94/374/EC: Commission Decision of 2 February 1994 on Sicilian Regional Law No 23/1991 concerning extraordinary assistance for industry and Article 5 of Sicilian Regional Law No 8/1991 concerning, in particular, financing for Sitas (Text with EEA relevance)

• Articles: 13

Article 1

1. The aid provided for in Article 4, 5, 7, 8, 14 and 15 of Regional Law No 23/1991 of the Region of Sicily and in Article 5 of Regional Law No 8/1991 of the Region of Sicily is unlawful since it was not notified in advance to the Commission by the Italian authorities in accordance with Article 93 (3) of the EC Treaty.

2. The aid provided for in Article 14 of Regional Law No 23/1991 is compatible with the common market within the meaning of Article 92 (3) (c) of the EC Treaty in so far as the recipients conform to the definition of small and medium-sized enterprises given in the relevant Community guidelines.

3. The aid granted under Articles 4, 5, 7, 8 and 15 of Regional Law No 23/1991 and under Article 5 of Regional Law No 8/1991 establishing, respectively, extraordinary measures for industry and aid to the alkaline salts industry, is incompatible with the common market pursuant to Article 92 (1) of the EC Treaty.

Article 2

Italy is hereby required to suspend implementation of the aid measures referred to in Article 1 (3) and to ensure that any aid already paid is recovered.

The aid shall be recovered in accordance with the procedures and provisions of national law, in particular those relating to interest on arrears on amounts owed to the State, with interest starting to run on the date on which the unlawful aid was granted.

Article 3

Italy shall inform the Commission, within two months of the date of notification of this Decision, of the measures taken to comply herewith.

Article 4

This Decision is addressed to the Italian Republic.

Done at Brussels, 2 February 1994.

For the Commission

Karel VAN MIERT

Member of the Commission

(1) OJ No C 59, 2. 3. 1993, p. 4.

(2) OJ No C 137, 27. 5. 1992, p. 4.

(3) OJ No C 213, 19. 8. 1992, p. 2.

(4) EC Bulletin 9-1984, p. 98 and Commission communication published in OJ No C 273, 18. 3. 1991, p. 2.

(5) Case 77/72 [1973] ECR 611.

(6) Case 120/73 [1973] ECR 1471.

(7) Case 78/76 [1977] ECR 595.

(8) Case C-301/87, France v. Commission [1990] ECR I-307.

(9) OJ No L 69, 12. 3. 1987, p. 55.

(10) [1973] ECR 813.

(11) [1987] ECR 901.

(12) [1990] ECR I-959.

(13) [1989] ECR 175, 192.

Article 10

concerns the financing of extraordinary maintenance work on the dry dock at the port of Messina. The measures to assist ship-repair facilities at the Messina dry dock must be regarded as State aid within the meaning of Article 92 (1).

Article 11

of the Regional Law No 23/1991 concerns the financing of extra costs incurred as a result of the delays in payment by the regional authorities of aid for the Syracuse-based port company San Sebastiano, previously authorized by the Commission. The measure does not therefore contain any new aid elements in relation to the aid originally approved by the Commission.

Article 13

establishes a scheme of subsidized loans in respect of orders received by firms engaged almost exclusively in manufacturing. The scheme consists in the part-financing of interest charges and is based on available budgetary resources, determined by the competent authorities, amounting to Lit 50 billion (some ECU 27 million). The measure constitutes State aid. The same is true of the measure provided for in Article 14 concerning the reorganization of a scheme of aid for small and medium-sized Sicilian enterprises exercising factoring activities. The aid intensity is around 4,25 % gross. The scheme has already formed the subject-matter of a Commission decision.

Article 14

establishes a factoring aid scheme designed to reduce the cost of commercial invoice discounting by SMEs conforming to the definition given in the Community guidelines. While the scheme comprises operating aid, its effect on recipients' operating costs is only partial, amounting to 4,25 % gross of the amount benefiting from the aid.

Therefore, taking account of the socio-economic situation in Sicily and the fact that, under the Community guidelines in force, aid to productive investment by SMEs may amount to 65 % in Sicily and that aid for other purposes may be authorized in circumstances which justify it, the scheme in question qualifies for exemption under Article 92 (3) since the aid is intended to facilitate the development of certain activities without adversely affecting trading conditions to an extent contrary to the common interest.

Lastly, as regards the amendment, provided for in Article 15, of a general aid scheme for stockbuilding authorized by the Commission in 1982, certain conditions were, however, attached to the approval.

The Commission stated at the time that it would approve any future refinancing of the aid only on condition that the method of calculation was altered so that stocks were adjusted to the firm's initial productive investments. The new measure, however, adjusts the aid to investments already made and carried forward to the latest balance sheet, thereby increasing the amounts of aid and the lack of transparency which the condition imposed by the Commission was designed to rectify.

Since Article 15 cannot be approved in its present form, the Commission must conclude that it is incompatible with the common market.

VIII In conclusion, the aid granted under Articles 4, 5, 7, 8 and 15 of Regional Law No 23/1991 and under Article 5 of Regional Law No 8/1991 is incompatible with the common market. It must therefore be abolished and any aid already paid recovered.

Where aid is incompatible with the common market, the Commission may, pursuant to the judgments given by the Court of Justice in Case 70/72, Commission v. Germany (10) and in Case 310/85, Deufil v. Commission (11), order Member States to repay any aid granted unlawfully.

The aid must be repaid in accordance with the procedures and provisions of Italian law, in particular those relating to interest on arrears on amounts owed to the State, with interest starting to run on the date on which the unlawful aid was granted. This measure is necessary in order to restore the status quo by removing all the financial benefits which the firms receiving the unlawful aid have improperly enjoyed since the date on which the aid was paid (see the Court of Justice's judgment in Case C-142/87, Belgium v. Commission (12)).

The Commission would also point out that the procedures and provisions of national law 'must be applied in such a way that the recovery required by Community law is not rendered practically impossible' (paragraph 12 of the Court's judgment in Case 94/87, Commission v. Germany (13)),

HAS ADOPTED THIS DECISION:

Article 15

amends a scheme to assist stockbuilding in general which was approved by the Commission in 1982, subject to certain conditions.

Those conditions are no longer fulfilled by new Article 15 of Regional Law No 23/1991 as the aid is no longer tied solely to the initial investment.

Article 16

concerns the possible use of resources in the regional budget to grant advances of up to 85 % of the amount of financing granted within the framework of the extraordinary assistance for the Mezzogiorno approved by the Commission on 2 March 1988 and 9 December 1992.

Like Article 11 of Regional Law No 23/1991, this measure does not comprise any new aid elements in relation to the scheme for the Mezzogiorno and is not, therefore, covered by Article 92 (1).

Article 17

concerns the financing of infrastructures to be set up by a public body. Consequently, the measures cannot be regarded as State aid within the meaning of Article 92 (1).

The measures provided for in Articles 18, 20 and 21, which contain technical provisions relating to the regional budget and to publication of the Law, cannot be regarded either as State aid within the meaning of Article 92 (1).

Finally, Article 19 repeals the deadline laid down in earlier legal provisions for the repayment of advances granted by the region to creditors of Liquichimica.

This scheme, approved by the Commission in connection with aid for industry, commerce, crafts, fisheries and cooperation and industrial development in Sicily would, as amended by Regional Law No 23/1991, entail the definitive payment to each of the recipients of a maximum amount of Lit 25 million (about ECU 13 500), any overlapping with other aid being prohibited.

The measure in question cannot be regarded as constituting State aid under either Article 92 (1) of the Treaty or point 3.2 of the Community guidelines.

The Commission therefore considers that the measures provided for in Articles 4, 5, 7, 8, 14 and 15 of Regional Law No 23/1991 and in Article 5 of Regional Law No 8/1991 are to be regarded as constituting State aid within the meaning of Article 92 (1).

V The measures to be regarded as constituting State aid constitute assistance to firms operating in Sicily. They benefit those firms inasmuch as the assistance is not provided outside the region.

The aid has the effect of distorting competition since it improves the economic position of the recipients in relation to their competitors who do not receive such assistance.

The aid in question also affects trade between Member States. Although it is not possible to asses the full impact of the aid as not all the recipients are known, import and export statistics (Level III region of the nomenclature of territorial statistical units - NUTS) reveal that a significant proportion of Sicilian products and services is exported to other Member States. In addition, trade between Member States is also affected in cases where the aid favours domestic output and services to the detriment of imports and the provision of services from other Member States.

VI It must be concluded that the aid in question is unlawful since the Italian authorities did not notify it to the Commission beforehand, as required by Article 93 (3) of the Treaty.

The situation resulting from this infringement of the Treaty is particularly serious since the aid in question has already been paid to the recipients. In view of the mandatory nature of the rules of procedure laid down in Article 93 (3), which are also important from the standpoint of public policy and the direct effect of which was recognized by the Court of Justice in its judgments in Capolongo v Maya, (5). Lorenz v Germany (6) and Steinike und Weinlig v Germany (7), the unlawful nature of the aid at issue cannot be rectified retrospectively.

None the less, the Commission is required to continue the procedure initial under Article 93 (2), in accordance with the Court of Justice's judgment of 14 February 1990 (8).

In view of the foregoing, the aid in question is liable to affect trade between Member States and to distort competition since, with the exception of Article 19, it satisfies the conditions of Article 92 (1) of the Treaty, in the light of point 3.2 of the Community guidelines.

VII Article 92 (1) of the Treaty provides that aid meeting the criteria laid down therein is, in principle, incompatible with the common market.

In the case at issue, the exceptions provided for in Article 92 (2) of the Treaty are not applicable because the aid is not directed towards the attainment of the objectives set out in that paragraph. Nor has such exemption been requested by the Italian authorities.

Article 92

(3) lists aid which may be considered compatible with the common market. Compatibility with the Treaty must be determined in the context of the Community as a whole and not in the context 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 (g) of the Treaty, the exceptions provided for in Article 92 (3) must be construed narrowly when any aid scheme or 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 partners of behaviour that would serve one of the objectives of the said exceptions.

Applying the exceptions to aid which does not contribute to such an objective or in cases where the aid is not necessary for that purpose would be tantamount to conferring advantages on industries or firms of certain Member States whose financial position would be artificially strengthened and to affecting trade between Member States and distorting competition without any justification based on the common interest as required by Article 92 (3).

As regards the aid to Sirap, it has already been stated under point IV that this company is in competition with operators in Italy and in other Member States in the engineering sector.

The amount of the proposed aid (some ECU 2,16 million) is such that, taking account of the generally small size of engineering firms (there were 5 636 of them in the Community in 1988 employing on average some 29 persons each), it would have the effect either of impeding market access or of eliminating Sirap's competitors by unduly restoring its financial viability.

Article 93

(2) (a) exempts aid that promotes the development of areas where the standard of living is abnormally low or where there is serious underemployment. Although Sicily is eligible for regional aid under Article 92 (3) (a), the aid in question was not granted under a regional aid scheme but on the basis of discretionary ad hoc decisions by the competent authorities.

Even if the aid in question were to be regarded as regional aid, it could not qualify for exemption under Article 92 (3) (a) for that reason since such aid must contribute to the long-term development of the region; that is not the case here as the aid is aimed only at covering the firm's losses, without any structural improvements.

With regard to the exceptions provided for in Article 92 (3) (b), the aiud at issue is not intended to promote the execution of an important project of common interest or to remedy a serious disturbance in the Italian economy, nor does it have any of the features of such projects. Furthermore, the Italian authorities have not requested exemption on these grounds in the comments sent to the Commission.

With regard to the exceptions provided for in Article 92 (3) (c) in respect of aid to facilitate the development of certain economic activities where such aid does not adversely affect trading conditions to an extent contrary to the common interest, the aid is not tied to any restructuring plan ensuring restoration of the firm's viability. It is therefore an operating aid which preserves the status quo by preventing normal market forces from taking effect.

The aid cannot, therefore, be considered compatible with the common market.

The same conclusion applies to the two amounts of aid granted to Sitas, particularly since, as stated under III, Sitas has been financial difficulties for many years.

With regard to the aid provided for in Article 7, in the form of unemployment benefit for IMAC employees, the Italian authorities have stated orally that the aid forms part of a restructuring plan intended to restore the firm's viability. Neither the restructuring plan nor any further details have been supplies on this point by the Italian authorities.

According to an oral statement by the Italian authorities, the measure set out in Article 8 consists of the part-financing by the region of the wages paid to Vetem employees following the termination of the payment of State aid to the wage guarantee fund.

The measures provided for in Articles 7 and 8 amount to aid for the recipients since the region assumes some of their operating costs. They therefore constitute operating aid prohibited under Community law and can be authorized only exceptionally and in cases where proper justification has been presented.

No other information was, in fact, supplied by the Italian authorities concerning the aims of the IMAC restructuring plan or of the partial relief for wage costs normally payable by Vetem. It follows that this aid too cannot be considered compatible with the common market.

The measure provided for in Article 10 of Regional Law No 23/1991 concerns the refinancing of an aid scheme for the Trapani and Messina dry docks already approved by the Commission under Article 6 (1) of Council Directive 87/167/EEC on aid to shipbuilding (9).

As the circumstances of the original scheme have not changed, the Commission can but confirm its original approval.

As regards the measures referred to in Article 13, the Commission reserves its position in view of the fact that the scheme is covered in part by provisions it is currently examining; it will take an overall decision once its examination is completed.