92/389/EEC: Commission Decision of 25 July 1990 concerning the State aid provided in for in Decree-Laws No 174 of 15 May 1989 and No 254 of 13 July 1989 and in draft Law No 4230 regularizing the effects produced by the abovementioned Decree-Laws (Only the Italian text is authentic)

• Articles: 5

Article 1

The tax incentive scheme provided for in draft Law No 4230 of 4 October 1989 is incompatible with the common market within the meaning of Article 92 (1) of the EEC Treaty.

Italy shall not implement the scheme in question and, in particular, shall not grant any tax relief in respect of transfers by Montedison or by any other firms under Decree-Laws No 174 of 15 May 1989 and No 254 of 13 July 1989.

Article 2

Italy shall inform the Commission, within two months of the date of notification of this Decision, of the measures it has taken to comply with Article 1.

Article 3

This Decision is addressed to the Italian Republic. Done at Brussels, 25 July 1990. For the Commission

Leon BRITTAN

Vice-President

(1) Germany v. Commission [1984] ECR 1451. (2) OJ No C 281, 7. 11. 1989, p. 9. (3) OJ No C 48, 28. 2. 1990, p. 6. (4) Gezamenlijke Steenkolenmijnen v. A. Autorità, [1961] ECR 40. (5) Commission v. France, [1969] ECR 523. (6) Italy v. Commission, [1974] ECR 709. (7) Philip Morris v. Commission, [1980] ECR 2671.

Article 92

(3). The discretionary powers of the Chambers of Parliament cannot, therefore, be exercised in a particular case in order to render permanent an infringement of the EEC Treaty.

Lastly, the fact that a mandatory act is not involved is implicitly acknowledged by the Italian Government in its telex message dated 18 June 1990, in which it states that the draft Law would not be ratified by Parliament in time for it to benefit Montedison. However, there is no guarantee that this will not happen since Parliament could at any time decide to approve the draft Law. Furthermore, if the draft Law is no longer of any practical value, it should be definitively withdrawn by the Government.

In view of the above considerations, the Commission considers that the measure introduced by Decree-Law No 174 cannot be regarded as a general measure but rather as granting aid within the meaning of Article 92 (1) to a very small number of enterprises, if not just to Montedison, the only firm, according to the information available to the Commission, to carry out a transfer - approved by the CIPE - in the short time Decree-Laws No 174 and No 254 were in force.

It should also be noted, for the purposes of Article 92 (1), that Montedison operates in the chemicals sector through Montefluos, which produces fluorides, elastomers, chlorofluorine derivatives, peroxides, etc., through Himont, which manufactures polypropylenes and other polymers, and through SIR, which produces resins, polyesters, etc.

It is the main shareholder in Enimont, which is present in virtually all sectors of the chemical industry. In these sectors, intra-Community competition is intense and substantial overcapacity is a frequent feature at Community level.

The Commission notes that, in 1987, Italy's exports of chemical products to other Member States were worth ECU 4 234 million while exports to third countries were valued at ECU 3 813 million, the respective figures for 1988 being ECU 5 074 million and ECU 4 151 million.

Italian imports from other Member States in 1987 and 1988 were worth ECU 9 633 million and 10 974 million, while those from third countries amounted to ECU 3 085 million and 3 472 million respectively.

In 1988, Montedison achieved a turnover of Lit 14 122 000 million, of which Lit 7 412 000 million (52,5 %) represented sales in Italy and Lit 2 964 000 million, (21 %) sales elsewhere in western Europe. Thus, it is clear that Montedison holds a substantial share of the Italian market and has a significant presence on the markets in the other Member States.

Even if the turnover of the companies subsequently transferred to Enimont were to be deducted from the total turnover, Montedison's remaining turnover, i. e. Lit 5 446 000 million, would still be considerable.

The Commission is of the opinion that, as the Court ruled on 17 September 1980 in Case 730/79 (7), when State financial aid strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid.

Under the circumstances, there is no doubt that the tax relief amounting to Lit 774 000 million would considerably strenghten Montedison's financial position. Article 92 (1) embodies the principle of a general prohibition on aid having the characteristics which are set out in that Article and present in the case in question.

IV

The exceptions to the above principle provided for in Article 92 (2) are inapplicable to the aid at issue because of its nature and objectives.

Article 92

(3) lists the aid which can be considered compatible with the common market. Compatibility with the Treaty should be considered within the Community context and not within the context of a single Member State. In order to maintain a properly functioning common market and to observe the principle laid down in Article 3 (f) of the Treaty, the exceptions provided for in Article 92 (3) must be construed in a restrictive manner.

In particular, the exceptions are applicable only when the Commission is satisfied that, without the aid, the interplay of market forces would alone be insufficient to prompt potential recipients to adopt patterns of behaviour that would serve one of the objectives of common interest pursued by those exceptions.

To apply the exceptions in the case of aid that did not serve such an objective or in cases where aid was not necessary for that purpose would be to confer an unfair advantage on the enterprises or industries of certain Member States, thereby strengthening their financial position, and to affect trade between Member States and distort competition without any justification on grounds of common interest within the meaning of Article 92 (3).

In the case in point, the Italian Government has been unable to provide, and the Commission to find, any reason for classifying the planned aid in any of the categories of exemption under Article 92 (3).

Since the aid is operating aid and is not designed to finance productive investments, the exceptions provided for in Article 92 (3) (a) and (c) in respect of aid to promote or facilitate the development of certain areas are not applicable.

As regards the exceptions provided for in Article 92 (3) (b), it is clear that the aid in question is not intended to promote the execution of an important project of common European interest or to remedy a serious disturbance in the Italian economy.

As for the exception provided for in Article 92 (3) (c) for aid to facilitate the development of certain economic activities, it is clear, as stated above, that the aid in question is operating aid and is not aimed at financing productive investments. Market conditions in the relevant sector seem likely to ensure a normal development without State aid. Such aid cannot, therefore, be justified on grounds of common interest,

HAS ADOPTED THIS DECISION: