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C 291/2 EN Official Journal of the European Communities 19.9.

98

STATE AID
C 29/98
Belgium

(98/C 291/02)

(Text with EEA relevance)

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

Commission notice pursuant to Article 93(2) of the EC Treaty to other Member States and
interested parties concerning aid which Belgium (Flemish community) intends to grant to
Hermes Europe Railtel NV

The Commission has sent the Belgian Government the intends to supply, via its network, a wide range of
following letter, informing it that it has decided to hi-tech transfrontier telecommunications services.
initiate proceedings pursuant to Article 93(2) of the EC The network will provide the necessary infra-
Treaty. structure in order to carry conversations, data,
video images and graphical information.

‘1. By letter dated 4 August 1997, registered on 20
August 1997, the Belgian authorities notified the
Commission of the Flemish authorities’ intention to 2.3. The overall investment in Flanders will amount to
provide a guarantee covering 50Ø% of a loan of ECU 64 million, of which ECU 14 million will be
ECU 50 million for Hermes Railtel NV (HER). By financed by HER BV (Netherlands) and ECU 50
letter dated 3 October 1997, the Commission million by private banks. The guarantee of the
requested further information, which it received on Flemish Region is intended to secure 50Ø% of the
27 October 1997. Since the Belgian authorities’ loans provided by the banks. It will not be
letter of 27 October 1997 could still not provide provided on the basis of an approved aid scheme
detailed information on important issues such as but will be awarded ad hoc. Its duration will be 10
the creation of employment in an assisted area, the years. The deposit payment will amount to 2Ø%
Commission again requested such information by and the annual fee to 0,5Ø% of the guaranteed
letter dated 28 November 1997. A reply was sum.
received on 30 December 1997. The annexes to
this reply, however, were missing. A reminder was
sent to the Belgian authorities on 13 January 1998,
and they transmitted the annexes by letter dated
4 February 1998 which was registered on 12 2.4. According to the information provided by the
February 1998. Belgian authorities, the project might lead to the
creation of approximately 200 new jobs. It is,
however, not clear where the new jobs will be
2.1. HER is a joint venture between the American tele- created. Some of the Belgian authorities’
communications service company GTS and the information indicated the province of Limburg,
Dutch company HIT Rail BV, both of which are which is a depressed area covered by Article
too large to meet the SME criteria. HER’s 92(3)(c) and where aid for new investment may be
management centre is currently located in granted up to 15Ø% of the overall investment costs.
Hoeilaart, with a backup centre in Antwerp. The Commission therefore insisted in its letters on
Neither of these areas is eligible for regional aid clarification of these issues. None of the Belgian
under Article 92(3)(a) or (c) of the EC Treaty. authorities’ replies, however, could substantiate in
detail where the new employment will be created.

2.2. HER aims to become a leading pan-European
carrier’s carrier and thus to act in a market which
has only recently been liberalised and become In addition, the Belgian authorities emphasised that
accessible to private suppliers. In order to achieve the aid would be meaningful since the investment
its objective, HER will set up and operate along was supposed to take place in a difficult
Europe’s rail system and optical fibre network environment. The telecommunications sector had
which, by mid-1998, will interconnect six EU only recently been liberalised and this market was
countries and Switzerland and, by the end of the currently still dominated by the former State
project, will cover the whole of Europe. HER monopolies.
19.9.98 EN Official Journal of the European Communities C 291/3

3.1. The Commission cannot, at this stage, rule out the that has been made available to the Commission, it
possibility that the guarantee granted to HER appears doubtful whether the aid falls within the
constitutes aid within the meaning of Article 92(1) scope of application of the derogations as set out
of the EC Treaty. The guarantee will enable HER in Article 92(2) and (3) of the EC Treaty. The
to obtain an ECU 50 million loan from private reasons are the following:
banks. Public loan guarantees usually have the
effect of helping the beneficiaries obtain loans or,
at least, loans on better financial terms than those —Ùthe exemptions set out in Article 92(2) of the
normally available on the financial market. In this EC Treaty do not apply at all in this case in
context, the Belgian authorities could not confirm view of the features of the aid and the fact that
that, without the State guarantee, HER would it does not seek to satisfy the conditions for
have found a financial institution prepared to grant application of those exemptions,
the ECU 50 million loan at all or on the same
terms and conditions. In addition, even though
HER will have to pay a deposit payment of 2Ø%
—Ùthe aid is not covered by the derogation
and an annual fee of 0,5Ø% of the guaranteed sum,
provided for in Article 92(3)(a) of the EC
there are doubts that these payments correspond to
Treaty since none of the Belgian regions belong
the usual commercial rate of remuneration for the
to areas eligible for regional aid under that
risk incurred by a lender of private loans for the
provision,
same duration and on comparable terms, taking
account of the beneficiary’s financial position, the
sector of activity and its prospects and the security
put up for the loan. —Ùwith respect to the exemption set out in Article
92(3)(b) of the EC Treaty, it is extremely
doubtful whether the investment can be
These doubts are in particular borne out by the regarded as a project which aims to promote
fact that HER is owned by two large and healthy the common European interest within the
enterprises which should normally be able to raise meaning of that provision. Although the
the funds they need to finance their investments on investment is intended to provide telecommuni-
the financial market. cations infrastructure for Member States within
the EU, the project is not part of a cross-
border programme which is supported by
several Member States,
3.2. The investment will take place in the market for
telecommunications services which has only
recently been liberalised. In this sector, competition —Ùunder the derogation set out in Article 92(3)(c),
between several service providers from different the Commission can approve certain investment
Member States is developing rapidly and HER will aid if specific criteria are met. However, the aid
be competing with a number of operators. The in question does not appear to meet the
planned investment is part of a project to build a requirements under which the Commission
telecommunications network interconnecting six accepts aid for investment purposes:
EU countries. It is therefore obvious that any State
intervention without financial return from the firm
is likely to distort competition and affect trade
1.Ùthe proposed aid does not meet the
between Member States.
requirements of the Community guidelines
on State aid for small and medium-sized
enterprises (SME guidelines)Ø(Î). HER is not
3.3. Cases in which State guarantees are to be regarded an SME since it does not meet the inde-
as State aid and in which the guarantee is not pendence criterion. Thus, the aid cannot be
granted under an approval scheme have to be approved as investment aid for an SME on
notified individually under Article 93(3) of the EC the basis of the SME guidelines;
Treaty. Consequently, since the guarantee is not
based on an approved aid scheme, the proposed
guarantee is notifiable individually pursuant to 2.Ùit is doubtful whether the investment will
Article 93(3). The authorities complied with this lead to job creation in an assisted area
obligation by notifying the planned aid to the which is eligible for regional aid under
Commission by letter dated 4 August 1997. Article 92(3)(c). From the information the
Commission has received, there is no indi-
cation, in spite of several specific requests,
3.4. After close examination of the proposed aid, the that employment will be created in the
Commission has serious doubts concerning the
compatibility of the planned measure with the (Î)ÙCommunity guidelines on State aid for small and
common market since, based on the information medium-sized enterprises (OJ C 213, 23.7.1996).
C 291/4 EN Official Journal of the European Communities 19.9.98

Article 92(3)(c) area of Limburg. On the calculated at the reference rate used to calculate
contrary, given the fact that the firm’s head- the net grant equivalent of aid schemes which was
quarters are in Hoeilaart and Antwerp, applicable at that date.
it can rather be concluded that employment
will exclusively be created there. Hoeilaart
and Antwerp are, however, not depressed 4.4. The Commission also informs the Belgian
areas eligible for aid under Article 92(3)(c) Government that it will be publishing this letter in
of the EC Treaty. the Official Journal of the European Communities,
giving the other Member States and other
interested parties notice to submit their comments,
3.5. The Commission takes note of the Belgian auth- and in the EEA Supplement to the Official
orities’ view that the investment is supposed to take Journal, giving interested parties in the EFTA
place in a difficult environment, that the telecom- States similar notice to submit comments. The ESA
munications sector has only recently been will be informed in accordance with Protocol 27 of
liberalised and that this market is currently still the EEA Agreement. Third parties demonstrating
dominated by the former State monopolies. Never- sufficient interest can obtain a copy of this letter.
theless, it is difficult, at this stage, to approve the The Belgian authorities are therefore invited to
proposed measure without a further in-depth inform the Commission, within seven days of
examination of the case. notification of this letter, whether they consider
that it contains any confidential information which
4.1. On the basis of the above assessment, the they would wish to be deleted before publication.
Commission has serious doubts at this stage as to The specific reasons should be stated clearly in
the compatibility of the proposed aid with the each case. If the Commission does not receive a
common market pursuant to Article 92(3) of the reasoned request within the stipulated period, it
EC Treaty. The Commission has therefore decided will consider that publication of the full text of this
to initiate Article 93(2) proceedings on the planned letter is agreed. Requests should be sent by
measure, so as to scrutinise further the doubtful registered letter or fax to:
aspects of the case, particularly as regards the area
where the jobs are to be created and the effect on
European Commission,
competition.
Directorate-General for Competition (DG IV),
State Aid Directorate,
4.2. As part of the proceedings, the Commission hereby Rue de la Loi/Wetstraat 200,
calls on the Belgian Government to submit its B-1049 Brussels
comments and any information it considers Fax (32-2) 296Ø98Ø18’.
relevant within one month of receiving this letter.
The Commission hereby gives other Member States and
4.3. The Commission would remind the Belgian auth- interested parties notice to submit their comments on the
orities of the suspensory effect of Article 93(3) of measures within one month of the date of publication of
the EC Treaty and draws their attention to the this notice to:
communication published in the Official Journal of
the European Communities C 318 of 24 November
1983, page 3, in which it was stipulated that any European Commission,
aid granted unlawfully, i.e. without prior notifi- DG IV — H-2,
cation or without awaiting the Commission’s final Rue de la Loi/Wetstraat 200,
decision under the procedure provided for in B-1049 Brussels.
Article 93(2) of the EC Treaty, may have to be
recovered from the recipient, including interest The comments will be communicated to the Belgian
running from the day the aid was paid to it, Government.