21.12.2005   

EN

Official Journal of the European Union

L 335/1

(1)

Regulation (EC) No 3223/94 lays down, pursuant to the outcome of the Uruguay Round multilateral trade negotiations, the criteria whereby the Commission fixes the standard values for imports from third countries, in respect of the products and periods stipulated in the Annex thereto.

(2)

In compliance with the above criteria, the standard import values must be fixed at the levels set out in the Annex to this Regulation,

21.12.2005   

EN

Official Journal of the European Union

L 335/3

(1)

Pursuant to the Community’s international obligations in the context of the Uruguay Round of multilateral trade negotiations (2), the Community has undertaken to import a certain quantity of maize into Spain.

(2)

Commission Regulation (EC) No 1839/95 of 26 July 1995 laying down detailed rules for the application of tariff quotas for imports of maize and sorghum into Spain and imports of maize into Portugal (3), lays down the special additional detailed rules necessary for implementing the invitation to tender.

(3)

In view of the current market demand in Spain, an invitation to tender for the reduction in the duty on maize is appropriate.

(4)

The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Cereals,

21.12.2005   

EN

Official Journal of the European Union

L 335/4

(1)

Pursuant to the Community’s international obligations in the context of the Uruguay Round of Multilateral Trade Negotiations (2), the Community has undertaken to import a certain quantity of sorghum into Spain.

(2)

Commission Regulation (EC) No 1839/95 of 26 July 1995 laying down detailed rules for the application of tariff quotas for imports of maize and sorghum into Spain and imports of maize into Portugal (3), lays down the special additional detailed rules necessary for implementing the invitations to tender.

(3)

Taking into account the current market demand in Spain, an invitation to tender for the reduction in the duty on sorghum is appropriate.

(4)

Council Regulation (EC) No 2286/2002 of 10 December 2002 on the arrangements applicable to agricultural products and goods resulting from the processing of agricultural products originating in the African, Caribbean and Pacific States (ACP States) (4) provides in particular for a 60 % reduction in the duty applicable to imports of 100 000 tonnes of sorghum per calendar year, and a 50 % reduction over this quota. Cumulation of this benefit and the benefit resulting from the invitation to tender for the reduction in the import duty would disturb the Spanish cereals market. Such cumulation must therefore be ruled out.

(5)

The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Cereals,

21.12.2005   

EN

Official Journal of the European Union

L 335/6

(1)

In order to enable the Commission to monitor market developments in the raw tobacco sector covered by the common market organisation established by Regulation (EEC) No 2075/92, Member States are required to communicate the necessary information.

(2)

To that end, Commission Regulation (EC) No 604/2004 of 29 March 2004 on the communication of information on tobacco from the 2000 harvest onwards (2) was adopted.

(3)

The information to be communicated should provide a general overview of the entire Community tobacco market, and should in particular take into account the provisions of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers (3) and its implementing rules.

(4)

In the interest of efficient administration, the communicated information should be grouped by group of tobacco variety and time limits should be set for its submission.

(5)

It is therefore appropriate to adapt the provisions on the information to be communicated accordingly.

(6)

For the sake of clarity and rationality, Regulation (EC) No 604/2004 should be repealed and replaced by a new regulation.

(7)

The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Tobacco,

21.12.2005   

EN

Official Journal of the European Union

L 335/13

(1)

Pursuant to Regulation (EC) No 550/2004, the Commission is required to establish common requirements for the provision of air navigation services throughout the Community. A Regulation providing direct application is the most suitable instrument for this purpose.

(2)

The provision of air navigation services within the Community should be subject to certification by Member States. Air navigation service providers which comply with the common requirements should receive a certificate in accordance with Article 7 of Regulation (EC) No 550/2004. Those air navigation service providers which may operate without a certificate should endeavour to ensure maximum compliance with the common requirements as far as their legal status allows.

(3)

The application of the common requirements to be laid down pursuant to Article 6 of Regulation (EC) No 550/2004 should be without prejudice to Member States' sovereignty over their airspace and to the requirements of the Member States relating to public order, public security and defence matters, as set out in Article 13 of Regulation (EC) No 549/2004 of the European Parliament and of the Council of 10 March 2004 laying down the framework for the creation of the single European sky (the framework Regulation) (2). The common requirements should not cover military operations and training within the scope of Article 1(2) of Regulation (EC) No 549/2004.

(4)

The definition of common requirements for the provision of air navigation services should take due account of the legal status of air navigation service providers in the Member States. Furthermore, when an organisation pursues activities other than the provision of air navigation services, the common requirements to be laid down pursuant to Article 6 of Regulation (EC) No 550/2004 should not apply to such other activities or to resources allocated to activities outside the provision of air navigation services, unless provision is made to the contrary.

(5)

The application of common requirements to air navigation service providers should be proportionate to the risks linked with the specific features of each service such as the number and/or the nature and characteristics of processed movements. Should certain air navigation service providers elect not to avail themselves of the opportunity to provide cross-border services and thereby waive the right to mutual recognition within the single European sky, a national supervisory authority should be entitled to allow those providers to comply commensurately with, respectively, certain general requirements for the provision of air navigation services and certain specific requirements for the provision of air traffic services. Consequently, the conditions attached to the certificate should reflect the nature and the scope of the derogation.

(6)

In order to ensure the proper functioning of the certification scheme, Member States should provide the Commission with all relevant information on the derogations granted by their national supervisory authority in the context of their annual reports.

(7)

The different types of air navigation services are not necessarily subject to the same requirements. It is therefore necessary to adjust common requirements to the special features of each type of service.

(8)

The onus of proving compliance should lie with the air navigation service providers, for the period of validity of the certificate and for all the services covered.

(9)

In order to ensure the effective application of common requirements, a system of regular supervision and inspection of compliance with those common requirements and with the conditions specified in the certificate should be established. The national supervisory authority should examine the suitability of a provider prior to issuing a certificate and should assess the ongoing compliance of the air navigation service providers it has certified on a yearly basis. Consequently, it should establish and update annually an indicative inspection programme covering all the providers it has certified, on the basis of an assessment of the risks. The programme should allow the inspection of all relevant parts of the air navigation service providers within a reasonable time-frame. When assessing the compliance of designated providers of air traffic services and meteorological services, the national supervisory authority should be entitled to check relevant requirements stemming from international obligations on the Member State in question.

(10)

Peer reviews of national supervisory authorities should further a common approach to the supervision of air navigation service providers throughout the Community. The Commission, in cooperation with the Member States, should arrange these peer reviews, which should be co-ordinated with the activities undertaken within the framework of Eurocontrol's ESARR Implementation Monitoring and Support programme (ESIMS) and the Universal Safety Oversight Audit Programme (USOAP) run by the International Civil Aviation Organisation (ICAO). This will avoid duplication of work. In order to allow the exchange of experience and best practice during a peer review, the national experts should preferably originate from a national supervisory authority or a recognised organisation.

(11)

Eurocontrol has developed Safety Regulatory Requirements (ESARRs) which are of the highest importance for the safe provision of air traffic services. In accordance with Regulation (EC) No 550/2004, the Commission should identify and adopt the relevant provisions of ESARR 3 on the use of safety management systems by air traffic management (ATM) service providers, ESARR 4 on risk assessment and mitigation in ATM and ESARR 5 on ATM services' personnel, requirements for engineering and technical personnel undertaking operational safety related tasks. Pursuant to Article 5 of Regulation (EC) No 550/2004, the Commission has presented a proposal for a directive of the European Parliament and of the Council on a Community Air Traffic Controller Licence (3) which covers the provisions of ESARR 5 for air traffic controllers. It is therefore not appropriate to repeat these provisions in this Regulation. However, provisions should be included to require a national supervisory authority to check whether the personnel of a provider of air traffic services, in particular air traffic controllers, is properly licensed, if so required.

(12)

It is similarly not appropriate to repeat the ESARR 2 provisions on reporting and assessment of safety occurrences in ATM, which are covered by Council Directive 94/56/EC of 21 November 1994 establishing the fundamental principles governing the investigation of civil accidents and incidents (4) and by Directive 2003/42/EC of the European Parliament and of the Council of 13 June 2003 on occurrence reporting in civil aviation (5). However, new provisions on safety occurrences should be introduced to require a national supervisory authority to check whether a provider of air traffic services, and also a provider of communication, navigation or surveillance services, meet the arrangements required to cover the reporting and assessment of such occurrences. The relevant provisions of ESARR 1 on safety oversight in ATM, and of ESARR 6 on software in ATM systems, should be identified and adopted by way of separate Community acts.

(13)

It should be recognised in particular that, first, safety management is that function of air traffic services which ensures that all safety risks have been identified, assessed and satisfactorily mitigated, and that, secondly, a formal and systematic approach to safety management will maximise safety benefits in a visible and traceable way. The Commission should update and specify further the safety requirements applying to air traffic services, in order to ensure the highest possible level of safety without prejudice to such future role as may be defined for the European Aviation Safety Agency in this area.

(14)

Air navigation service providers should operate in compliance with the relevant ICAO standards. With a view to facilitating the cross-border provision of services, the Member States and the Commission, acting in close cooperation with Eurocontrol, should work towards minimising the differences notified by Member States in the application of ICAO standards in the field of air navigation services in order to reach a common set of standards between Member States within the single European sky in particular with a view to developing common rules of the air.

(15)

Different national arrangements as to liability should not prevent an air navigation service provider from entering into agreements on the cross-border provision of services, once they have set up arrangements to cover losses for damages arising from liabilities under the applicable law. The method employed should follow national legal requirements. Member States which allow the provision of air navigation services in all or part of the airspace under their responsibility without certification in accordance with Regulation (EC) No 550/2004 should cover the liabilities of those providers.

(16)

While ESARR 4 defines a maximum tolerable probability for ATM directly contributing to accidents in the ECAC (European Civil Aviation Conference) region, maximum tolerable probabilities for all severity classes have not yet been established. The Member States and the Commission, acting together with Eurocontrol, should complete and update these probabilities and develop mechanisms to apply them in different circumstances.

(17)

The measures provided for in this Regulation are in accordance with the opinion of the Single Sky Committee established by Article 5 of Regulation (EC) No 549/2004,

(a)

activities other than the provision of air navigation services by a provider;

(b)

resources allocated to activities outside the provision of air navigation services.

(a)

ESARR 3 on the use of safety management systems by air traffic management (ATM) service providers, issued on 17 July 2000;

(b)

ESARR 4 on risk assessment and mitigation in ATM, issued on 5 April 2001;

(c)

ESARR 5 on ATM services' personnel, requirements for engineering and technical personnel undertaking operational safety related tasks, issued on 11 April 2002.

(a)

‘aerial work’ shall mean an aircraft operation in which an aircraft is used for specialised services such as agriculture, construction, photography, surveying, observation and patrol, search and rescue or aerial advertisement;

(b)

‘commercial air transport’ shall mean any aircraft operation involving the transport of passengers, cargo or mail for remuneration or hire;

(c)

‘functional system’ shall mean a combination of systems, procedures and human resources organised to perform a function within the context of ATM;

(d)

‘general aviation’ shall mean any civil aircraft operation other than commercial air transport or aerial work;

(e)

‘national supervisory authority’ shall mean the body or bodies nominated or established by Member States as their national authority pursuant to Article 4 of Regulation (EC) No 549/2004;

(f)

‘hazard’ shall mean any condition, event, or circumstance which could induce an accident;

(g)

‘operating organisation’ shall mean an organisation responsible for the provision of engineering and technical services supporting air traffic, communication, navigation or surveillance services;

(h)

‘risk’ shall mean the combination of the overall probability, or frequency of occurrence of a harmful effect induced by a hazard and the severity of that effect;

(i)

‘safety assurance’ shall mean all planned and systematic actions necessary to afford adequate confidence that a product, a service, an organisation or a functional system achieves acceptable or tolerable safety;

(j)

‘safety objective’ shall mean a qualitative or quantitative statement that defines the maximum frequency or probability at which a hazard can be expected to occur;

(k)

‘safety requirement’ shall mean a risk-mitigation means, defined from the risk-mitigation strategy that achieves a particular safety objective, including organisational, operational, procedural, functional, performance, and interoperability requirements or environment characteristics;

(l)

‘services’ shall mean either an air navigation service or a bundle of air navigation services.

(a)

general aviation;

(b)

aerial work;

(c)

commercial air transport limited to aircraft with less than 10 tonnes of maximum take-off mass or less than 20 passenger seats;

(d)

commercial air transport with less than 10 000 movements per year, regardless of the maximum take-off mass and the number of passenger seats, ‘movements’ being counted as the sum of take-offs and landings and calculated as an average over the previous three years.

(a)

part 1 technical and operational competence and capability;

(b)

part 3.1 safety management;

(c)

part 5 human resources;

(d)

part 8.1 open and transparent provision of services.

(a)

safety management responsibility as well as external services and supplies (under part 3.1.2);

(b)

safety surveys (under part 3.1.3);

(c)

safety requirements for risk assessment and mitigation with regard to changes (part 3.2).

(a)

specify the nature and the scope of the derogation in the conditions attached to the certificate by indicating its legal basis;

(b)

limit the validity of the certificate in time; and

(c)

monitor whether the air navigation service providers continue to qualify for the derogation.

(a)

to examine the relevant records, data, procedures and any other material relevant to the provision of air navigation services;

(b)

to take copies of or extracts from such records, data, procedures and other material;

(c)

to ask for an oral explanation on site;

(d)

to enter relevant premises, lands or means of transport.

(a)

issue appropriate safety rules for engineering and technical personnel who undertake operational safety-related tasks;

(b)

ensure adequate and appropriate safety oversight of the engineering and technical personnel assigned by any operating organisation to undertake operational safety-related tasks;

(c)

on reasonable grounds and after due enquiry, take appropriate action in respect of the operating organisation and/or its technical and engineering personnel who do not meet the provisions of Annex II, part 3.3;

(d)

verify that appropriate methods are in place to ensure that third parties assigned to operational safety-related tasks meet the provisions of Annex II, part 3.3.

21.12.2005   

EN

Official Journal of the European Union

L 335/31

(1)

Council Regulation (EC) No 27/2005 of 22 December 2004 fixing for 2005 the fishing opportunities and associated conditions for certain fish stocks and groups of fish stocks applicable in Community waters and for Community vessels, in waters where catch limitations are required (3), lays down quotas for 2005.

(2)

On 6 June 2005 Lithuania closed the fishery for Northern prawn in NAFO zone 3L, for vessels flying its flag.

(3)

Commission Regulation (EC) No 1170/2005 (4) prohibits fishing for Northern prawn in NAFO zone 3L, by vessels flying the flag of Lithuania or registered in Lithuania.

(4)

On 30 October 2005 Japan transferred to Lithuania 144 tonnes of Northern prawn quota in the waters of NAFO zone 3L. Fishing for Northern prawn in the waters of NAFO zone 3L by vessels flying the flag of or registered in Lithuania should consequently be authorised. Commission Regulation (EC) No 1170/2005 should therefore be repealed,

21.12.2005   

EN

Official Journal of the European Union

L 335/32

(1)

Council Regulation (EC) No 27/2005 of 22 December 2004 fixing for 2005 the fishing opportunities and associated conditions for certain fish stocks and groups of fish stocks applicable in Community waters and for Community vessels, in waters where catch limitations are required (3), lays down quotas for 2005.

(2)

On 9 October 2005 Denmark closed the fishery for sprat in ICES zone IIIa, for vessels flying its flag.

(3)

Commission Regulation (EC) No 1779/2005 (4) prohibits fishing for sprat in ICES zone IIIa, by vessels flying the flag of Denmark or registered in Denmark.

(4)

On 15 November 2005 Sweden transferred to Denmark 1 000 tonnes of sprat quota in the waters of ICES zone IIIa. Fishing for sprat in the waters of ICES zone IIIa by vessels flying the flag of or registered in Denmark should consequently be authorised. Commission Regulation (EC) No 1779/2005 should therefore be repealed,

21.12.2005   

EN

Official Journal of the European Union

L 335/33

(1)

Council Regulation (EC) No 27/2005 of 22 December 2004 fixing for 2005 the fishing opportunities and associated conditions for certain fish stocks and groups of fish stocks applicable in Community waters and for Community vessels, in waters where catch limitations are required (3), lays down quotas for 2005.

(2)

On 4 November 2005 Spain closed the fishery for hake in ICES zone Vb (EC waters), VI, VII, XII, XIV, for vessels flying its flag.

(3)

Commission Regulation (EC) No 1894/2005 (4) prohibits fishing for hake in ICES zone Vb (EC waters), VI, VII, XII, XIV, by vessels flying the flag of Spain or registered in Spain.

(4)

On 28 November 2005 the United Kingdom transferred to Spain 300 tonnes of hake quota in the waters of ICES zone Vb (EC waters), VI, VII, XII, XIV. Fishing for hake in the waters of ICES zone Vb (EC waters), VI, VII, XII, XIV by vessels flying the flag of or registered in Spain should consequently be authorised. Commission Regulation (EC) No 1894/2005 should therefore be repealed,

21.12.2005   

EN

Official Journal of the European Union

L 335/34

(1)

Annex I to Regulation (EC) No 881/2002 lists the persons, groups and entities covered by the freezing of funds and economic resources under that Regulation.

(2)

On 15 December 2005, the Sanctions Committee of the United Nations Security Council decided to amend the list of persons, groups and entities to whom the freezing of funds and economic resources should apply. Annex I should therefore be amended accordingly.

(3)

In order to ensure that the measures provided for in this Regulation are effective, this Regulation must enter into force immediately,

21.12.2005   

EN

Official Journal of the European Union

L 335/36

(1)

The representative prices and additional duties applicable to imports of white sugar, raw sugar and certain syrups for the 2005/2006 marketing year are fixed by Commission Regulation (EC) No 1011/2005 (3). These prices and duties were last amended by Commission Regulation (EC) No 2019/2005 (4).

(2)

The data currently available to the Commission indicate that the said amounts should be changed in accordance with the rules and procedures laid down in Regulation (EC) No 1423/95,

21.12.2005   

EN

Official Journal of the European Union

L 335/38

(1)

In accordance with Article 4 of Regulation (EC) No 1051/2001, a world market price for unginned cotton is to be determined periodically from the price for ginned cotton recorded on the world market and by reference to the historical relationship between the price recorded for ginned cotton and that calculated for unginned cotton. That historical relationship has been established in Article 2(2) of Commission Regulation (EC) No 1591/2001 of 2 August 2001 laying down detailed rules for applying the cotton aid scheme (3). Where the world market price cannot be determined in this way, it is to be based on the most recent price determined.

(2)

In accordance with Article 5 of Regulation (EC) No 1051/2001, the world market price for unginned cotton is to be determined in respect of a product of specific characteristics and by reference to the most favourable offers and quotations on the world market among those considered representative of the real market trend. To that end, an average is to be calculated of offers and quotations recorded on one or more European exchanges for a product delivered cif to a port in the Community and coming from the various supplier countries considered the most representative in terms of international trade. However, there is provision for adjusting the criteria for determining the world market price for ginned cotton to reflect differences justified by the quality of the product delivered and the offers and quotations concerned. Those adjustments are specified in Article 3(2) of Regulation (EC) No 1591/2001.

(3)

The application of the above criteria gives the world market price for unginned cotton determined hereinafter,

21.12.2005   

EN

Official Journal of the European Union

L 335/39

(1)

Italy enacted Decree-Law No 269 of 30 September 2003 laying down urgent measures to promote development and correct the trend in public finances (DL 269/2003), published in Official Gazette of the Italian Republic No 229 of 2 October 2003. Article 1(1)(b) of DL 269/2003 provides for specific tax incentives for participation in trade fairs abroad and was subsequently converted, without amendments, into Law No 326 of 24 November 2003 (L 326/2003), published in Official Gazette of the Italian Republic No 274 of 25 November 2003.

(2)

By letter dated 22 October 2003 (D/56756), the Commission invited the Italian authorities to provide information about the incentives in question and their entry into force, with a view to establishing whether they constituted aid within the meaning of Article 87 of the EC Treaty. By the same letter, the Commission reminded Italy of its obligation under Article 88(3) of the EC Treaty to notify the Commission of any measures constituting aid before their implementation.

(3)

By letters of 11 November 2003 (A/37737) and 26 November 2003 (A/38138), the Italian authorities provided the information requested. By letter dated 19 December 2003 (D/58192), the Commission again reminded Italy of its obligations under Article 88(3) of the EC Treaty and invited the Italian authorities to inform the possible beneficiaries of the tax incentives in question of the consequences envisaged by the Treaty and by Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (2) in the event that the incentives in question were found to constitute aid implemented without prior authorisation by the Commission.

(4)

By letter of 18 March 2004 (SG 2004 D/201066), the Commission informed Italy that it had decided to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of Italy’s tax incentives in favour of undertakings taking part in trade fairs abroad. By letter of 1 June 2004 (A/35042), the Italian authorities submitted their observations.

(5)

The Commission decision to initiate the formal investigation procedure was published in the Official Journal of the European Communities, with an invitation to interested parties to submit their observations (3). No comments were received.

(6)

Article 1(1)(b) of DL 269/2003 provides that any undertakings liable to corporate income tax in Italy and in business on the date the scheme entered into force may reduce their taxable income by the amount of the expenses directly incurred with respect to their participation in trade fairs abroad. The provision applies exclusively to the expenses incurred by beneficiaries during the first tax year following the one when DL 269/2003 entered into force (2 October 2003); thus, for undertakings whose business cycle follows the calendar year, the measure affects the determination of their 2004 taxable income. Article 1(1)(b) of DL 269/2003 provides that the reduction in taxable income is in addition to the ordinary deduction from the beneficiary’s declared income of the costs associated with participation in trade fairs abroad.

(7)

As regards the general rules for deducting business costs associated with participation in trade fairs abroad, Article 108(2) of the Italian Income Tax Code (TUIR) makes a distinction between advertising and promotion costs, including trade fair costs, on the one hand, and agency costs, on the other. While advertising and promotion costs are deductible in full in the tax year in which they are incurred or in equal instalments in that and the following four years, agency costs may only be deducted up to one third of their amount, in equal instalments over a period of five years.

(8)

With respect to the possible different categories of expenses associated with participation in trade fairs, the wording of Article 1(1)(b) of DL 269/2003 indicates that the incentives provided under the scheme are limited to the costs of exhibiting products and that no other costs incurred in connection with participation in trade fairs are included in the amount eligible for aid under the scheme.

(9)

The Italian authorities have indicated that the benefit applies irrespective of the classification of the expenses, which are usually subject to differentiated tax treatment, as seen above. Italy explained that all the expenses associated with participation in trade fairs are treated alike in order to overcome the difficulty in classifying expenditure items in the various categories. However, Article 1(1)(b) of DL 269/2003 expressly excludes from the eligible amount sponsoring costs, which form part of advertising costs and are ordinarily deductible in full under Article 108(2) TUIR.

(10)

In its letter of 18 March 2004 initiating the formal investigation procedure, the Commission considered that the measure fulfilled the criteria for being classed as state aid under Article 87(1) of the EC Treaty.

(11)

In particular, the Commission took the view that the scheme conferred a selective advantage on the beneficiaries because it appeared to benefit only companies engaged in exhibiting products for export, while excluding other business activities. For example, Italian companies trading their goods exclusively on the Italian market, those providing services, companies trading in goods that are not suitable for being exhibited at trade fairs, and those taking part in trade fairs in Italy are excluded from the scheme.

(12)

The Commission was also of the opinion that the scheme favoured Italian undertakings participating in trade fairs abroad, thereby strengthening their position with respect to their foreign competitors, including both foreign traders competing with the undertakings in question in the Italian and foreign markets and foreign competitors established in Italy competing with the beneficiaries on the Italian market.

(13)

The Commission finally considered that the selective character of the tax advantages at issue could not be justified by the nature or general scheme of the Italian tax system, nor did it appear to compensate for possible expenses incurred abroad on account of participation in such trade fairs, as the aid is not contingent upon any specific foreign tax or financial burden being imposed. Neither did any of the exceptions provided for in Article 87(2) and (3) of the EC Treaty seem to apply. The advantages were linked to expenses not eligible for aid under any of the block exemption regulations or Community guidelines; under the Block Exemption Regulation for SMEs in particular, aid for participation in trade fairs is admissible only if it does not exceed 50 % of the eligible costs and for the first participation by an SME in a particular fair or exhibition, while the tax incentive in question concerns all companies and all costs associated with taking part in any trade fairs abroad.

(14)

In response to the appraisal made by the Commission in its letter of 18 March 2004 initiating the formal investigation, the Italian authorities raised three main observations aimed at demonstrating that the scheme at issue does not discriminate between potential beneficiaries in the different branches of the distributive trades, but constitutes a general measure open to all undertakings engaged in trading activities.

(15)

First, according to the Italian authorities, the measure is applicable without distinction to all sectors of the economy and is open to all undertakings liable to Italian business taxation, provided they incur costs with respect to participation in trade fairs abroad. The Italian authorities also point out that the tax incentive in question also applies to undertakings having a permanent establishment abroad. They add that the tax incentive is strictly linked to the costs incurred in taking part in trade fairs abroad, and does not provide any disproportionate tax benefits. The Italian authorities consider that the scheme does not promote participation in trade fairs abroad as a separate business activity, but as an investment open to all undertakings, which the Italian Government intends to encourage as a general economic policy objective. The Italian authorities finally clarify that the advantage applies to undertakings having a permanent establishment abroad insofar as the expenditure incurred in taking part in trade fairs is charged to the head office in Italy.

(16)

Second, the Italian authorities argue that the measure does not put non-exporting undertakings at a disadvantage, but that, on the contrary, it offers an incentive for them to find it worthwhile to participate in fairs of this kind. Where an undertaking operated in a sector producing goods or services that cannot be traded or exported, it would not be in competition with other undertakings operating in sectors producing the same goods or services.

(17)

Third, the Italian authorities stress that the measure is in force for one year only, and that therefore the advantage given to undertakings participating in trade fairs abroad does not significantly distort the functioning of the common market.

(18)

Having considered the observations submitted by the Italian authorities, the Commission maintains the position it expressed in the letter of 18 March 2004 initiating the formal investigation procedure, namely that the scheme under examination constitutes state aid because it cumulatively fulfils all the relevant criteria laid down in Article 87(1) of the EC Treaty.

(19)

First, to be considered aid a measure must afford the beneficiaries an advantage that reduces the costs they would normally bear in the course of their business. All undertakings in Italy are liable for corporate income tax charged on their net profits resulting from the difference between their gross revenues and their business expenses as indicated in their accounts. The scheme affords the beneficiaries an economic advantage consisting in the reduction of their taxable profits by an amount corresponding to the costs incurred through taking part in trade fairs abroad, in addition to the ordinary deduction from gross revenues permitted for tax purposes. A beneficiary undertaking incurring such costs posts in its accounts a corresponding negative adjustment having the effect of lowering the corporate income tax burden for the tax year in question. This advantage finally results in lower payments of tax due for the year, constituting a financial benefit for the beneficiary.

(20)

In its submissions, Italy observed that the scheme in question does not confer any significant competitive advantages on its beneficiaries in that its effects are limited to the costs actually incurred, and the same mechanisms are applied as for the other deductions allowed by the Italian Income Tax Code (TUIR).

(21)

The Commission considers, however, that, as the Italian authorities have recognised, the deduction at issue is extraordinary with respect to the normal deduction allowed for tax purposes and should therefore be viewed as an advantage reducing costs normally borne by undertakings liable to corporate income tax in Italy. The Commission therefore confirms its appraisal that the scheme in question provides its beneficiaries with an economic and financial advantage taking the form of a reduction of taxable profits in Italy.

(22)

Second, the advantage must be granted by the State or through state resources. As the Italian authorities did not submit any objections, the Commission confirms the appraisal made when initiating the formal investigation procedure, according to which the advantage is attributable to the State as it consists in the forgoing of tax revenues normally collected by the Italian Treasury.

(23)

Third, the measure must be specific or selective in that it favours ‘certain undertakings or the production of certain goods’. The Italian authorities essentially maintain that the measure is open to all undertakings taxable in Italy and carrying out certain investments which are favoured by the Italian Government, according to the economic policy objectives pursued by the scheme in question.

(24)

After attentive scrutiny, the Commission confirms its opinion that the exceptional tax deduction scheme enacted by Italy constitutes a specific scheme favouring only the undertakings incurring certain eligible expenses concerned with participation in trade fairs abroad and excluding other undertakings not participating in these fairs. Even if it is in principle open to all undertakings participating in trade fairs abroad on a voluntary basis, the scheme effectively favours only the undertakings engaged in exporting and is not open to other business sectors. According to the case law of the Court of Justice, advantages granted to undertakings that carry on export activities and incur certain expenses related to those activities are selective in nature (4).

(25)

The Commission cannot accept the argument put forward by the Italian authorities that undertakings not involved in trading and exporting cannot be compared with those involved in trading and therefore that the scheme is general. The Commission considers that, since the advantage conferred by excluding certain specific expenses from the tax base is limited only to undertakings carrying on export activities and comes on top of the ordinary tax deduction, it cannot be considered a general measure. The Commission further notes that the Italian authorities have not demonstrated that the measure is justified by the nature or general scheme of the tax system. In any event, the advantages conferred on the beneficiaries are not consistent with the internal logic of the Italian tax system and are of an exceptional and temporary nature.

(26)

The Commission therefore confirms its view that the scheme is specific because, for example, it favours only undertakings that are engaged in exporting and accordingly ‘exhibit products’ at trade fairs abroad, as opposed to service undertakings, undertakings trading in goods not suitable for being exhibited at trade fairs, and undertakings taking part in trade fairs in Italy.

(27)

The Commission also confirms its initial doubts as to whether all the companies subject to tax in Italy are entitled to the same level of benefits with respect to trade fairs in which they take part abroad. The Italian authorities have confirmed that the expenses eligible for the incentive at issue also include those incurred by a foreign permanent establishment of an Italian company which assumes a degree of independence from its head office, as provided by Article 162 TUIR or under the relevant tax conventions in force with the country where the permanent establishment is situated.

(28)

However, Italy maintains that the advantage in question is applicable only if, in accordance with Article 1(1)(b) of DL 269/2003, the expenses in question are directly incurred by an Italian beneficiary. This obliges foreign establishments or branches of Italian companies to charge the expenses in question directly to an Italian office in order to benefit from the tax reduction in question, effectively excluding foreign establishments of Italian-based undertakings from the advantage at issue. The Commission concludes that for this reason too the scheme does not seem open to all undertakings on an equal basis.

(29)

Finally, the measure must affect competition and trade between Member States. Italy essentially maintains that the measure does not affect competition at all or, alternatively, that its effects on competition are insignificant given the short duration of the scheme in question.

(30)

Considering the effects of the measure, the Commission confirms the appraisal made when initiating the formal investigation. In line with settled case law of the Court (5), for a measure to distort competition it is sufficient that the recipient of the aid competes with other undertakings on markets open to competition. In particular, the Commission confirms that the measure distorts competition and trade between Member States because its objectives and effects are specifically concerned with improving the trading conditions of the beneficiaries in exporting their goods to foreign markets and therefore directly affect companies active in international trade, including intra-Community trade. Moreover, even aid for extra-Community export activities may affect intra-Community trade and distort competition within the Community (6).

(31)

The Commission cannot accept the argument concerning the scheme’s limited effects on competition, because the fact that the measure remains in force for only one year does not rule out the possibility that the amounts involved may be large enough to have significant effects on certain markets. This is particularly true where the beneficiaries are large companies that normally take part in many trade fairs. Moreover, given that the aid is not limited in absolute terms, its amount could be substantial. In any event, the limited amount of the aid would not be enough to rule out the possibility of competition and trade between Member States being distorted.

(32)

In addition, it seems reasonable to assume that the short period of validity of the measure will not allow undertakings that do not normally take part in trade fairs to benefit from the advantage provided, in particular if these companies have to take decisions such as whether or not to enter a new market. The measure therefore seems more aimed at benefiting firms that already commonly use trade fairs, including companies whose main business objective is specifically to organise and manage the exhibition of products at trade fairs, which would disproportionately benefit from the incentive at issue because they are not expressly excluded from the scope of Article 1(1)(b) of DL 269/2003.

(33)

The Italian authorities have put the scheme into effect without prior notification to the Commission and have therefore failed to fulfil their obligation under Article 88(3) of the EC Treaty. Insofar as the measure constitutes state aid within the meaning of Article 87(1) of the EC Treaty and has been put into effect without prior approval from the Commission, it is to be classed as illegal aid.

(34)

Insofar as the measure constitutes state aid within the meaning of Article 87(1) of the EC Treaty, its compatibility must be assessed in the light of the exceptions provided for in Article 87(2) and (3) of the EC Treaty.

(35)

The Italian authorities have not explicitly challenged the Commission’s assessment, set out in its letter of 18 March 2004 initiating the formal investigation, that none of the exceptions provided for in Article 87(2) and (3) of the EC Treaty, whereby state aid may be considered compatible with the common market, applies in the present case. The Commission therefore confirms its assessment as set out in points 25 to 32 of its letter of 18 March 2004.

(36)

The advantages in question are linked to expenses that are not eligible for aid under any of the block exemption regulations or Community guidelines. With special reference to participation in trade fairs, Article 5(b) of Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid (7)  (8) provides that aid for participation in trade fairs is only admissible if it does not exceed 50 % of the eligible costs and for the first participation by an SME in a particular fair or exhibition, while the tax incentive in question concerns all companies and all costs associated with taking part in any trade fairs abroad.

(37)

The exceptions provided for in Article 87(2) of the EC Treaty, which concern aid of a social character granted to individual consumers, aid to make good the damage caused by natural disasters or exceptional occurrences and aid granted to certain areas of the Federal Republic of Germany, do not apply in this case.

(38)

Neither does the scheme qualify for the exception allowed by Article 87(3)(a) of the EC Treaty for aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment.

(39)

In the same way, the scheme cannot be considered to be a project of common European interest or to remedy a serious disturbance in Italy’s economy, as provided for by Article 87(3)(b) of the EC Treaty; nor does it have as its object the promotion of culture and heritage conservation as provided for by Article 87(3)(d) of the EC Treaty.

(40)

Finally, the scheme in question must be examined in the light of Article 87(3)(c) of the EC Treaty. This Article provides for the authorisation of aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent that is contrary to the common interest. The tax advantages granted by the scheme are not linked to specific investments, job creation or specific projects. They simply constitute a reduction in the costs that would normally have to be borne by the firms concerned in the course of their export business and must therefore be regarded as export linked operating aid. In line with the Commission’s standard practice, such aid is considered to be incompatible with the common market.

(41)

The Commission observes furthermore that, even if the measure were found to facilitate the development of certain economic activities, such as the internationalisation of Italian businesses, and thus result in increased volumes of trade, the Commission cannot rule out the possibility that the extent of the relative effects on intra-Community trade would be contrary to the common interest.

(42)

The Commission concludes that the tax incentives granted under this measure constitute operating aid that does not qualify for any of the exceptions to the prohibition and is therefore incompatible with the common market. The Commission also finds that Italy has illegally implemented the measure in question.

(43)

Where illegally granted state aid is found to be incompatible with the common market, the natural consequence of such a finding is that the aid should be recovered from the beneficiaries. Through recovery of the aid, the competitive position that existed before the aid was granted is restored as far as possible.

(44)

Although the present procedure was closed before the end of the tax year in which the scheme is in force and therefore before the tax liability of most beneficiaries has become definitive, the Commission cannot rule out the possibility that firms may already have benefited from the aid in terms, for example, of lower part payments of taxes relating to the current tax year. The Commission notes that, following the opening of the formal investigation, the Italian authorities publicly warned the scheme’s potential beneficiaries of the possible consequences should the Commission find that the measure in question constituted incompatible aid. The Commission nevertheless considers it necessary that, in order to recover any aid already made available to the beneficiaries, Italy should enjoin the potential beneficiaries of the scheme, within two months of the adoption of this Decision, to reimburse the aid with interest in accordance with Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (9). In particular, where the aid has been already made available through reductions in payments of taxes due for the current tax year, Italy must collect the entire tax due by means of the final scheduled payment for 2004. In any event, full recovery must be completed at the latest by the end of the first tax year following the date of notification of the present Decision.

(45)

Italy must provide the Commission, using the questionnaire in the Annex to this Decision, with a list of the beneficiaries concerned and indicate clearly the measures planned and already taken to secure immediate and effective recovery of the illegal state aid. Within two months of the adoption of this Decision, all documents giving evidence that recovery proceedings have been initiated against the beneficiaries of the illegal aid (such as circulars, recovery orders, etc.) must also be transmitted to the Commission.

(46)

This Decision concerns the scheme as such and must be implemented immediately, including recovery of aid granted under the scheme. However, it is without prejudice to the possibility that all or part of the aid granted in individual cases may be deemed compatible, in particular under Article 5(b) of the Block Exemption Regulation for SMEs,

(a)

enjoin all beneficiaries of the aid referred to in Article 1 to reimburse the illegal aid, with interest;

(b)

transmit all documents giving evidence that the recovery proceedings have been initiated against the beneficiaries of the illegal aid.

21.12.2005   

EN

Official Journal of the European Union

L 335/48

(1)

The measure was notified in accordance with Article 88(3) of the EC Treaty by letter of 6 November 1997. It appeared that the beneficiary had already received a related aid at an earlier stage. Therefore, the measure was registered as non-notified aid. By letters dated 4 February 1998, 10 June 1998 and 4 February 1999 Germany provided the Commission with further information.

(2)

By letter dated 7 June 1999 the Commission informed Germany that it had decided to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of the aid.

(3)

The Commission Decision to initiate the procedure was published in the Official Journal of the European Communities  (2). The Commission invited interested parties to submit their comments on the aid.

(4)

The Commission received comments from interested parties. It forwarded them to Germany, which was given the opportunity to react; its comments were received by letter dated 23 February 2000.

(5)

By letter of 18 May 2005, registered as received on 23 May 2005, Germany asked the Commission to take a Decision on the basis of the information available to it, pursuant to Article 7(7) of 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).

(6)

The benefiting company, Greußener Salamifabrik GmbH, was a meat-processing company producing and marketing several kinds of sausages and meat products. The beneficiary did not slaughter animals itself but processed meat. According to information provided by Germany, the insolvency procedure was initiated for Greußener Salamifabrik on 1 October 1999. The Commission was not informed about the outcome of the procedure. However, it would appear that at least the assets of the company are still operating under the name ‘Greußener Salami- und Schinkenfabrik GmbH’. The remarks of the present Decision, however, refer to the pre-insolvency company Greußener Salamifabrik GmbH.

(7)

A steady decrease in the turnover of Greußener Salamifabrik led to losses and to a negative operating cash flow from 1995 onwards. A document prepared by Dr. Zimmermann & Partner in September 1996 points to an extremely critical cash flow situation of the company. The fact that the company was in financial difficulty was stated in the Commission Decision initiating the procedure (4) and has not been contested in the course of the investigation procedure. A reorganisation of Greußener Salamifabrik was considered necessary. To finance this reorganisation, the company took out additional loans (a loan of DEM 375 000 at the Dresdner Bank AG and a loan of DEM 725 000 at the Sparkasse Erfurt) in the fourth quarter of 1996. For both these loans an 80 % State guarantee, thus covering the total amount of DEM 880 000, was granted via the Thüringer Aufbaubank. The guarantee was not notified to the Commission, contrary to the provisions of the Commission letter to Member States SG(89) D/4328 of 5 April 1989, hereinafter referred to as Aid 1.

(8)

As of 8 January 1997 Ergewa GmbH took over 75 % of the shares of the beneficiary. The new owner wrote off DEM 1,2 million as bad debt related to exports to Russia and devaluation of stock. Combined with a further decrease in sales, this measures resulted in a deteriorated balance sheet making a second restructuring necessary.

(9)

The German authorities made clear in their notification letter of 6 November 1997 that as Greußener Salamifabrik failed to reach its turnover and income targets for 1997, the company was permanently threatened by insolvency and was considered no longer to be able to meet its repayment obligation towards banks. Therefore, a new restructuring plan for Greußener Salamifabrik GmbH was elaborated by Schitag, Ernst & Young Deutsche Allgemeine Treuhand AG in August 1997. This new restructuring plan consisted of three parts:

(10)

As part of the restructuring, Sparkasse Erfurt renounced an outstanding debt amounting to DEM 1 700 000. In compensation, the guarantee previously given by Thüringer Aufbaubank (a State bank) for a loan of DEM 725 000 (cf. recital 7) was partly liquidated and DEM 370 000 (64 % of the guaranteed amount) were paid to Sparkasse Erfurt in the context of this restructuring. Additionally, another guarantee given in 1993 by a private bank, Bürgschaftsbank Thüringen GmbH for a loan amounting to DEM 1 000 000 was partly liquidated which resulted in a payment of DEM 590 000 (74 % of the guaranteed amount) to Sparkasse Erfurt.

(11)

Furthermore, Dresdner Bank Erfurt refinanced a DEM 2 500 000 loan, formerly granted by Sparkasse Erfurt. Dresdner Bank was only prepared to give this loan under an 80 % guarantee to be granted by Thüringer Aufbaubank.

(12)

This new guarantee, covering an amount of DEM 2 000 000, as well as the partial mobilisation of the DEM 370 000 under the old guarantee were notified to the Commission by letter of 6 November 1997 pursuant to Article 88(3) of the EC Treaty as well as to the Commission letter to Member States SG(89) D/4328 of 5 April 1989. These two measures are hereinafter referred to as Aid 2. The German authorities stated in their letter of 4 February 1999, and reiterated in their letter of 18 May 2005, that the guarantee by Thüringer Aufbaubank covering DEM 2 000 000 was given subject to the Commission authorisation.

(13)

The loan of DEM 2 500 000 by Dresdner Bank Erfurt was paid out to Greußener Salamifabrik.

(14)

Finally, Ergewa GmbH, the 75 % shareholder of the company, injected DEM 1 500 000 in the form of a subordinated loan to Greußener Salamifabrik.

(15)

In the field of marketing, the restructuring plan described three areas for improvement: product development, product policy and sales promotion. In general, Greußener Salamifabrik GmbH would become more market oriented.

(16)

In an earlier reorganisation the easiest cost-cutting measures had been taken already. However, the reorganisation plan mentioned further cost saving measures to reduce electricity consumption and transport costs.

(17)

According to information provided to the Commission services, these measures combined would have led to a return of viability of the company and to a return of profitability. However, to regain profitability the turnover would have had to increase from DEM 6 845 000 in 1996 to DEM 7 million in 1998 and to DEM 8 million in 1999.

(18)

The Commission initiated the procedure provided for under Article 88(2) of the EC Treaty in respect of the abovementioned measures in favour of Greußener Salamifabrik GmbH, which can be summed up as follows:

(19)

As the guarantees were given to a company that was in financial difficulties, the Commission considered the aid element of these guarantees to be at the time of their granting equal to 100 % of the guaranteed amount, namely DEM 880 000 in 1996 and DEM 2 000 000 in 1997, in total DEM 2,88 million.

(20)

The Commission initiated the procedure provided for under Article 88(2) of the EC Treaty in respect of the above measures because it had doubts on the following points: compliance with the Commission letter SG(89) D/4328 of 5 April 1989 concerning State guarantees and compliance with the Community guidelines of 1994 and 1997 on State aid for rescuing and restructuring firms in difficulty (5). In the latter case specific doubts were raised concerning the effect of the restructuring which should be a return to viability of the company, compliance with the one time — last time principle, and compliance with the condition to fully implement the restructuring plan.

(21)

Aid 1 was given in the form of State guarantees which means that the aid had to comply with the letter to the Member States SG(89) D/4328 of 5 April 1989. In this letter the Commission stated it would accept guarantees only if their mobilisation would be contractually linked to specific conditions which might go as far as the compulsory declaration of bankruptcy of the benefiting company. It seemed no such conditions were attached to the guarantees granted under the measure.

(22)

The aids were granted because the company was in financial difficulty and needed restructuring. This means the aid had to be considered in the light of the Community guidelines on State aid for rescuing and restructuring firms in difficulty applicable at the time when the guarantee was granted. As far as Aid 1 is concerned, the Commission had no information to evaluate the compatibility of the aid with the abovementioned guidelines. As for Aid 2, it seemed that three of the conditions of the restructuring guidelines were not met. It seemed as if the aid would not lead to a return of viability of the benefiting company. Moreover, it seemed the company tried to regain its viability by outgrowing its problems. This expansion would seem to unduly distort competition. Finally, it was not clear whether the restructuring plan was adhered to.

(23)

The Commission received comments from Kemper Fleischwarenfabrik (Nortrup), from the Bundesverband der Deutschen Fleischwarenindustrie e.V. (Bonn) and from an interested party that prefers to remain anonymous. All three parties argued that an increased turnover could only be realised by lowering prices which would be detrimental to the sector. The Bundesverband der Deutschen Fleischwarenindustrie e.V. pointed out that every year 1 % of the meat-processing companies in Germany are forced to halt their activities. In this highly competitive market only the best undertakings can survive. By artificially keeping a company afloat, the interests of the sector are harmed. Moreover, the proposed new marketing strategy was the common strategy followed by almost all companies. According to the Bundesverband, such a strategy would not be successful without a large marketing budget, which was not available.

(24)

Apart from requests to prolong the period in which Germany could react, Germany gave its comments by letters of 22 July 1999, 28 July 1999, 6 August 1999 and 23 February 2000.

(25)

In the first letter Germany stated that the ownership of the company had partly changed hands.

(26)

In the second letter Germany mentioned that the guarantee contract showing the conditions under which the guarantee could be mobilised would be sent. A restructuring plan of the first restructuring was presented and the planned results following the second restructuring would be sent as well. Furthermore, Germany stated more information would follow which would explain why the targeted turnover was not reached after the second restructuring.

(27)

In the same letter of 28 July 1999 Germany stressed that the company would not increase its capacity, it would only produce the same amounts of products as in the past (years 1994/1995). The problems of the company were due to external factors such as swine fever, the implosion of the Russian market and the advent of BSE. Finally, Germany argued it was unlikely that the aid would distort competition as the beneficiary was an SME which was only active in Thüringen.

(28)

In the third letter of 6 August 1999 Germany presented the guarantee contract and the restructuring plan of the first restructuring.

(29)

In its letter of 23 February 2000 Germany stated that the insolvency procedure had been initiated for Greußener Salamifabrik GmbH. Germany mentioned that the banks had withdrawn their credit. Furthermore, a letter of Greußener’s main bank, Dresdner Bank, was handed over. In this letter the bank stated it was obvious that competitors would be against the aid.

(30)

The measure grants aid to an undertaking that is active in meat processing. Article 40 of Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal (6) and Article 21 of Council Regulation (EEC) No 2759/75 of 29 October 1975 on the common organisation of the market in pigmeat (7) lay down that Articles 87, 88 and 89 of the EC Treaty apply to products covered by these Regulations. The sectors concerned by the aid scheme in question are therefore subject to the Community rules on granting State aids.

(31)

Under Article 87(1) of the EC Treaty 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 is, insofar as it affects trade between Member States, incompatible with the common market.

(32)

The aid was granted in the form of State guarantees. The guarantees enabled the beneficiary undertaking to raise money in order to remain active instead of being eliminated or restructured.

(33)

Aid 1 was granted in 1996. Non-notified State aid has to be assessed on the basis of the legislation in force at the time of its granting. The legal basis applicable for State guarantees in 1996 was the Commission letter to the Member States SG(89) D/4328 of 5 April 1989. According to this letter the Commission regards all guarantees given by a State as falling within the scope of Article 87(1) of the EC Treaty. Moreover, pursuant to point 2.3 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (1994 guidelines), funding guaranteed by the State to an enterprise that is in financial difficulties is presumed to involve State aid. As described in point 7, the beneficiary was a firm in financial difficulties at the time of granting of Aid 1. According to point 2.1 of the 1994 guidelines, deteriorating profitability, diminishing turnover and declining cash flow are typical symptoms for firms in difficulties.

(34)

Aid 2 was notified in 1997. Notified aid has to be assessed on the basis of the legal framework applicable at the time of its assessment. Point 4 of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (8) sets out the four conditions that have to be met for an individual State guarantee not to constitute State aid under Article 87(1) of the EC Treaty. As the German authorities made clear that the borrower Greußener Salamifabrik GmbH had to be classified as a firm in difficulties at the time of the granting of the second guarantee (cf. recital 9), already the first condition is not met.

(35)

Therefore, the measure is considered to grant an aid through State resources (via the Thüringer Aufbaubank).

(36)

As the guarantees were given to a company that was in financial difficulties, the Commission considers the aid element to be equal to 100 % of the guaranteed amount, namely DEM 880 000 for the first and DEM 2 000 000 for the second guarantee, in total DEM 2,88 million.

(37)

The aid is selective in that it favours a single company, Greußener Salamifabrik GmbH.

(38)

According to the case law of the Court of Justice, improvement in the competitive position of a company resulting from a State aid generally points to a distortion of competition compared with other competing companies not receiving such assistance (9). Neither the relatively low level of aid nor the relatively modest size of the beneficiary company rules out the possibility of trade between Member States being distorted (10).

(39)

A measure affects trade between Member States if it hampers imports from other Member States or facilitates exports to other Member States; the deciding factor is whether there is a risk that intra-Community trade will develop differently or is liable to develop differently as a result of the measure in question.

(40)

The products to which the aid in question relates are involved in trade between Member States (11) and are thus exposed to competition. Therefore, there is a risk that intra-Community trade has developed differently as a result of the measure.

(41)

The measure in question thus constitutes aid within the meaning of Article 87(1) of the EC Treaty.

(42)

Exceptions to the prohibition laid down in Article 87(1) of the EC Treaty are set out in paragraphs 2 and 3 of that Article.

(43)

The exceptions listed in Article 87(2) are not applicable, given the nature of the aid measure and its objectives. Nor has Germany claimed that Article 87(2) is applicable.

(44)

Article 87(3) of the EC Treaty lists aids which may be considered to be compatible with the common market. Their compatibility with the Treaty has to be studied from the point of view of the Community, not solely that of a given Member State. To ensure the proper operation of the common market, the exceptions provided for in Article 87(3) must be interpreted in a strict manner.

(45)

As regards Article 87(3)(a) of the EC Treaty, it is pointed out that the beneficiary of the aid is located in a region where the economic situation can be described as extremely unfavourable in relation to the Community as a whole according to the Guidelines on national regional aid (12) (having a per capita gross domestic product, measured in purchasing power standards, of less than 75 % of the Community average). However, the abovementioned regional aid guidelines (and a previous version of these guidelines (13)) state that the specific provisions concerning the granting of State aid in Article 87(3)(a) regions are not applicable in the agriculture sector. Therefore, Article 87(3)(a) of the EC Treaty cannot justify an aid for the production, processing or marketing of Annex I products.

(46)

As regards Article 87(3)(b) of the EC Treaty, it is noted that the measure concerned is not intended to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy in Germany.

(47)

Nor is the aid designed or intended or appropriate to the objectives referred to in Article 87(3)(d) of the EC Treaty.

(48)

Aid to facilitate the development of certain economic activities or of certain economic areas may be deemed by the Commission to be compatible with the common market under Article 87(3)(c) of the EC Treaty if the aid does not adversely affect trading conditions to an extent contrary to the common interest.

(49)

Normally, the Commission would assess compatibility with Article 87(3)(c) of the EC Treaty of aid granted to companies in financial difficulty on the basis of the 2004 Community guidelines on State aid for rescuing and restructuring firms in difficulty (14) (2004 guidelines). However, in accordance with points 103 and 104 of these guidelines, the Commission assesses aid notified prior to 10 October 2004 as well as non-notified rescue and restructuring aid granted in full before the publication of the 2004 guidelines on the basis of the guidelines in force at the time of notification or at the time the aid was granted, as the case may be. Aid 1 was granted in 1996 and Aid 2 was notified in November 1997. At the time, the 1994 Community guidelines on State aid were in force. According to point 2.2 of the 1994 guidelines, special rules for rescue and restructuring aid could be applied to individual beneficiaries in the agriculture sector at the discretion of the Member State concerned. Germany has not asked for the application of special rules. Therefore, the measure is assessed under the conditions and provisions of the 1994 guidelines.

(50)

Aid 1 concerns an 80 % State guarantee on loans worth DEM 1,1 million. The Commission initiated the procedure provided for under Article 88(2) of the EC Treaty on the following grounds:

(51)

Germany has sent a copy of the guarantee contract. This copy shows that the guarantee can only be invoked when the benefiting company is in financial difficulties (bankruptcy- or a similar procedure) and when the sale of other assets owned by the company cannot lead to redemption of the guaranteed loan. Therefore, the specific condition mentioned in the Commission letter to Member States SG(89) D/4328 of 5 April 1989 (15) has been met and the guarantee thus complied with the specific conditions required for a State guarantee.

(52)

However, as the beneficiary of the guarantee, Greußener Salamifabrik GmbH, had to be regarded as a firm in difficulty at the time of the granting of the guarantee, the aid has to be assessed under the rules for rescuing and restructuring firms in difficulties applicable at that time (cf. recital 49). The guarantee was granted in the context of a restructuring of the beneficiary company.

(53)

Germany has sent a copy of a report drafted by Dr. Zimmermann & Partner dated 9 September 1996. According to Germany, this report was the restructuring plan that was adopted at the time of the first State aid. The report has two major shortcomings as a restructuring plan: the status of the report is not clear and the report does not seem to concern any restructuring.

(54)

The report seems to be a description of the company, dated 9 September 1996. According to the report, difficulties are caused by the BSE-crisis and by the loss of export markets in Eastern Europe. However, figures have been changed by hand, presumably at a later date. The status of those amendments is not clear. Furthermore, it is not clear whether the plan was adopted by the owners of the company.

(55)

The report depicts the cost structure and the need for capital in September 1996. Apart from a description of a reinforcement of the existing management it is not clear how the company is to be restructured. If the report was meant as a restructuring plan at the time, which is not clear, it seemed to suggest that the company could outgrow its difficulties without any restructuring.

(56)

To be compatible with the 1994 guidelines, the following conditions would have to be met:

(57)

The report drafted by Dr. Zimmermann & Partner showed a yearly decrease in turnover from 1994 onward. Still, according to the report, turnover would increase again in the following year. The report did not give an explanation of this expected development. However, the return to viability depended on this change of trend. According to point 3.2.2(i) of the 1994 guidelines ‘the improvement in viability must mainly result from internal measures contained in the restructuring plan and may only be based on external factors such as … price and demand increases …, if the market assumptions made are generally acknowledged’. As this condition is not met, the Commission does not consider the aid in form of a guarantee to lead to a restoration of viability.

(58)

The restoration of viability would have been the result of an increase of turnover. Although, this increased turnover apparently could be realised with the existing capacity, the restoration would depend on the loss of market share of competitors (if the market would be stable, however, according to the ‘restructuring’ report, the demand was decreasing). Therefore, the Commission also concludes that the aid does not avoid an undue distortion of competition since a return to viability would have led to a disadvantage of competitors.

(59)

The condition concerning the balance between costs and benefits of the restructuring plan is difficult to assess. Normally, beneficiaries are expected to make a significant contribution from their own resources or from external commercial financing. According to the report drafted by Dr. Zimmermann & Partners the owner of the benefiting company would inject new capital but it was unclear whether this was done. Therefore, the Commission cannot conclude that the aid complies with the 1994 guidelines on this point.

(60)

Finally, it is unclear how the ‘restructuring’ would be monitored or reported on. Consequently, this condition of the guidelines is not met either.

(61)

Greußener Salamifabrik GmbH met the criteria to fall under the definition of small and medium-sized enterprises (SMEs). Point 3.2.4 of the 1994 guidelines provides that the Commission is justified in taking a less restrictive attitude towards restructuring aids granted to SMEs as those tend to affect trading conditions less than that to large firms. However, this more lenient approach towards SMEs in assessing restructuring aid particularly concerns the obligation of capacity reduction in markets of structural overcapacity and the reporting obligation. In spite of the more lenient approach applicable to SMEs, the aid was already found not to lead to a restoration of viability (cf. recital 57) and to distort competition unduly.

(62)

For the abovementioned reasons, the Commission considers Aid 1, granted in the form of State guarantees to Greußener Salamifabrik GmbH for an amount of maximally DEM 880 000, to be incompatible with Articles 87 and 88 of the EC Treaty. Since the aid has been granted illegally and is incompatible, it has to be recovered.

(63)

The second aid concerns the partial mobilisation and payment of DEM 370 000 to Sparkasse Erfurt under the first guarantee in the context of the debt rescheduling/restructuring undergone in 1997 as well as an 80 % State guarantee on a DEM 2,5 million loan taken out in 1997 at Dresdner Bank.

(64)

As it is stated in point 62 that the first State guarantee was found to be illegal and incompatible aid to Greußener Salamifabrik GmbH under Articles 87 and 88 of the EC Treaty, the part-mobilisation of the first guarantee under the second restructuring plan is covered by these findings.

(65)

The 80 % State guarantee on a DEM 2,5 million loan has to be assessed under the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (cf. recital 34). The general conditions for guarantees applied by Thüringer Aufbaubank, provided to the Commission, show that guarantees can only be invoked when the benefiting company is in financial difficulties (bankruptcy- or a similar procedure) and when the sale of other assets owned by the company cannot lead to redemption of the guaranteed loan (cf. also recital 51). Therefore, the specific conditions for guarantees under point 5.3 of the abovementioned Commission Notice are met.

(66)

Pursuant to point 2.1 of the 1994 guidelines, typical symptoms for a firm in difficulties are deteriorating profitability, increasing size of losses, diminishing turnover, growing inventories, excess capacity, declining cash flow, increasing debt, rising interest charges and low net asset value.

(67)

As the German authorities communicated that the company was permanently threatened by insolvency, Greußener Salamifabrik GmbH was found to be a firm in difficulty at the time of the granting of the guarantee (cf. recitals 9 and 34). Therefore the aid has to be assessed under the applicable rules for rescuing and restructuring firms in difficulties. As set out in recital 49, these are the 1994 guidelines. The Commission initiated the procedure provided for under Article 88(2) of the EC Treaty against this aid because it was doubted whether the following conditions from the 1994 guidelines were met:

(68)

According to point 3.2.2(i) of the 1994 guidelines, aid for restructuring shall basically only be granted once. Germany has not commented upon this point.

(69)

The fact that another guarantee was granted in the course of a second restructuring violates the basic principle of the one-off character of restructuring aid.

(70)

The Commission doubted whether the restructuring plan, presented to justify the second restructuring aid (i.e. the second guarantee), would lead to a restoration of viability. The restoration of viability seemed to be based on a higher turnover. This increased turnover seemed unlikely, especially since the first projected turnover figures were already proven to be too optimistic at the time of the initiation of the procedure. Germany has not provided any justification or explanation for the projected increases in turnover. Therefore, the Commission maintains its doubts on the fulfilment of the condition that the restructuring plan should lead to restoration of viability.

(71)

As far as the condition on the avoidance of an undue distortion of competition is concerned, Germany presented two arguments. First of all, Germany stated that the company concerned was too small to distort competition or influence Community trade. Secondly, Germany stated that the company would not expand its capacity but would make better use of existing capacity.

(72)

The first argument is rebutted by the jurisprudence of the Court of Justice (cf. recital 38). As to the second argument, according to point 3.2.2(ii) of the 1994 guidelines, the Commission only asks for a reduction of capacity if there is a structural excess of production capacity in the European Community. At the initiation of the procedure the Commission found that there was no overcapacity in the sector concerned. However, the Commission wondered how the measure could be considered in the common interest if it was based on increased production. Increased production would automatically lead to a decrease in market share for competitors.

(73)

Germany has in no way explained how the increased production could be absorbed by the market without negative consequences for competitors. Moreover, Germany has not given any data on the balance between the benefit for the company concerned and the costs for the sector as a whole. Therefore, the Commission cannot assess whether the measure avoids an undue distortion of competition.

(74)

Germany did not provide any information on the monitoring of the restructuring plan.

(75)

As of 8 January 1997 Ergewa GmbH took over 75 % of the shares of the beneficiary. It is not clear whether Ergewa falls under the SME definition under the 1994 guidelines and thus changes the status of Greußener Salamifabrik GmbH, being a more than 25 % shareholder. However, even taking into account the more lenient approach for SMEs provided for in point 3.2.4 of the 1994 guidelines, it was made clear in recital 72 that no overcapacity existed in the sector concerned and furthermore no assessment could be made on the monitoring requirement due to a lack of information. Therefore, the fact that the beneficiary company could probably still fall under the SME definition in 1997, does not change the evaluation of the present aid.

(76)

For the abovementioned reasons, the Commission considers Aid 2, granted in the form of a State guarantee for an amount of up to DEM 2 million to Greußener Salamifabrik GmbH to be incompatible with Articles 87 and 88 of the EC Treaty. The German authorities stated in their letter of 4 February 1999, and reiterated in their letter of 18 May 2005, that the guarantee had been given subject to the Commission authorisation. Therefore, as no payments have been made under the guarantee, the incompatible aid does not have to be recovered.

(77)

The Commission finds that the State aid measures in the form of State guarantees worth DEM 880 000 (Aid 1) and DEM 2 000 000 (Aid 2), totalling DEM 2,88 million on loans worth DEM 1 100 000 and DEM 2 500 000 respectively, totalling DEM 3,6 million are incompatible with the common market.

(78)

Incompatible aid granted illegally has to be recovered. The Commission notes that the insolvency procedure was initiated for Greußener Salamifabrik on 1 October 1999. As it is not known to the Commission whether the company has ceased its existence as a result of the insolvency proceedings, the recovery may still have to take place.

(79)

The Commission draws the attention of the German authorities to the fact that according to point 6.4 and 6.5 of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees the question whether the illegality of the aid affects the legal relationship between the State and third parties is a matter which has to be examined under national law. National courts may have to examine whether national law prevents the guarantee contracts from being honoured and in that assessment the Commission considers that they should take account of the breach of Community law,

21.12.2005   

EN

Official Journal of the European Union

L 335/57

(1)

On 9 December 2004, the Political and Security Committee adopted Decision EUPOL Kinshasa/1/2004 (2) appointing Mr Adílio Custódio as Head of Mission of EUPOL ‘Kinshasa’.

(2)

The abovementioned Decision expires on 31 December 2005.

(3)

On 7 November 2005 the Council agreed to extend EUPOL ‘Kinshasa’ for a further period of 12 months.

(4)

The Secretary—General/High Representative has proposed the extension of the mandate of Mr Adílio Custódio as Head of Mission of EUPOL ‘Kinshasa’ until the end of the Mission.

(5)

The mandate of the Head of Mission of EUPOL ‘Kinshasa’ should therefore be extended until the end of the Mission,

21.12.2005   

EN

Official Journal of the European Union

L 335/58

(1)

Article 9(1) of Joint Action 2005/824/CFSP provides that the Council authorises the Political and Security Committee to take the relevant decisions in accordance with Article 25 of the Treaty, including the decision to appoint, upon a proposal by the Secretary-General/High Representative, a Head of Mission/Police Commissioner.

(2)

The Secretary-General/High Representative has proposed the appointment of Mr Vincenzo Coppola,

21.12.2005   

EN

Official Journal of the European Union

L 335/59

‘—

34 t originating in Botswana;’,

‘—

34,1 t originating in Botswana;’.