91/305/EEC: Commission Decision of 24 January 1991 concerning investment aid which the Belgian Government plans to grant to Mactac SA, Soignies (Only the French and Dutch texts are authentic)

• Articles: 3

Article 92

(1) provides that aid having the features therein described is in principle incompatible with the common market.

The exceptions provided for in Article 92 (2) of the EEC Treaty are not applicable in the case in point in view of the nature and objectives of the aid in question.

V

Article 92

(3) of the EEC Treaty lists aid which may be compatible with the common market. Compatibility with the EEC Treaty must be determined in the context of the Community as a whole and not in that of a single Member State. In order to ensure the proper functioning of the common market, and having regard to the principle embodied in Article 3 (f) of the EEC Treaty, the exceptions provided for in Article 92 (3) must be construed narrowly when any aid scheme or any individual aid award is scrutinized.

In particular, they may be invoked only when the Commission is satisfied that, without the aid, market forces alone would be insufficient to guide the recipients towards the patterns of behaviour that would serve one of the said objectives.

Applying the exceptions to cases not contributing to such an objective or where aid is not needed to this end would mean conferring advantages on the industries or undertakings of certain Member States, thus strengthening their financial position, adversely affecting trading conditions between Member States and distorting competition without any justification based on grounds of the common interest referred to in Article 92 (3).

In view of the foregoing, the aid in question does not qualify for any of the exceptions provided for in Article 92 (3).

Article 92

(3) (a) and (c) allows exceptions for aid that promotes or facilitates the development of certain areas, but there is no region in Belgium which has an abnormally low standard of living or serious underemployment within the meaning of subparagraph (a); as regards the exception in subparagraph (c), the Soignies area in the province of Hainaut, where the firm concerned is located, is not included in the special regional aid zones set out in Commission Decision 82/740/EEC (4), as last amended by Decision No 88/612/EEC (5), on the definition of development areas in Belgium.

In the course of the procedure, the Belgian Government and the recipient enterprise stressed the serious problems of high structural unemployment and low per capita GDP in the Soignies area. On the basis of indicators defined by the Commission, they submitted that Soignies fulfilled the conditions for being considered a region qualifying for regional aid pursuant to Article 92 (3) (c).

The first point to be noted in this connection is that the scheme to be applied here has no regional objectives. In the course of the Commission's examination of the Law of 17 July 1959 pursuant to Article 93 (1) of the EEC Treaty referred to in the last recital of point 1 of this Decision, the Belgian Government emphasized in its letter of 12 November 1990 that the Law was not simply a general aid scheme but also a horizontal aid system which provided for:

- aid to protect the environment, in accordance with the Commission framework,

- aid for energy savings and the rational use of energy,

- aid to small and medium-sized undertakings,

- aid to reduce structural and long-term unemployment,

- aid to promote the rational utilization of raw materials.

It must therefore be concluded that regional development is not one of the objectives of the Law of 17 July 1959.

A second problem concerning the application of the regional exemption provided for in subparagraph (c) to the aid plan in question concerns the eligibility of the town of Soignies for regional aid. It should first be noted that the region of Soignies is not listed as an eligible region under the aid scheme introduced by the Law of 30 December 1970 which was authorized by Decision No 82/740/EEC. The Commission also notes that it has never been requested by the Belgian Government to amend the abovementioned Decision in order to include the region of Soignies in the list of eligible regions.

The principles for the coordination of regional aid schemes and the method for the application of Article 92 (3) (c) to regional aid established by the Commission were published in the C series of the Official Journal of the European Communities (4). According to that method, assessment of aid is based in particular on structural unemployment and the gross domestic product of a region in relation to the national average. The Belgian Government and Mactac referred in their letters of 25 September 1990 and 6 November 1990 to that method, pointing out that on the basis of the thresholds in force for Belgium (5), the region of Soignies in practice satisfied the conditions for entitlement to regional aid.

The Commission considers that the fact that a region reaches or exceeds the thresholds of the method is not sufficient to apply the exemption of Article 92 (3) (c) if the Member State in question does not regard the region in question as eligible under its regional policy and therefore does not adopt measures under national law establishing a regional aid scheme in that region.

The application of regional development measures to the whole of a given region, and not to enterprises in isolated geographical points of a region, is not simply an administrative necessity but a response to the need for action throughout the area in question, in accordance with the spirit and letter of Article 92 (3) (c) which provides for aid 'to facilitate the development . . . of certain economic areas'.

This interpretation is confirmed in point 9 (iii) of the abovementioned coordination principles which states that regional aid may not be granted in a pinpoint manner, i. e. to isolated geographical points having virtually no influence on the development of a region as a whole.

In so far as such aid is not granted to all enterprises located in the region experiencing the socio-economic difficulties described in the method, an individual award to a single enterprise located at a given geographical point (e.g. a town) of the region in question would necessarily have a very limited effect and would not contribute to the development of the region. The aid will not be sufficiently in the Community interest as required by the EEC Treaty.

It must be concluded from the foregoing that the aid which the Belgian Government plans to grant to Mactac alone (investment aid leading to only 51 new jobs) does not satisfy the tests of Article 92 (3) (c) with regard to regional aid.

As to the exceptions provided for in Article 92 (3) (b), the aid in question is not intended to remedy a serious disturbance in the Belgian economy and the Belgian Government has not put forward any such justification. The other exception provided for in paragraph 3 (b) concerns aid to promote the execution of an important project of common European interest. In its framework on State aid in environmental matters which it communicated to Member States by letters dated 7 November 1974, 7 July 1980 and 23 March 1987, the Commission stated that such aid could qualify for exemption pursuant to Article 92 (3) (b) provided that it was granted to finance additional adaptation investments in existing plants, other than investments leading to increased production capacity.

The Mactac investment, however, concerns the setting-up of a new production line leading to a 36 % increase in overall capactiy. Aid to such an investment does not satisfy the criteria for exemption pursuant to Article 92 (3) (b).

With regard to the exception in Article 92 (3) (c) for aid to facilitate the development of certain economic activities without adversely affecting trading conditions to an extent contrary to the common interest, the Commission pointed out in its letter of 11 July 1990 to the Belgian Government that the construction of a new production line does not facilitate the development of the industry in question within the meaning of paragraph (3) (c). It considered that it was quite normal, and in each producer's own interests, to maintain or increase its market presence, to develop and market new products, and to use the most modern and efficient techniques for a new line. It also noted that the Belgian authorities had not been able to show the need for the aid and assumed that, given the financial position of the firm and its parent company, market forces alone were sufficient to ensure that the project was carried out without State aid.

In their comments following the opening of the procedure, the Belgian Government and Mactac placed particular emphasis on the regional and environmental aspects of the investment and did not reject the assessment set out by the Commission in its letter of 11 July 1990 as described above.

Mactac SA stressed the fact that it allocates a large part of its budget to research and development costs and that the results obtained are often copied by new producers. The view of the Commission is that the aid in question is an investment aid to finance the construction of a new production line and not an aid covered by the Community framework on State aid for research and development (1). Thus the firm's research activities do not justify aid for a productive investment.

Mactac also referred to the higher investment, compared with the setting-up of a traditional line, required for a new coating system involving resins in suspension in water instead of resins dissolved in solvents derived from oil. Reference should be made in this connection to the framework on a Community approach to State aid in environmental matters, which is based on the 'polluter pays' principle.

Lastly, Mactac pointed out that two of its competitors were in the process of building new factories for the production of self-adhesive materials in France and Luxembourg with State aid. First, aid to an enterprise cannot be justified on the ground that aid is granted to its competitors. As regards the specific aids to which Mactac referred, one concerns an aid to the setting-up of Fasson at Rodange in Luxembourg and the other the setting-up of Raflatac at Pompey (Meurthe-et-Moselle) in France.

It should be noted that both the new plants benefited under regional aid schemes. By Decision of 5 November 1986, the Commission approved regional aid not exceeding 30 % net grant equivalent for the European Development Pole in which Rodange is located and, by Decision of 27 July 1989, it approved a nominal 10 % regional planning grant (PAT) for the setting-up of Raflatac at Pompey. While it is true that both investments could also have gone ahead without the aid, they would not necessarily have been in the form of new plants in the regions in question.

Consequently the aid proposed by the Belgian Government does not fulfil the conditions for exemption under Article 92 (3) of the EEC Treaty,

HAS ADOPTED THIS DECISION: Article 1

The Belgian Government shall not implement the plan of the Walloon authorities, notified to the Commission by letter dated 31 May 1990, to grant aid under the Law of 17 July 1959 in the form of a capital grant of Bfr 93 million and a five-year exemption from the property tax for investments to be carried out by Mactac SA at Soignies. Article 2

The Belgian Government shall inform the Commission, within two months of the date of notification of this Decision, of the measures it has taken to comply therewith. Article 3

This Decision is addressed to the Kingdom of Belgium. Done at Brussels, 24 January 1991. For the Commission

Leon BRITTAN

Vice-President (1) Moniteur belge 29. 8. 1959. (2) OJ No L 177, 8. 7. 1975, p. 13. (3) OJ No C 229, 14. 9. 1990, p. 8. (4) OJ No L 312, 9. 11. 1982, p. 18. (5) OJ No L 335, 7. 12. 1988, p. 31. (6) OJ No C 31, 3. 2. 1979, p. 9 and OJ No C 212, 12. 8. 1988, p. 2. (7) OJ No C 163, 4. 7. 1990, p. 5. (8) OJ No C 163, 4. 7. 1990, p. 5. (9) OJ No C 83, 11. 4. 1986, p. 2.