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State aid

Legislation archive

Commission letter to Member States SG(92) D/06981 of 19 March 1992

Your Excellency

By letter of 26 May 1988 (SG(88)D/6181) the Commission informed Member States of its decision of 29 March 1988 as regards the interpretation of the coexistence of the sixth Council Directive of 26 January 1987 on aid to shipbuilding (1) and Council Regulation (EEC) No 4028/86 on Community measures to improve and adapt structures in the fisheries and aquaculture sector. (2)

In a multilateral meeting of 27 September 1991 the Danish delegation requested the Commission to clarify in writing how the decision of 29 March 1988 is implemented by the Commission.

Council Regulation (EEC) No 4028/86 has been amended by Council Regulation (EEC) No 3944/90 of 20 December 1990 (3) in order to take into account the European Parliament's resolution on a reasonable standard of living for smallscale fishermen (OJ C 47, 27.2.1989) and to bring within the scope of the resolution fishing vessels previously excluded from support under the guidelines. Under the Regulation support can, inter alia, be given for modernization of the fisheries fleet if conforming to the objectives of the multiannual guidance programmes and/or zonal programmes, The levels of support, which are laid down in Annex 2 of Council Regulation (EEC) No 3944/90 and depend on the availability of sufficient Community funds, are as follows:

Area Community support Member State support
Vessels under 9 m length: - designated areas* - other areas 35% 20% between 5 and 25 % between 5 and 25 %
Vessels over 9 m length and under 33 m: - designated areas* - other areas 30% 15% between 5 and 25 % between 5 and 25 %
Vessels over 33 m length : - designated areas* - other areas 20% 5% between 5 and 25 % between 5 and 25 %

* Designated areas are Greece, Andalusia, the Canary Islands, CeutaMelilla, Galicia, west Scotland, the departments of Quimper and Lorient, Ireland, Northern Ireland, Mezzogiorno, Portugal, the French overseas departments, Veneto and MecklenburgWestern Pomerania.

In the case of insufficient Community funds, Member States can make up the shortfall only if the level of such aid does not result in exceeding, in subsidy equivalent, the overall level of State and Community support permitted under the rules of Regulation (EEC) No 4028/86.

The seventh Council Directive of 21 December on aid to shipbuilding (4) inter alia contains provisions as regards the maximum allowable level of contractrelated operating aid granted to shipowners and shipyards, the prevention of unfair competition, notification of aid schemes and monitoring of the implementation of approved aid schemes. This Directive, as a matter of course, also contains a provision stating that aid granted by a Member State to its shipowners or third parties in that Member State for shipbuilding or ship conversion shall not result in distortion of competition in the placing of orders between national yards and yards from other Member States. The Directive includes within its scope the construction and conversion of fishing vessels of not less than 100 grt.

Since the structural policies expressed in the fisheries Regulation and the shipbuilding Directive were not immediately compatible, the Commission in its letter SG(88)D/6181 of 26 May 1988 informed the Member States of how it intended to apply these acts. In this letter it was stated that for the promotion of the construction, or conversion of fishing vessels inside the multiannual guidance programmes the aid intensity ceilings of the fisheries Regulation would prevail over the more restrictive ceiling prescribed under the shipbuilding Directive. On the other hand, State aid under the provisions of the shipbuilding Directive for the construction, or conversion of fishing vessels for the Community fleet, which were not part of an approved multiannual guidance programme, were considered incompatible with the common market and therefore excluded. In all other respects, fishing vessels of more than 100 grt constructed for third country owners would remain subject to the rules of the shipbuilding Directive. It was emphasized in the letter that the general principle expressed in Article 3 of the shipbuilding Directive that the granting of aid must not lead to distortion of competition between national shipyards and shipyards in other Member States in the choice of placing orders would continue to prevail in all cases.

The amendment of the fisheries Regulation and the replacement of the sixth by the seventh shipbuilding Directive (both in 1990) do not affect the Commission's interpretations of these two legal acts as set out in its letter of 26 May 1988. In the minutes of the Council meeting of 21 December 1990 the Council stated that aid for the construction or conversion of fishing vessels granted to Community shipowners under the structural policy for fisheries will be governed by the relevant Community provisions, for as long as this proves a suitable means of furthering the structural policy in the fishery sector. In all Commission decisions to approve aid schemes notified under the seventh Directive on aid to shipbuilding in 1991, reference has been made to the framework laid down in the Commission's letter of 26 May 1988.

In practice the Commission's way of implementing these two legal acts comes down to the following. National aid schemes to support national fishermen's efforts to modernize their fleet have to be notified to the Commission to enable it to assess the compatibility of such schemes with the general principles laid down in Article 2 and Article 3(3) of the seventh Directive as well as compliance with the provisions of the fisheries Regulation as regards the objectives of the multiannual guidance programmes and/or zonal programmes. In order to enable the Commission to monitor the implementation of such approved aid schemes Member States are obliged to provide the necessary information both under Article 12(1) of the seventh Directive and the requirements of the fisheries Regulation.

While aid levels permitted under Council Regulation (EEC) No 4028/86 for fishing vessels approved under the multiannual guidance programmes prevail and vessels not complying with this programme cannot receive any aid support, subsidies under the shipbuilding Directive can be granted for the benefit of contracts to build or convert a fishing vessel for a shipowner outside the territory of the Community.

As regards aid for building fishing vessels for the Community fleet the availability of aid at all and the intensity of such aid is ruled by the fisheries Regulation, while all other competition provisions of the shipbuilding Directive apply for such vessels beyond 100 grt. This implies, for example, that if Member States in individual cases of competition for a contract to build or convert a fishing vessel feel that competition is distorted, due to the application of the various national aid schemes in support of the shipbuilding industry of the Community, their governments can request the Commission, pursuant to Article 4(5) of the seventh Directive, to investigate the different aid intentions in order to ensure that the planned aid does not affect trading conditions to such an extent that the common interest would be damaged. The way in which the Commission will implement this general principle under the shipbuilding Directive has been laid down in a Commission declaration to the minutes of the Council meeting of 26 January 1987. In practice this means that the Commission will ensure that shipowners are free in their choice of a building yard within the territory of the Community and that different aid levels available to yards in various Member States are not used to distort competition by the toppingup of the aid granted to the shipowner.

In the case of extraCommunity competition for a contract for building a fishing vessel for the Community fleet for which Community yards are also competing, Article 4(5) of the shipbuilding Directive allows for accepting the highest of the proposed aid supports to the competing yards , but within the overall maximum aid support ceiling laid down in the fisheries Regulation , if this is judged necessary to avoid the contract being placed outside the Community.

If on the other hand, extraCommunity competition exists for a building contract which does not qualify for aid under the Community fisheries Regulation most Member States have provisions to exclude such foreign built vessels from access to Community waters.

Yours faithfully

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