(1)

By electronic notification dated 29 November 2006, registered as received by the Commission on 30 November 2006 under reference number A/39718, the Slovak authorities, in accordance with Article 88(3) of the EC Treaty, notified the Commission of their intention to grant regional ad hoc investment aid in favour of the company Glunz&Jensen s.r.o.

(2)

A request for information was sent on 26 January 2007 (D/50360). The Slovak authorities replied by letter dated 20 February 2007 (A/31585).

(3)

By letter dated 24 April 2007 (hereinafter ‘the opening decision’) the Commission informed Slovakia that it had decided to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of the measure.

(4)

The Commission’s decision to initiate the procedure was published in the Official Journal of the European Union (2). The Commission called on interested parties to submit their comments.

(5)

The Commission did not receive any comments from interested parties or from the Slovak Republic.

(6)

The aim of the aid measure is to promote regional development in the Prešov region (eastern Slovakia), which was an assisted area under Article 87(3)(a) of the EC Treaty in accordance with the Slovak regional aid map (3) applicable at the date of the notification, with a regional aid ceiling of 50 % net grant equivalent (NGE).

(7)

The proposed project constitutes an ad hoc aid measure notified by the Slovak authorities. The aid in question is not being granted under an existing scheme (i.e. its legal basis is not listed in the Accession Treaty as an existing aid scheme, nor was it the subject of the so-called interim mechanism, nor has the Commission approved an aid scheme based on these legal provisions since Slovakia’s accession to the EU).

(8)

The notified aid is to be provided in the form of a tax exemption, applied on an annual basis between 2007-2010, of up to 100 % of the corporate tax liability of the aid recipient, Glunz&Jensen s.r.o. The total amount of the tax exemption is limited to SKK 42 million at present value (4) (approx. EUR 1,15 million). The aid cannot be cumulated with aid received from other sources for the same investment project.

(9)

The legal basis of the ad hoc aid is State Aid Act No 231/1999, as amended; Income Tax Act No 595/2003, as amended; and Income Tax Act No 366/1999, as amended at 31 December 2003, in particular Section 52(3) of Income Tax Act No 595/2003, as amended, under the conditions laid down in Section 35a of Income Tax Act No 366/1999, as at 31 December 2003 (5).

(10)

The beneficiary of the aid, Glunz&Jensen s.r.o., is a large enterprise, i.e. not an SME within the meaning of Commission Regulation (EC) No 70/2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises (6). Glunz&Jensen s.r.o. is the Slovak subsidiary of Glunz&Jensen A/S (hereinafter ‘Glunz&Jensen’) which has its headquarters in Ringsted (Denmark), with other subsidiaries at the time of notification in Virginia (USA) and in Thetford (UK).

(11)

Glunz&Jensen is the world’s leading manufacturer and distributor of graphic arts pre-press processing equipment for offset printing plates and plateline equipment, with a market share of approximately […] % (7) in Europe.

(12)

In 2004, Glunz&Jensen s.r.o. started work on an initial investment in Slovakia involving an investment volume of SKK 213 million (approx. EUR 5,8 million). The investment project is being implemented over the period 2004-2009, according to the Slovak authorities, in two phases: 2004-2006 and 2007-2009.

(13)

The project aims to relocate the production activities that existed in 2004 in the UK and Denmark to Prešov. As a result of the relocation project, the Thetford plant was closed down at the end of 2006.

(14)

The Prešov plant is to be developed into the firm’s main production centre. In fact, as indicated by the Slovak authorities, all machinery to be installed in the Slovak plant is being transferred directly from Denmark and the UK. The eligible costs of the project therefore include only the buildings and some minor additional equipment.

(15)

The first step of the 2004-2006 investment phase consisted in the purchase of a production hall and a greenfield site for future expansion. The subsequent second step involved renovating the facilities and purchasing equipment (not directly linked to production). The total amount for the first phase of the investment was SKK 128 million (approx. EUR 3,5 million). As stated in declarations annexed to the notification, Glunz&Jensen s.r.o. did not receive any State aid for this part of the project, nor is any application pending.

(16)

The second phase of the investment, to be carried out over the period 2007-2009, is the project notified by the Slovak authorities on 29 November 2006. This part covers continuation of the initial project with the construction of further buildings and the purchase of further equipment (IT, trucks and office equipment) for a total of SKK 84 million at present value (approx. EUR 2,3 million).

(17)

The production unit in Slovakia opened in April 2005. Since then, production at the factory has increased markedly and productivity has improved considerably (8).

(18)

The Commission, in its decision to initiate the formal investigation procedure in the present case, noted that it had doubts as to the compatibility of the aid with the common market based on Article 87(3)(a) of the EC Treaty and on the Guidelines on National Regional Aid (9) (hereinafter referred to as ‘RAG 1998’) for the following reasons:

(19)

No comments were received from the Slovak authorities or from third parties to allay the doubts which were raised when the formal investigation was initiated.

(20)

By notifying the aid measure with a standstill clause until authorised by the Commission, the Slovak authorities have complied with the procedural requirements of Article 88(3) of the EC Treaty.

(21)

The Commission considers that the measure constitutes State aid within the meaning of Article 87(1) of the EC Treaty for the following reasons, already indicated in the opening decision.

(22)

State resources are involved since an exemption from the payment of corporate income tax is planned.

(23)

The measure would relieve the beneficiary of the aid from costs which it would have had to bear under normal market conditions. It would therefore provide an advantage to Glunz&Jensen s.r.o. over other companies.

(24)

The measure is selective since it relates to only one undertaking.

(25)

The measure affects trade between Member States since (i) the beneficiary is active in a sector where strong intra-Community trade exists and (ii) the relocation of activities from Denmark and the UK has a strong effect on sectoral trade flows.

(26)

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. 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. The measure cannot be considered an important project of common European interest or a measure intended to remedy a serious disturbance in the Slovak economy, as provided for by Article 87(3)(b) of the EC Treaty. Nor does the measure qualify for the exception allowed by Article 87(3)(c) of the EC Treaty, which provides for the authorisation of aid to facilitate the development of certain economic activities or of certain economic areas if the aid does not adversely affect trading conditions to an extent contrary to the common interest. In the same way, it does not have as its objective the promotion of culture and heritage conservation as provided for by Article 87(3)(d) of the EC Treaty.

(27)

Article 87(3)(a) of the EC Treaty provides for the authorisation of aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment. The Prešov region (eastern Slovakia) is an eligible region under that derogation.

(28)

In its decision to open the formal investigation procedure, the Commission explained the reasons, summarised in Part III of this Decision, for which it doubted that the measure could qualify for the derogation under Article 87(3)(a) of the EC Treaty. In the absence of any comments from the Slovak Republic or third parties, the Commission can only find that these doubts are confirmed.

(29)

The Commission finds that the measure notified by the Slovak Republic, as set out under paragraphs 6 to 9 above, is not compatible with the common market under any derogation laid down in the EC Treaty and must be prohibited. According to the Slovak authorities, the aid has not been granted, and therefore there is no need for it to be recovered,