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PAGE 50 EC COMPETITION POLICY NEWSLETTER Vol. 1, N° 2, Summer 1994

Summary of most important developments

by Henrik Morch, DG IV-E-1

A. Notion of aid (Article 92,1 EC)

For Article 92(1) to apply the state measure must provide a

firm with an economic

advantage which it would not have

received in the normal course of business. The Commission

considers that this condition is met when a firm receives

financial assistance from the State to cover certain social

costs linked to the retirement of its employees, when the

firm under national law would otherwise have to bear these

costs itself. This is illustrated in the Commission's decision

in May concerning state aid to the French company

"Entreprise minière et chimique"(EMC).

For Article 92(1) to apply the aid measure concerned must

be capable of affecting

trade between Member States. The

Court of Justice has decided that an aid to a company might

distort competition and affect trade between Member States

even if the company receiving the aid exports almost all its

production outside the Community ( cf. judgement of

21.3.1990 ("Tubemeuse"), ECJ 1990 p. 959). In line with

this ruling the Commission decided in June that, in view of

the existence of competing firms and intra-community trade

in the sector concerned, an aid to a tin-mine in Cornwall,

UK, to carry out a restructuring of the mine constituted a

state aid, even though the mine at present exports all of its

production of tin outside the Community.

In determining whether a financial transaction between the

State and a company(ies) involves state aid within the

meaning of Article 92(1) the Commission shall examine the

matter at the time the transaction is carried out or at least

decided in an irreversible way. On the basis of this principle

the Commission decided in July that, given the prosperous

financial situation of the company concerned and the

favourable outlook of the aluminium market in 1990, the

irreversible decision by the Spanish Government in 1990 to

inject 258 million ECU in the "Inespal Group" to enable the

company to take advantage of these favourable market

conditions in 1990-1994 was equivalent to that of a private

market investor operating under normal commercial

conditions. This capital injection therefore did not involve

state aid even though at the time the capital injection was

actually made, in 1992, the market conditions were

considerably less favourable.

B. Possibilities of derogation

Forms

of aid

As a general principle in its state aid policy the Commission

views operating aid and export aid as undesirable and not

eligible for exemption under Article 92 (2) and (3) EC.

However, in certain exceptional cases and under strict

conditions operating aid may be authorized in regions

suffering from serious economic problems and a high

unemployment rate and which are, thus, eligible for regional

aid under Article 92(3)(a) EC. In line with this policy the

Commission decided in June to open the Article 93(2) EC

procedure with regard to a proposed state aid for the

restructuring of the German company AEG Sachsenwerk

GmbH, Regensburg, as this aid measure involves both

operating aid and export aid and as the company is not

located in an Article 92(3)(a) region.

However, the Commission authorized operating aid in the

form of a temporary tax relief scheme for Financial Service

Centers providing capital exclusively for the Eastern

European market in light of the fundamental interest of the

Community to develop a private capital market in Eastern

Europe.

Cumulation

When the Commission examines a state aid for its

compatibility with the common market, it also takes into

consideration the cumulation of this aid with other public

funds, including Community Funds. The resulting aid

intensity must respect the prevailing thresholds for the aid in

question. The Commission therefore decided to open the

Article 93(2) procedure with regard to a German aid for the

construction of a rape seed oil methylester pilot plant

operated by the German company "Raiffeisen

Hauptgenossenschaft Nord AG" whose aid intensity, when

cumulated with aid from Community Funds, reached 67%.

Regional aid

The Commission is committed to allow state aid that help to

reduce disparities between the various regions of the

Community, thereby strengthening its economic and social

cohesion. In line with this policy the Commission in July

decided to authorize a number of important regional aid

schemes for the 5 new German Länder, including the basic

regional aid scheme for these 5 Länder for the period 1994-

1998 (the "Gemeinschaftsaufgabe") with an annual budget of

ECU 7,8 billion.

The Commission seeks to ensure that there is the necessary

coherence between the Community's regional aid policy

under the Community Structural Funds and its regional aid

policy under the state aid rules in Article 92-94. The region

of Hainaut in Belgium was designated in 1993 as an

Objective 1 area by the Council eligible for Community aid

under the Community Structural Funds. The Commission has

now decided to make that region eligible for national

regional aid pursuant to Article 92(3)(c) EC.

In July the Commission, moreover, decided to approve two

investment aid schemes for the region of Hainaut which

offer grants for the setting up of new businesses with an aid

intensity of 25% NGE for big companies and 30% NGE for

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