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25.3.

98 EN Official Journal of the European Communities C 89/3

STATE AID
CØ67/97 (ex NNØ109/B/96)
Italy

(98/C 89/03)

(Articles 92 to 94 of the Treaty establishing the European Community)

Commission communication pursuant to Article 93(2) of the EC Treaty to other Member States
and interested parties concerning measures taken by the Italian Region of Molise to assist
cooperatives (agricultural part)

By the following letter, the Commission informed the participation by the Region in the regional cooperative
Italian Government of its decision to open the credit asociation (consorzio fidi), with a view to
procedure. examining their compliance with Articles 92 and 93 of
the Treaty.

‘By letter dated 12 April 1996, recorded as received on


2 May 1996, the Office of the Italian Permanent With regard to the staff recruitment and specialisation
Representative to the European Union notified the aids provided for in Article 12 of Regional Law No
Commission, in accordance with Article 93(3) of the EC 6/95, the Commission has decided not to raise any
Treaty, of the above measures concerning Law No 6/95 objections under Articles 92 and 93 of the Treaty.
of the Region of Molise introducing measures to assist
cooperatives, and of the operational programme for 1995
provided for in Article 8 of that Law. The Commission hereby informs the Italian Government
that it has decided to initiate the procedure provided for
in Article 93(2) of the Treaty in respect of the aid
As Regional Law No 6/95 was not notified as required measures provided for in Artricles 10, 11, 13, 16(4),
under Article 93(3) of the Treaty, it was entered in the subparagraphs (a) and (b) of Regional Law No 6/95.
register of non-notified aid under number NNØ109/96.
In addition, since the aid measures apply also to the agri-
cultural sector, the file was divided between DGØIV and In adopting this decision, the Commission was guided by
DGØVI and the Italian authorities were notified of this the following considerations.
by letter.

1.ÙRental/leasing aid
On 12 February 1997, the Commission took a decision
not to raise any objections to aid number NNØ109/A/96
under Articles 92, 93 and 94 of the Treaty. As a result, The aids granted by the Region of Molise under Articles
this decision concerns the section considered under 10 and 11 for projects for the rental of equipment
number NNØ109/B/96 only, i.e. the measures that apply required for the management, distribution and marketing
to the production and the processing and marketing of activities of the consortium/cooperative are operating
products covered by Annex II to the Treaty (agricultural aids, which are contrary to the Commission’s established
products). practice regarding the application of Articles 92, 93 and
94 of the Treaty. They place the beneficiary cooperatives
in a more advantageous financial position than other
The Commission regrets that Regional Law No 6/95 of businesses in the European Union, which do not receive
13 February 1995 concerning the above measures was such aids. Furthermore, as rental is involved, the
adopted without being notified in advance to the Commission cannot accept that the aids may have a
Commission in breach of the provisions of Article 93(3) positive and lasting effect on the development of the
of the Treaty. It would urge the Italian Government to sector or the region concerned.
ensure in future that this obligation of prior notification
is observed.
On the matter of the leasing operations, these consist of
financial operations falling somewhere between rental
On the substance of the matter, and as regards the and purchase that deserve to be examined in greater
measures provided for in Article 17 of Regional Law No depth. Commission Decision 97/322/EC of 23 April
6/95, the Commission has taken note of the undertaking 1997 modifying the decisions approving the Community
by the Italian authorities to notify it pursuant to support frameworks, the single programming documents
Article 93(3) of the Treaty of the arrangements for the and the Community initiative programmes in respect of
C 89/4 EN Official Journal of the European Communities 25.3.98

ItalyØ(Î) provides that leasing may be regarded as eligible examined for compliance with Commission Communi-
expenditure as part of structural programmes funded by cation 95/CØ334/04 setting guidelines on aid to
the Community, provided certain conditions are met. employmentØ(Ï). The Commission states, in the first
indent of point 21 of the guidelines, that it will be
favourably disposed towards aid to create new jobs in
To be eligible under the Structural Funds, leasing small and medium-sized enterprises and in regions
contracts must include an option to purchase or a eligible for regional aid. In the third indent, it states that
provision that the leasing period will be the same length it will scrutinise the terms of the employment contract, in
as the useful life of the asset to which the contract particular to check whether the contracts are for an
relates. In addition, the maximum amount eligible for indefinite period or are sufficiently long to ensure that
assistance must not exceed the net market value of the the job created is a stable one. In the fourth indent, it
asset leased. The purpose of these conditions is to ensure states that the level of aid must not exceed that which is
that the leasing is a financial operation with features necessary to provide an incentive to create jobs and that
similar to the purchase of equipment, but where the the aid must be temporary. According to the fifth indent,
benefits are not transferred to the leasing company. if the creation of jobs is combined with the training or
National aids for the leasing of equipment could, under retraining of the worker concerned, this will make a
these conditions, be regarded as aids for investment. positive contribution to a favourable assessment by the
Commission.

No such conditions exist, however, in Articles 10 and 11


of Regional Law No 6/95, or in the operational
programme for 1995. The obligation imposed by the In the case under consideration, the aid fulfils the
Region on the beneficiaries of the aid to use the aid- requirements of the first indent (Molise is a region
assisted machinery for at least five years is not sufficient eligible for regional aid) and the fifth indent (the
to ensure compliance with the above conditions, since it employment aid is combined with aid to help workers to
is unlikely that all the machinery for which the aid is specialise). Furthermore, the Commission has taken
granted will have a useful life shorter than that period. account of the fact that net jobs are being created, since
Furthermore, the requirement that the term of the the aid arrangements do not apply to consortia/cooper-
leasing contracts must not exeed five years reinforces the atives which shed staff in the preceding 12 months.
Commission’s argument that the length of the useful life
of the equipment and the period of the legal obligation
are not the same.
However, even allowing for the phased reduction of the
aid and any difficulites facing the SMEs or disadvantages
In these circumstances, it would seem that the aid for the affecting the region, a maximum rate of aid of 60Ø% for
leasing operations provided for in Articles 10 and 11 of categories of work that are not at a disadvantage would
the Regional Law cannot be regarded in general as aid seem to exceed that which could be regarded in the
for investment but must be regarded as aid for the rental normal course of events as an incentive for job creation.
of capital goods, that is to say, operating aid having no Even if, in the case of Annex II products, the
lasting effect on the improvement of production Commission has accepted as an incentive aid of only up
structures; it does not therefore qualify for any of the to 50Ø%, in the present case it has to accept that the
derogations set out in Article 92(3) of the Treaty. average aid is reduced annually, averaging not more than
45Ø% in mountain community areas and 35Ø% in other
areas. The Commission agrees therefore that the level of
the aid in this particular case is not incompatible with the
The deadline of 31 December 1996 imposed by the oper- guidelines (which set no upper level) and can be accepted
ational programme for 1995 on the application of the provided the other conditions are met.
measure for the leasing of equipment and machinery,
with aid covering 45Ø% of the investment, and a ceiling
on the investment for each project, is not sufficient to
modify the above appraisal under Articles 92 and 93 of
the Treaty. The Commission, furthermore, must scrutinise the terms
of the employment contracts. In the present case, it
would seem that the three-year minimum term of the
contracts (equivalent to the period for which aid is
2.ÙRecruitment/job creation aid granted) can be regarded as sufficient for ensuring that
Commission has taken note of the additional information
from the Italian authorities, showing that the phase ‘‘the
The aid for the recruitment of staff provided for in duration of the proposed employment contract cannot be
Article 12 of Regional Law No 6/95 needs to be shorter than three years’’, in the operational programme

(Î)ÙOJ L 146, 5.6.1997, p. 57. (Ï)ÙOJ C 334, 12.12.1995, p. 4.


25.3.98 EN Official Journal of the European Communities C 89/5

the jobs created are stable ones. In addition, the for lation (EC) No 950/97, may be granted only under
1995, does not prejudice the continuation of the Article 12(1) or Article 12(4) of that Regulation (in the
employment relationship, which in any case has to latter case, pursuant to Article 37(2) of Regulation (EC)
remain one of indeterminate length. No 950/97, Articles 92, 93 and 94 of the Treaty,
excluding Article 92(2), are not applicable and,
consequently, the aids are considered only in the light of
the regulation concerned).
The Commission therefore regarded the measure to be
compatible with the common market.

—Ùthe measures providing aid for investment in the


purchase of land, the protection of the environment,
3.ÙAid to assist staff to specialise
the welfare of animals and the purchase of male
breeding animals are covered by Article 12(2) of
Regulation (EC) No 950/97. The maximum rates of
The Commission usually regards the aids for consortia/ aid from public sources are 35Ø% and 75Ø% of total
cooperatives to encourage staff to become specialised eligible costs in the less-favoured areas within the
provided for in Article 12 of the Law as ‘‘soft aids’’, meaning of Article 21(2) of Regulation (EC) No
having no direct link with the market. The Commission 950/97 (formerly Directive 75/268/EEC), 35Ø% and
view, as a rule, is that they make a valuable contribution 45Ø% for investments for the protection of the
to the development of agriculture without creating any environment and 40Ø%, in all cases, for the purchase
significant distortions of competition. The Commission of pure-bred male breeding animals registered in
normally considers aid for these activities to be herd books,
compatible with the common market up to a maximum
of 100Ø%. While the rate of aid actually applied is not
entirely clear (upper limit of 60Ø% under Article 12 of
the Law and 75Ø% under the operational programme for —Ùall the other measures providing aid for investments
1995), as these aids, which are funded by the Region of in farming come within Article 12(4) and must
Molise, do not in any case exceed 75Ø% of total costs respect the limits set in Article 6 of that Regulation
and fall therefore within the maximum permitted by the and the aids rates applied must be at least one
Commission in practice, they should be regarded as quarter lower than those granted under Article 7, i.e.
being compatible with the common market. 33,75Ø% (immovable property) and 22,5Ø% (other
investments) in the less-favoured areas within the
meaning of Article 21(2) of Regulation (EC) No
950/97 and 26,25Ø% (immovable property) and 15Ø%
4.ÙAid for the recapitalisation of cooperatives/consortia (other investments) in the other areas.

When examining the compatibility of the aid for


changing the capital structure of cooperatives and
In the case of investments in primary agricultural
consortia with Articles 92 and 93 of the Treaty, the
production, the Commission notes that the aid rate of
Commission took account of the undertaking by the
50Ø% (60Ø% in mountain community regions) exceeds
Italian authorities to consider only cases where the
the permitted upper limits for some investments and
capital is increased in order to finance investment
types of regions.
projects and not to cover operating losses. The aid
concerned should therefore be regarded as investment
aid.

The measures to be considered under Article 12(4) of the


Regulation should be examined separately.
In view of the fact that the aid applies to cooperatives in
the sectors covering the production, processing and
marketing of agricultural products, Council Regulation
(EC) No 950/97Ø(Ð) [former Regulation (EEC) No
2328/91] and Council Regulation (EC) No 951/97Ø(Ñ) As regards investments in the food processing sector,
[former Regulation (EEC) No 866/90] apply. Commission policy on examining their compatibility with
Articles 92 and 93 of the Treaty is to apply the
guidelines for state aid in connection with investments in
the processing and marketing of agricultural productsØ(Ò).
With regard to agricultural production: national aids, if The guidelines state that the only aids which may be
ineligible for Community part-financing under Regu- regarded as compatible with the common market are
those which respect the sectoral limits imposed by
(Ð)ÙOJ L 142, 2.6.1997, p. 1.
(Ñ)ÙOJ L 142, 2.6.1997, p. 22. (Ò)ÙOJ C 29, 2.2.1996, p. 4.
C 89/6 EN Official Journal of the European Communities 25.3.98

Commission Decision 94/173/ECØ(Ó) and an aid rate of 6.ÙAid for investments by new cooperatives and young
not more than 55Ø% of the total eligible costs (75Ø% in people’s and women’s cooperatives
the Objective 1 regions). As Molise is an Objective 1
region, the maximum rate applied (60Ø%) does not
exceed the maximum rate authorised (75Ø%). However, The measures provided for in Article 16(4)(a) of the
the Italian authorities have not provided information Regional Law consist of aids for productive investment
showing that the sectoral limits set by Decision and apply to cooperatives engaged in the production,
94/173/EC have been observed or given a formal under- processing and marketing of agricultural products.
taking that they will be. The measure cannot be regarded
therefore as compatible with the common market.

For Commission policy regarding this type of national


aid, reference is made to point 4 above.

5.ÙAid for the setting up of consortia


The Commission considers that the aid rate of 60Ø%
applied to investments by cooperatives in primary agri-
The established policy of the Commission in relation to cultural production (which may be raised to 70Ø% for
aid for the setting up of consortia of cooperatives and innovative projects and projects in mountain community
business mergers is based on the application by analogy regions) in most cases exceeds the minimum rates
of the guidelines for state aid for producers’ organi- permitted by the Commission.
sations. Authorisation can be given therefore for up to
50Ø% of the new capital which members must contribute
in order to join a group/cooperative/consortium, on the In the case of aid for investments by cooperatives in the
grounds that it is intended to encourage membership of processing and marketing of agricultural products, as
these groups and has the effect of strengthening coop- Molise is a region eligible under Objective 1 the
erative structures like the aid for the setting up of coop- maximum rates of aid applied (60Ø% and 70Ø%) are
erativesØ(Ô). In the case under consideration, the within the maximum permitted (75Ø%). However, the
maximum aid for the setting up of consortia or cooper- Italian authorities have not provided data to show that
atives is, as a rule, 50Ø%, or 60Ø% in mountain the sectoral limits set by Commission Decision
community areas. 94/173/EC have been met or a formal commitment that
they will be respected. The Commission considers
therefore that the measure cannot be regarded as
compatible with the common market.
The Commission notes therefore that the rate of aid in
the latter areas is above the maximum rate the
Commission usually accepts for operations of this type.
The Italian authorities mention that they have received
no applications for financing from cooperatives involved
in primary agricultural production or in the processing
The Italian authorities were informed of this previously sector under the operational programme for 1995. They
in the course of the procedure for the examination of aid say also that they intend to discontinue these aids in
NNØ109/B/96. They informed the Commission that no future. The Commission points out that the fact that no
applications for financing had been received under the agricultural/processing cooperative wished to benefit
Article in 1995 and gave an undertaking to abolish in from the Law in the present economic circumstances
future the additional 10Ø% for cooperatives in mountain does not mean that the aid arrangements are not the
community areas. The Commission takes the view that retically available to them. The Commission notes also
the fact that no applications for public funding have been the intention of the Italian authorities to repeal the
received in no way alters the incompatibility of the provisions of this Article but is unable to modify in any
measure, which in theory continues to apply. The way its views on the aids covered by it in the light of that
Commission emphasises further that it cannot take intention.
decisions on the basis of undertakings regarding possible
future amendments to laws that have been adopted and
published. It concludes therefore that the aids do not
satisfy the requirements for being regarded as compatible 7.ÙManagement aid for new cooperatives and young
with the common market under Article 92(3) of the peoples’ and womens’ cooperatives
Treaty.

The Commission took account of the fact that the aids


for the management of new cooperatives and young
peoples’ and womens’ cooperatives are operating aids
(Ó)ÙOJ L 79, 23.3.1994, p. 29. which are contrary to its established practice regarding
(Ô)ÙCommission staff working paper No VI/503/88. the application of Articles 92, 93 and 94 of the Treaty.
25.3.98 EN Official Journal of the European Communities C 89/7

These aids place the beneficiary cooperatives in a more 16(4)(a) and (b) of Molise Regional Law No 6/95 of
advantageous financial position than other EU busi- 13 February 1995.
nesses, which do not receive such aid.
Under the procedure provided for in Article 93(2) of the
Launching aid for agricultural cooperatives can be Treaty, the Commission hereby gives notice to the
regarded by analogy as aid granted to producers’ organi- Italian Government to submit its comments within one
sations within the meaning of the criteria adopted by the month.
Commission for appraising national aids for producers’
organisationsØ(Õ). These criteria require national aids to It will give notice to the other Member States and
meet the following conditions: interested parties by way of a notice in the Official
Journal of the European Communities to submit their
—Ùthe aid may not under any circumstances exceed the comments within the same time limit.
actual setting-up costs and administrative expen-
diture, including expenditure on staff, The Commission would draw the attention of the Italian
Government to the letter it sent to all the Member States
—Ùpayments must cease not later than seven years from on 3 November 1983 concerning their obligations under
the setting up of the producers’ organisation, Article 93(3) of the Treaty and to the notice published in
the Official Journal of the European Communities No
—Ùthe duration of the aid must not be longer than five C 318 of 24 November 1983, page 3, which stated that
years; it must be granted on a diminishing scale any aid granted illegally, i.e. without a final decision
(normally 20Ø% per year). In some cases, the under the procedure laid down in Article 93(2) of the
Commission may permit non-decreasing aids Treaty having been reached, is likely to be the subject of
(provided the rate does not exceed the average of the a request for reimbursement and/or a refusal to charge
permitted rates with a scaled 20Ø% reduction, i.e. to the EAGGF budget expenditure on national measures
60Ø%). directly affecting Community measures.

The Commission notes that the articles of association of


The aids under consideration satisfy the latter two the regional cooperative credit association (consorzio
conditions but not the first. To qualify as launching aid fidi), in which the Region of Molise intends to
for a cooperative, the eligible expenditure should have participate financially, have not yet been adopted. The
been strictly limited to the actual setting-up costs and the Commission cannot therefore express an opinion, in the
administrative expenditure in the early years. The agricultural sphere, on their conformity with Articles 92
measure in question is based on a wider definition of and 93 of the Treaty.
eligible expenditure that includes the costs of buying
inputs, and intermediate and finished products, which The Commission takes formal note of the untertaking by
are not admissible as setting-up costs and administrative the Italian authorities to notify, in accordance with
expenditure. Article 93(3) of the Treaty, these implementing
provisions, on which it will take a position concerning
The Commission found in addition that the costs of their conformity with Articles 92 and 93 of the Treaty.’
providing services and the financing costs were not
related solely to the actual setting-up and administrative The Commission hereby gives notice to the other
costs, as required by Commission policy. The measure Member States and interested parties to submit their
cannot be regarded therefore as being compatible with comments on the measures in question within one month
the common market. from the date of publication of this notice in the Official
Journal of the European Communities to:
Consequently, the Commission has decided to initiate
the procedure provided for in Article 93(2) of the European Commission,
Treaty in respect of the aid measures provided for, in Rue de la Loi/Wetstraat 200,
the field of agriculture, in Articles 10, 11, 13, 14, B-1049 Brussels.

The comments will be communicated to the Italian


(Õ)ÙCommission staff working paper No VI/503/88. Government.