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C 284/10 EN Official Journal of the European Communities 14.9.

98

with this complex subject reasonably soon. Such efforts their applications change much faster than regulations.
are made all the more arduous by lengthy and costly Procedural streamlining must be included in the review
procedures, which can only be modified if there is an which international and EU bodies should take on as
understanding of the basic problem: technologies and their primary duty to the community as a whole.

Brussels, 1 July 1998.

The President
of the Economic and Social Committee
Tom JENKINS

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) laying down detailed rules for the application of Article 93 of the EC Treaty’ (1)

(98/C 284/04)

On 11 March 1998, the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned
proposal.
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 June 1998. The rapporteur
was Mr Sepi.
At its 356th plenary session (meeting of 1 July 1998), the Economic and Social Committee
adopted the following opinion by 135 votes to one, with three abstentions.

1. Introduction 1.5. The proposal also follows the regulation on the
application of Articles 92 and 93 of the Treaty to certain
categories of horizontal state aid (3).
1.1. The Committee has several times acknowledged
the need to regulate competition in a thorough and
legally valid manner. 1.6. The Committee urges the Commission to con-
tinue to extend its regulatory work, in order to build up
a corpus of measures which harmonize and clarify the
1.2. In its opinion (2) on the 22nd report on compe- entire competition issue, also in view of enlargement.
tition policy, the Committee had already emphasized
how important and necessary it was for the Commission
to lay down regulations that would improve trans- 1.7. In some key sectors of EU industry, these
parency and give greater legal certainty to all interested measures will have to take account of the situation
parties. regarding aid granted in competing countries.

1.3. The Committee wishes to highlight the greater 1.8. The proposal attempts to strike a balance
awareness that is developing in all EU countries on the between efficiency and transparency. The Committee
subject of competition, both among economic and legal believes that, broadly speaking, Community institutions
practitioners and, more generally, on the part of public should pay greater attention to transparency and third
opinion. This is due to the good results obtained in price party rights.
restraint and in increased competitiveness.

2. The Commission’s document
1.4. It is precisely in this sphere that legislation is
needed to make the Commission’s work more methodi-
cal and transparent. 2.1. The proposed regulation is basically a procedural
proposal which on the one hand codifies a tried and

(1) OJ C 116, 16.4.1998, p. 13.
(2) OJ C 34, 2.2.1994. (3) OJ C 129, 27.4.1998.
14.9.98 EN Official Journal of the European Communities C 284/11

tested procedure and on the other ‘clarifies certain 2.10. A system of cooperation with national ‘indepen-
aspects and tightens up the rules’ in order to provide a dent’ competition authorities is also established for
more effective control system. particular cases (Article 21).

2.11. The common provisions stipulate that Member
2.2. The proposal confirms that the notification and States alone are sent the decisions and that they are
the ‘standstill’ right provided for in Article 93(3) of the published in the Official Journal in summary form,
Treaty, form the cornerstone of the control system. although it is possible to obtain a copy of the full text
Furthermore, the Commission will continue to have the in the authentic language version (Article 25).
sole decision-making authority on the matter (Articles 2
and 3).
2.12. Finally, an advisory committee consisting of
representatives of Member States is to be set up.
2.3. Article 4 outlines the procedure for the exami- The committee will assist the Commission on the
nation of the notification by the Commission and lays implementing provisions but not on the decisions
down the deadlines for decisions. After such deadlines, (Article 27).
if a formal decision has not been taken, aid is deemed
to have been authorized.
3. General comments

2.4. Likewise, if the Member State does not supply
the information requested by the Commission after a 3.1. The Committee highlights the importance of this
preliminary examination (Article 5), the notification is regulation, which integrates and rationalizes a series of
deemed to have been withdrawn. practices and principles expressed in the judgements of
the Court of Justice, giving them an organized structure.

2.5. After the formal investigation, the Commission 3.2. The Committee considers, however, that this
may either (i) decide that the aid is compatible with the legislative streamlining of Community action in respect
Treaty, (ii) approve it subject to certain conditions, or of competition should be further strengthened in order
(iii) decide that it is incompatible with the Treaty to have, in a few years, greater legal certainty on the
(Article 7 and Article 11). subject. The impetus that will stem from the completion
of the single market and EMU makes this particularly
important.
2.5.1. If the aid has been granted unlawfully and is
incompatible with the common market, the Commission
decides that the Member State must recover it from the 3.3. The Committee believes that once the Fiscal
beneficiary (Article 14). Code of Conduct has been introduced, the scope of this
regulation should cover tax provisions which distort
competition between Member States.
2.6. Articles 10 and 11 cover the procedure for
suspending or provisionally recovering aid which is
considered unlawful on the basis of information ‘from 3.4. A particular effort should be made to clarify the
whatever source’. legal concepts used and to ensure that the translations
into the various languages tally, so that they will be
interpreted in the same way by everyone. For example,
in the present regulation the difference between unlawful
2.7. Recovery of aid comes under Article 14, which aid and ‘misuse of aid’ should be more clearly defined,
provides for the use of the legal instruments available to bearing in mind that their legal consequences must be
the state in question and lays down that ‘remedies under the same.
national law shall not have suspensive effect’.

3.5. The Commission has the power both to lay down
2.8. As well as unlawful aid, ‘misuse of aid’ regulations and to enforce competition rules. Although
(Article 15) is also regulated, as are existing aid schemes the Committee has already expressed a favourable
which are ‘no longer compatible with the common opinion on this dual power, the appeal procedure should
market’. be specified more precisely, and it should be made clear
whether the Commission is obliged to make a decision
at the request of any interested party. The vagueness of
Article 10(3) on the acquisition of information appears
2.9. Member States may be asked to adopt ‘appropri- to grant the Commission too many discretionary powers.
ate measures’ to ensure that aid is compatible. The The Committee believes that interested third parties
regulation also establishes two systems of control — the should be guaranteed the right to appeal, and the
examination of Member States’ annual reports and Commission should be obliged to give an answer in all
on-site monitoring (Articles 19 and 20). cases.
C 284/12 EN Official Journal of the European Communities 14.9.98

3.6. The introduction of formal rules, however, is complex issues would be useful. The lack of such
also a unique opportunity to create a new culture of provision harms transparency and inhibits third party
increased transparency which guarantees that third rights.
parties are secured a right to information, have a right
to be heard and a right to comment before decisions are
made. Relevant input from third parties will improve 4.3.1. The Committee thinks that any party who has
the quality of the Commission’s work, enhance control submitted an opinion should receive a copy of the final
and contribute to less distortion of competition in the decision. It should also be stipulated that any party can
single market. notify the Commission of unlawful aid or of the unlawful
use of aid. If the Commission deems the information
provided to be insufficient, it should be obliged to
3.7. More transparency and better third party rights inform the party of this fact. It should also be obliged
will strengthen control of state aid. Competitors and to send the party the full text of its decision. This would
other affected parties could contribute to making the appear to be in line with several judgements passed by
investigation in important cases more comprehensive. the Court of Justice. (1)
Information from competing companies would enable
the Commission to better assess the impact of a given
aid on the market. Enhancing third party rights might
therefore help to reduce the overall level of aid. 4.4. The problem of the recovery of unlawful aid is a
difficult one because Member States have different
judicial and administrative procedures. The Committee
3.8. The definition of state aid by the Court of Justice therefore supports the Commission’s efforts to improve
and the Treaty also includes aid which does not the situation by including the injunction to suspend or
constitute a subsidy but which distorts competition. provisionally recover aid (Article 11) and stipulating that
The Commission should pay careful attention to the ‘remedies under national law shall not have suspensive
application of the regulation to some of this aid, since effect’ [Article 14(3)]. These two provisions make the
Member States do not always see fit to declare it; the Commission’s action more effective.
Commission should introduce legislation to bring such
cases out into the open.

4.5. The regulation does not say what will happen if
3.9. The Committee asks the Commission to assess national judicial procedures do not allow the immediate
whether it would be useful to make Member States’ and effective execution of the Commission’s decision.
notifications on new aid available to the public, even in Given the elementary principle that there should be a
summary form. level playing field, Member States should take steps to
make immediate recovery possible, and the Commission
3.10. The Commission proposal touches on sensitive should ensure that dilatory procedures are not intro-
areas of national structural policy. In view of its duced.
political significance, the regulation should contain clear
requirements to provide for better compliance with the
concepts of transparency and information, not least 4.6. The Committee considers that aid which has
with regard to the general public. been misused should be recovered as soon as it becomes
incompatible with Community rules and therefore
becomes fundamentally unlawful.
4. Specific comments

4.1. According to the definition of the Court of 4.7. The Committee considers the on-site monitoring
Justice, state aid also includes interventions which provided for in Article 20 to be of great importance.
‘without being subsidies in the strict meaning of the However, the same Article also envisages an agreement
word, are similar in character and have the same effect’. with the Member State on the appointment of experts,
The definition contained in Article 2 of the regulation which could give rise to prevarication and delays. It
should be clarified. would therefore be useful to set a deadline and for the
Commission to always have the final say on the
appointment of experts.
4.2. Article 4(6) provides for a de facto dual notifi-
cation, which renders the procedure unnecessarily com-
plicated.
4.8. On the basis of the Treaty definition, the Com-
mission, in Article 25 of the regulation, suggests an
4.3. As to third party rights in general, the proposal exclusive relationship with national authorities. Since
lacks a provision empowering the Commission to
publish the fact that individual aid has been notified
and basic information about the aid granted. Whereas
publication of every notification cannot be justified, a
flexible paragraph that allows publication of particularly (1) Sytraval judgement.
14.9.98 EN Official Journal of the European Communities C 284/13

in several Member States a great deal of aid is handled more legal certainty. Capacity constraints on the part
by decentralized authorities, it should be possible to of the Commission do not justify the absence of time
interpret the Treaty in such a way as to allow these limits. This is particularly true since the Commission
Member States to dialogue directly with local plans to apply block exemptions in the future.
authorities. This would shorten the administrative delays
that such an exclusive relationship entails. The same 4.10.1. The proposal fails to clarify when the aid
goes for the concept of ‘state aid’ contained in the Treaty notification is complete, and when the two-month
— this, however, is more broadly interpreted and period for the preliminary examination therefore begins.
includes any type of public aid. The Committee would welcome a provision to give legal
certainty on this point. A compulsory form, which the
Commission could provide for aid notification, would
4.9. The publication of ‘a summary notice’ of the
be one answer. The Committee would also welcome
decision in the Official Journal expedites procedures
other ways of improving legal certainty.
but makes them less transparent. However, in view of
translation problems that will progressively increase 4.10.2. In the interests of legal certainty, the Com-
over the next few years, the publication of a shortened mittee also recommends that aid which was paid
version is probably advisable. It is essential that the unlawfully more than ten years previously should be
notice be published as soon as possible in order for treated as de facto aid. After this period, neither
decisions to be effective. Complete and reasonably rapid notification nor recovery would be necessary. Such a
publication in all languages will require a considerable provision is justifiable because after ten years there is
increase in the Commission’s technical resources. no danger of competition being distorted or competitors
suffering directly.
4.10. The ESC therefore regrets that the proposal
lacks time limits when the Commission deals with 4.11. The Commission will have to make sure that
second-phase, formal investigations. The starting date procedures are rapid and transparent, and that legal
for calculating the two-month period is also not clear. certainty and the normal operation of companies cannot
Time limits would provide the parties engaged with be jeopardized under any circumstances.

Brussels, 1 July 1998.

The President
of the Economic and Social Committee
Tom JENKINS