Draft community guidelines applying article 87 and 88 of the treaty to the granting of urgency aid and/or restructuring aid to firms in difficulty – Norwegian comments

Reference is made to the Commission’s letter of 18 December 2003 with draft community guidelines on urgency and/or restructuring aid. The Norwegian Ministry of Trade and Industry appreciates the invitation to comment on the draft proposal.

Introduction

The Ministry of Trade and Industry take note of the efforts to modernise State aid control. In general, we welcome the changes and clarifications on the rules of urgency aid and/or restructuring aid. We agree on the general principle that prohibition of State aid should remain the rule in this area and that derogation from this principle should be limited. Aid for rescue and restructuring operations is perhaps the most distortive type of aid, and we appreciate a reduction in the use of such aid.

Comments to the draft guidelines

The new concept of "urgency aid"

In some cases it could be necessary to take certain measures before a restructuring plan is implemented. The current guidelines (the 1999 guidelines) does not allow for any restructuring measures during the phase of receiving rescue aid. The proposed new “urgency aid” would allow the beneficiary to undertake urgent measures, even of a structural nature. The Ministry supports the proposed new “urgency aid” as long as the use of such aid are strictly limited to the amount necessary and limited to six months, so that the division between urgency aid and restructuring aid still remains clear.

Concept of a firm in difficulty

According to both the existing and the proposed guidelines newly created firms cannot receive urgency or restructuring aid. In point 12 the Commission has proposed a clarification on the term “newly created firm”, namely that “ A firm will be considered as newly created up to [5] years since start of operations in the relevant field of activity.” We agree that newly created firms should not be eligible for such aid. However, we would appreciate an elaboration on the economic rationale on the 5-year limit.

Other provisions of community law

We note that the previous point 2.6 in the 1999 guidelines is deleted. We assume that it is only a technicality and that it does not imply any change in the Commission practice, and that other provisions of the Treaty would be respected when authorising aid.

General conditions for the authorisation of urgency and/or restructuring aid notified individually to the Commission

The Ministry supports the introduction of a general chapter on conditions on both urgency and restructuring aid, and the clarification that the “one time, last time”-principle apply to urgency aid as well as to restructuring aid.

Urgency aid

In point 32 it is stated that where less than 10 years has elapsed since the granting of urgency aid or the restructuring period came to an end, the Commission will not allow further urgency or restructuring aid, except inter alia in exceptional and unforeseeable circumstances for which the company is not responsible. The Ministry would like to know if this exception has been applied under the 1999 guidelines, and if not, whether this exception should be considered deleted.

Regarding point 37 b) the Ministry welcomes the limitation of all aspects of urgency aid to six months.

In point 37 d) it is highlighted that the urgency aid must be restricted to the amount necessary to keep the firm in business for the period during which the aid is authorised. The Commission has developed a formula for determining the maximum amount necessary (Annex I): [EBIT _t + Depreciation _t + (Working Capital _t - Working Capital _tt-1)]/2 The Ministry is of the opinion that the formula seems reasonable as a general threshold.

A simplified procedure on the granting of urgency aid is introduced in point 41. The Ministry welcomes a simplified procedure, as long as certain safeguards prevents that aid is authorised to easily. The formula in annex 1, combined with a ceiling on € 10 million could prevent that this simplified procedure leads to undue distortion of competition. € 10 million could still be regarded as a fairly high amount, and it should be considered to adjust this ceiling downwards.

With regard to the simplified procedure, the Commission shall as far as possible endeavour to take a decision within one month. The Ministry would appreciate if the Commission could commit itself more clearly to take a decision within one month in cases where the conditions are fulfilled.

Restructuring aid

As the Commission states in the proposed guidelines, aid for restructuring raises particular competition concerns as it can shift an unfair share of the burden of structural adjustment and the attendant social and economic problems onto other producers who are managing without aid and to other Member States. The Ministry therefore agrees on the general principle that the granting of restructuring aid only should be allowed in circumstances in which it can be demonstrated that it does not run counter to the Community interest.

With regard to avoidance of undue distortions of competition we agree that measures must be taken to mitigate as far as possible any adverse effects of the aid on competition at Community and at EEA level. We note that it is stated in point 51 and 53 (and also in point 82) that particular considerations must be taken if the beneficiary is active in a market suffering from long-term structural overcapacity. However, the term “long-term structural overcapacity” is not further elaborated. We assume that this is due to the difficulties in defining which sectors/markets that suffers from long-term structural overcapacity/sectors in structural decline in connection with the Commission Multisectoral framework on regional aid to large investment projects. We hope that the Commission could clarify if the term “long-term structural overcapacity” would be defined in more detail in the guidelines, or if it would be evaluated on a case-by-case basis.

It is stressed that the companies themselves have to make a real effort, an effort free of aid (point 54). The Ministry welcomes this clarification. The Commission proposes minimum percentages of own contribution that need to be provided by the beneficiary. Our view is that this will demonstrate that the market believes in the feasibility of the return to viability within a reasonable period and at the same time ensure that the aid is limited to the minimum required.

The Ministry agrees that small and medium-sized enterprises (SMEs) should be treated more favourably. Nevertheless, the reasoning behind the different percentages is not elaborated. We would appreciate if the Commission could explain why it has chosen the different percentages. We note that for large undertakings, no minimum ceiling is given even if it is stated that large undertakings normally is expected to contribute at least 50 %. We believe that an absolute minimum percentage should be set for large undertakings, to avoid that large undertakings in certain cases could be treated more favourable than SMEs.

Restructuring aid in assisted areas

Regarding restructuring aid in assisted areas (point 63 and 64), we notice that the draft guidelines remain the same as in the 1999 guidelines. We assume that the Commission are awaiting the revision of the guidelines on national regional aid.

Aid for restructuring small and medium-sized enterprises/ aid schemes for SMEs

The Ministry endorses the effort to concentrate the Commission effort on scrutinising aid to large enterprises and hence simplify the procedures on the granting of aid to small and medium-sized enterprises (SME) both regarding individual aid (point 65 and 66), and regarding aid schemes for SMEs (part 4).

Provisions applicable to aid for restructuring in the agricultural sector

The Ministry has no comments to the chapter on the provisions applicable to aid for restructuring in the agricultural sector since this sector does not fall within the scope of the EEA agreement with regard to State aid.

Appropriate measures, entry into force and non-notified aid

The Ministry takes note of the chapters regarding appropriate measures, entry into force and non-notified aid. The Ministry assumes that the EFTA Surveillance Authority will follow the same procedures with regard to the EFTA-states as the Commission with regard to the Member States.

Conclusion

The Norwegian Ministry of Trade and Industry welcomes the proposed changes and clarifications on the rules of urgency aid and/or restructuring aid and the modernising of State aid control in this area. We agree on the general principle that prohibition of State aid should remain the rule with regard to rescuing and restructuring operations, and that derogation from this principle should be limited. Aid for rescue and restructuring operations is perhaps the most distortive types of aid, and we appreciate a reduction in the use of such aid.

Yours sincerely,

Copy: EFTA Surveillance Authority