92/465/EEC: Commission Decision of 14 April 1992 concerning aid granted by the Land of Berlin to Daimler- Benz AG Germany (C 3/91 ex NN 5/91) (Only the German text is authentic)

• Articles: 6

Article 1

The land purchase contract of 16 July 1990 between Daimler-Benz AG and the Land of Berlin concerning a site of 61 740 m2 at the Potsdamer Platz in Berlin contains State aid amounting to DM 86 832 450, such aid being illegal, since it was granted to the undertaking in breach of Article 93 (3) of the EEC Treaty. Of this aid, an amount of DM 53 million is compatible with the common market under Article 92 (2) (c) of the EEC Treaty. However, the remaining DM 33 832 450 of the aid is incompatible with the common market within the meaning of Article 92 of the EEC Treaty.

Article 2

The Federal Government is hereby required to ensure that the aid which is incompatible with the common market is reimbursed within two months of publication of this Decision through repayment of DM 33 832 450 by Daimler-Benz to the Land of Berlin. This amount shall be increased by the amount of interest which the undertaking might improperly enjoy if repayment takes place after expiry of the two-month deadline.

Article 3

The Federal Government shall inform the Commission within two months of publication of this Decision of the measures which it has taken in order to comply with this Decision.

Article 4

This Decision is addressed to the Federal Republic of Germany. Done at Brussels, 14 April 1992. For the Commission

Leon BRITTAN

Vice-President

(1) OJ No C 128, 18. 5. 1991, p. 5. (2) In examining the question of whether this land transaction contains any elements of State aid, the Commission applied arguments similar to those in Decision 92/11/EEC of July 1991 (Toyota) (OJ No L 6, 11. 1. 1992, p. 36). (3) Capolongo v. Maya, [1973] ECR 611. (4) COM(90) 400/1 final, 21. 8. 1990, p. 70. (5) OJ No C 212, 12. 8. 1988, p. 2. (6) Commission v. Germany, [1973] ECR 813. (7) Deufil v. Commission, [1987] ECR 901.

Article 92

(2) (c) does indeed provide that 'aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division' is compatible with the common market.

West Berlin is certainly one of the areas covered by that provision. Thus, the Commission has on previous occasions, and most recently in March 1989 (cf. State aid N 266/88) authorized numerous grants of aid for the economy of West Berlin provided for in the Berlinfoerderungsgesetz (Berlin Promotion Law), on the basis of Article 92 (2) (c) and in accordance with the joint declaration of the six founding Member States of the Community regarding the special position of Berlin and the need to afford it the support of the free world.

In its Communication on the Community and German unification of 21 August 1990 (4), the Commission took the view that the economic justification for continued subsidization of Berlin had ceased to exist. The Commission, which welcomed the intention of the Germany authorities to phase out such aid totally, stated that, in its own re-examination of aid to the Zonal Border Area and West Berlin, which was in progress, it would take a decision on the phasing-out period which it considered necessary and justified for such aid.

However, the German authorities and DB have pointed out that DB made it clear as early as 1988 that it was interested in investing in Berlin and that the Potsdamer Platz was selected in September 1989, i.e. before the Berlin Wall was opened up. Even in April 1990, when the valuation of the chosen site was undertaken, no decision had yet been taken on the reunification of Germany and the timing of any such reunification was highly uncertain. At that time, the area round the Potsdamer Platz was not in any way integrated into West Berlin; nor were there any specific plans for the development of that part of the city.

A particular complicating factor for any investor interested at that time in acquiring a large piece of land in that part of the city was the uncertainty as to the ownership of certain sites and the impossibility of combining larger pieces of land without the usual disadvantage of having smaller pieces within the sites belonging to private individuals unwilling to sell. It is therefore not surprising that each of the three alternative pieces of land which were offered to DB by the Berlin Senate in January 1990 had these shortcomings.

The demolition of the Berlin Wall at the beginning of 1990 did not by any means eliminate the obvious disadvantages of the division of Germany and in particular the disadvantages for this part of the city. This situation confronted any specific interest on the part of large private investors (leaving aside DB), since any private project would have had to take account of a new town planning policy, as yet unspecified building regulations and public investment relating to transport links and public utilities. These circumstances and in particular the fact that the town planning requirements had not yet been determined not only created a large degree of uncertainty, but also meant that any potential investor had to be prepared to accept financial risks that were virtually unquantifiable.

The Commission consequently concedes that the Berlin Senate would have had sufficient arguments to demonstrate that specific aid was necessary and justified in order to offset the abovementioned disadvantages and to win over a pioneering investor who would be willing to accept the associated risk and undertake a large building project that would contribute to the town planning objectives for this part of the city.

In addition, the contract of sale imposes various specific obligations on DB that still have to be determined in detail once the town planning policy has been finalized and an implicit additional obligation on DB to acquire, if possible, the Bellevue Tower, to demolish this 'eyesore' and to include the site in the building project. After examination of the information transmitted to it by letter dated 25 September 1991, the Commission continued to take the view that the contract of sale contained a State aid element, but conceded that the Berlin Senate could grant State aid and that such State aid was necessary in order to offset the disadvantages created for DB by the circumstances surrounding the contract of sale at that time before unification. However, in so far as such circumstances were not expressly reflected in the contract, they could not be taken into account in the valuation of the land, though they justified State aid to offset such disadvantages.

The Commission therefore declared itself willing at the end of 1991 to examine, together with the Berlin Senate's experts and with DB, the financial consequences of the additional obligations and charges imposed on DB in the sale contract. For this purpose, the Commission determined the net expenditure which DB would incur as a result of its decision to include the land at Eichhornstrasse 5-6 in the building project. Such net expenditure could be regarded as a reflection of the economic disadvantages created in July 1990, i.e. before German unification, by the division of the country. Aid to offset these additional real economic costs could accordingly be justified on the basis of Article 92 (2) (c). However, the Commission emphasized that it could not declare itself in agreement with the net expenditure specified by DB in its comments during the procedure, which DB had estimated at DM 112,5 million out of the total of DM 207,8 million arising from obligations and charges under the contract of sale.

As stated above, the technical examination undertaken in January and February 1992 reached the conclusion that the net expenditure incurred by DB as a result of the purchase of the Bellevue Tower and the inclusion of the Bellevue site in the building project should be put at DM 53 million. The Commission therefore takes the view that aid to DB amounting to a maximum of DM 53 million is compatible with the common market under Article 92 (2) (c).

The remaining aid amounting to DM 33,8 million contained in the contract of sale is, however, incompatible with Article 92 of the EEC Treaty.

Article 92

(3) specifies the types of aid that may be considered compatible with the common market. Compatibility with the Treaty must be determined here in a Community context and not with reference to a single Member State. So as to ensure the proper functioning of the common market and take account of the principles of Article 3 (f), the derogations provided for in Article 92 (3) from the basic ban on aid laid down in Article 92 (1) must be interpreted strictly in examining aid schemes or individual aid. In particular, they must be applied only if the Commission is convinced that market forces alone are not sufficient to cause potential aid recipients to act, without aid, in such a way as to contribute to achieving one of the objectives specified in Article 92 (3).

As regards the derogation provided for in Article 92 (3) (a), it should be noted that the Commission has always taken the view that none of the regions of West Germany has such a serious economic and social situation as to allow application of this derogation from the basic ban on aid under Article 92 (1) (under this derogation, aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment may be considered to be compatible with the common market).

As regards the derogation provided for in Article 92 (3) (b), the indirect aid for the purchase of the land in question is not intended either to promote an important project of common European interest or to remedy a serious disturbance in the economy of a Member State.

Under Article 92 (3) (c), aid to facilitate the development of certain economic activities or of certain economic areas may be authorized, where such aid does not adversely affect trading conditions to an extent contrary to the common interest.

On the regional aid aspect, it should be noted that, in DB's view, Berlin should continue to be included amongst the German regions requiring assistance because the effects of the division of Germany are still evident. However, the aspect of the division of Germany is an argument that must be examined within the framework of Article 92 (2) (c). With regard to the eligibility of a region to receive regional aid under Article 92 (3) (c), the Commission has drawn up and published an analytical method involving two stages of analysis (5). Under the criteria applying in the first stage of analysis, the region in question must, on the basis of the thresholds (1990) applying for Germany, have either a gross domestic product per head of population of a maximum of 74 % of the (West German) national average or an unemployment rate of more than 143 % of the national average. However, West Berlin does not come near these thresholds (gross domestic product 1986: 102 %; unemployment 1987 to 1990: 119,4 %).

Other economic indicators may be applied in the second stage of analysis; in some circumstances, and especially for regions which are at the margin of the thresholds applied in the first stage of analysis, it is possible that the second stage may reveal an adequate justification for regional aid.

However, West Berlin is far from satisfying the thresholds established in the first stage of analysis. Furthermore, it must be noted that, when the new list of West German assisted areas was established on 25 January 1991, West Berlin was not included as requiring regional assistance under the joint task on the 'improvement of regional economic structures', which represents the main German regional aid scheme.

As the following economic indicators show, Berlin is near the (West German) national average. Gross wages in the West Berlin region amount to 98 % of the West German average, which, given the substantial tax advantages existing for West Berlin, corresponds in net terms to a wage level that is above the West German average. Furthermore, West Berlin's infrastructure endowment is 99 % of the West German average.

In view of the observations set out above, regional aid for West Berlin cannot be considered to be compatible with the common market within the meaning of Article 92 (3) (c).

It should also be mentioned that indirect ad hoc aid that is granted outside any transparent aid scheme cannot in principle be deemed to be compatible with the common market within the meaning of that Article.

On the basis of the above observations, the derogation provided for in Article 92 (3) (c) (regional aspects) cannot be applied to the aid.

As far as the derogation provided for in Article 92 (3) (c) for 'aid to facilitate the development of certain economic activities' is concerned, the Commission can consider certain aid to be compatible with the common market if such aid does not adversely affect trading conditions between Member States. The development of DB's service activities does not qualify for such a derogation, since there are no grounds for assisting undertakings in this sector, and since such economic activity cannot be regarded as essential to the Community as a whole.

VIII

In the case of aid that is incompatible with the common market, the Commission has the power under Article 93 (2) of the EEC Treaty, as confirmed by the Court of Justice in its Judgment of 12 July 1973 in Case 70/72 (6) and in a further Judgment of 24 February 1987 in Case 310/85 (7), to require Member States to compel recipients to repay the aid granted. The German authorities must therefore within two months recover the unlawful aid granted to DB by the Land of Berlin. The recovery of the aid must take place in accordance with the relevant national provisions, including the provisions on the payment of interest on arrears in the case of liabilities to the State, if the repayment occurs after expiry of the deadline set by the Commission,

HAS ADOPTED THIS DECISION: