional information provided, in the case of the exemption from social security contributions and the reduction of financial charges, the procedure set up by France, with the creation of a compensation unit in each department concerned, with representatives of the State services concerned, banking establishments and professionals, really was designed to avoid risks of over-compensation. France points out that investigating each case individually ensured that the aid was adjusted to the situation of each undertaking, thereby avoiding over-compensation.

(62)

In view of this information the Commission finds that France established an appropriate procedure allowing over-compensation to be avoided. It therefore finds that the only objective of this aid was indeed to compensate for damage suffered as a result of the two exceptional occurrences, the storm of December 1999 and the wreck of the Erika.

(63)

The exemption from social-security contributions and the reduction of financial charges must therefore be deemed compatible with the common market under Article 87(2)(b) of the Treaty.

(64)

The exemption from State fees will be analysed in section C.1 below, since the measure was applied to all French fish-farmers, contrary to the information at the Commission’s disposal prior to initiation of the formal investigation procedure. France informed the Commission in its letter of 21 June 2000 that the marine aquaculture concessions and the water intake authorisations in the departments concerned were exempt from payment of the State fee for the year 2000. Since France made no further mention of this exemption in its subsequent letters to the Commission, which described in detail the content of the measures implemented, the Commission asked France by letter of 21 June 2001 whether the exemption had in fact been applied, and if so asked France to supply the relevant information. In its reply of 13 August 2001 France stated that the fish farmers of the departments of Finistère, Morbihan, Loire-Atlantique, Vendée, Charente-Maritime and Gironde had in fact been granted exemption from the State fee payable in 2000, without mentioning that these departments were not the only ones to which the exemption had been applied. Not until it responded to the initiation of the formal investigation procedure did France state that the measure was a general one applying to all French fish farmers, like the reduction in social security contributions.