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STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUESRELATED TO ACCESSION* Abstract. This article aims to offer to the non-specialist reader a concise introduction to the main elements of the state aid acquis, and inform on what lies ahead of Romania in theaccession process in relation to state aid control, based on the precedent of the 2004enlargement. It also discusses the current state of affairs in Romania in the domain of state aidcontrol, with a particular view to the situation of the steel and coal sectors. Section I coversthe legal concept of state aid, the substantive rules applicable to state aid – the general banand exemptions from it, the Commission’s control and monitoring powers, and the regimecurrently applicable to coal and steel aid. Section II relates the experience of the countries thatjoined the EU in May 2004 in the negotiation of state aid issued under the CompetitionChapter, discusses the notion of “existing aid” (i.e. state aid given in the candidate countriesprevious to accession but which continues to produce effects after accession) in the contextof enlargement, and overviews the agreed transitional arrangements. Section III turns to thelegislative and institutional context for the control of state aid in Romania, and to topicalissues related to state aid in the context of the negotiations on the Competition Chapter. State aid control is therefore one of the hot issues of the moment in Romanian political, At the time of writing this article, a Romanian institutional and business circles, as well as for the team of negotiators is preparing to fly to Brussels press. It remains, however, one of the areas of EC for a new round on the Competition Chapter. This,together with Justice and Home Affairs, are the two law that is least known and understood by the remaining open negotiation chapters, which public. One of the purposes of this article is offer Romania hopes to conclude very soon so as to be an accessible guidance to the non-specialist able to sign the Accession Treaty in Spring 2005.
reader as to the main elements of the state aid The pending issues under the Competition Chapter acquis. The other is to inform those directly are related to state aid. One is that Romania still interested (academics, but also institutions cannot prove a “credible enforcement record” in involved in the granting of state aid and the the field of state aid - while this is one of the business community) about what lies ahead in the essential criteria for closing negotiations on accession process in terms of state aid regulation – competition, along with the adoption in full into based on the precedent of the countries that national legislation of the state aid acquis and the joined the EU in the 2004 enlargement – and on establishment of an adequate administrative the current state of affairs in Romania in the capacity for implementing it. The other is state aid domain of state aid control, with a particular view for the restructuring of the Romanian steel industry.
to the situation of the steel and coal sectors.
* This article draws on a study carried out in the context of the Pre-Accession Impact Studies II program of the European Institute in Romania.
See Gheorghe Oprescu, Isabela Atanasiu, Mariana Papatulica and Petre Prisecaru (2004): State Aid Control in the Sensitive Sectors – Coal,Steel, Shipbuilding, Motor Vehicles (English and Romanian versions available at http://www.ier.ro). ** Isabela Atanasiu is post-doctoral research fellow at the Robert Schuman Centre for Advanced Studies of the European University Institute– Florence, Italy (e-mail: [email protected]). Gheorghe Oprescu is professor of economics and director of the Department ofManagement at the Polytechnic University of Bucharest (e-mail: [email protected], [email protected]).
The article is structured as follows: Section I is effects, rather than objectives, form or content.
an introduction to the EC state aid control system, This effects-based approach in the application of covering the following aspects: the elements defining the concept of state aid; the structure of Commission to exert control over a wide spectrum the substantive law applicable to state aid – the of anticompetitive measures undertaken in the general ban and exemptions from it; and the Member States, ranging from economic regulation procedures according to which the Commission to transactions between the state and individual reviews and monitors state aid granted in the EU.
firms. This approach is at the same time somewhat In addition, this section overviews the regime challenging for those directly involved in the aid currently applicable in the EU to steel and coal operation - aid donors and beneficiaries, for a aid. Section II relates the experience of the good understanding of the EC notion of state aid is countries that joined the EU in May 2004 in the required in order to determine whether a support negotiation of the Competition Chapter - state aid initiative falls under the scope of EC state aid rules, issues in particular, and explains the mechanism especially when support is indirect. In Romania, adopted for the review of “existing aid”, i.e. aid similar to the case of other transition economies given in the candidate countries previous to that have recently joined the EU, indirect aid accession but which continued to produce effects instruments are often preferred over the ‘classical’ after accession. Section III briefly describes the direct subsidies, due to the existent budgetary legislative and institutional context for the control restraints. Therefore, a good understanding of the of state aid in Romania, and includes some conditions under which indirect support measures comments on the remaining topical issues related may be qualified as involving state aid is to state aid in the context of the negotiations on the Competition Chapter. Section IV concludes by What follows is not an exhaustive discussion of the legal definition of state aid,1) but a concise introduction
to the subject for the readers of this publication who are
The Treaty itself does not offer a straightforward definition of state aid. Article 87(1) EC prohibits“any aid granted by a Member State or through state resources in any form whatsoever which distorts or The EC notion of state aid goes beyond what is threatens to distort competition by favouring certain commonly referred to as “industrial subsidies”, to undertakings or the production of certain goods […] cover a variety of state measures and transactions in so far as affecting trade between the Member that confer support to industrial or service firms in States […].” (emphasis added) The European so far as having anticompetitive consequences.
Commission and EC courts have interpreted this Aid measures are singled out according to their provision to indicate four cumulative conditions 1) For a more detailed discussion on the legal definition of state aid, see e.g. Carl Baudenbacher (1999): A Brief Guide to European State AidLaw, London: Kluwer Law International; Malcolm Ross (2000): “State aids and national courts: definitions and other problems”, CommonMarket Law Review vol. 37, pp. 401-423; European Commission (2003): Vademecum – Community Rules on State Aid (available athttp://europa.eu.int/comm/competition/state_aid/others/Vademecum/Vademecumen2003_en.pdf); for a discussion on the legal definition ofstate aid and the soft budget phenomena arising in transition economies, see Isabela Atanasiu (2001): “State Aid in Central and EasternEurope”, World Competition vol. 24, no. 2, pp. 257-283. STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION under which a state measure or a transaction qualified as state resources. In PreussenElektra,4)
involving the state is qualified to involve state aid.
instead, the ECJ established that the German law These are as follows:
obliging electricity suppliers to purchase German- produced electricity from alternative resources at a pre- • the conferring of an economic advantage to established minimum price did not involve state aid, because it did not imply any transfer of state resources.
Economic advantage. ECJ jurisprudence has
established from the early years of application of the Transfer of state resources. Article 87(1) EC
Treaty of Rome that the notion of state aid comprises stipulates that state aid can be granted “by the state or “any support measure, whatever its form, that has as an through public resources”. This formulation was effect the reduction of the expenses normally borne by interpreted to have two implications. First, the notion of undertakings, even if it is not a subsidy, but it has the state aid covers both support measures directly same nature and effects” (emphasis added).5) This
implemented by public bodies (government, regional condition is more problematic to verify in the case of and local administrations) as well as those indirect support measures, where it is more difficult to implemented by private bodies acting on behalf of the identify and measure the effect of reducing the state (e.g., a commercial bank offering subsidised loans expenses normally borne by a firm. The European or loans based on state guarantees, or managing a state- Commission has developed an analytical tool for this funded SME aid scheme).2) Second, the notion of state
purpose, known as “the market economy investor aid covers not only measures involving a directexpenditure from the state’s coffers (e.g., direct principle” (MEIP), which consists of comparing the subsidies or subsidised loans), but also measures behaviour of the body implementing the support implying a loss of revenue for the state (e.g. waivers or measure with that of a private investor acting in similar postponed payment of public debts, the reduction or circumstances.6) Although the MEIP instrument appears
postponement of tax and social security contribution to be quite straightforward, in practice it is often difficult payments). For example, in DTM,3) a case involving
to identify the appropriate comparison benchmark. In postponement for 8 years of the social security Alfa-Romeo and ENI-Lanerossi,7) the ECJ established
payments due by a firm in difficulty (DMT) to the that, whenever a public institution implements a Belgian institution responsible for collecting such support measure in the context of a wider economic payments (the ONSS), the European Court of Justice policy strategy, this behaviour must be measured (ECJ) decided that, as long as social security against that of a holding company seeking to increase contributions are imposed by law and administered by its profits in the medium to long-term, rather than that the ONSS on its basis, such contributions must be of a company seeking short-term profit. In DMT,8) the
2) See in this sense Joint Cases C-72/91 and 73/91 Sloman Neptun -1993- ECR I_887, Joined Cases C-52/97 and C-54/97 Viscido -1998-, CaseC-379/98 PreussenElektra -2000- ECR I-2099. 3) Case C-256/97 Déménagements Manutention Transport SA (DMT) -1999- ECR I-3913.
4) See supra note no. 3.
5) See Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v. High Authority [1961] ECR 19.
6) For a detailed analysis of the MEIP, see e.g. Giuseppe Abbamonte (1996): “Market Economy Investor Principle: A Legal Analysis of anEconomic Problem”, European Competition Law Review no. 4, pp. 259-268; for recent developments of the jurisprudence in this area, seeMarc Hansen, Anne van Ysendyck, Susanne Zühlke (2004): “The Coming of Age of EC State Aid Law: A Review of the PrincipalDevelopments in 2002 and 2003”, European Competition Law Review no. 4, pp. 202-233, discussing inter alia the recent Altmark judgment– Case C-280/00 Altmark Trans GmbH et al. v. Nahverkehrsgesellshchaft Altmark GmbH, judgment of 24 July 2003 (not yet reported) – onwhether the compensation paid for performing public service obligations contains state aid. 7) Case C-305/89 Italy v. Commission (Alfa Romeo) -1991- ECR I-1603; Case C-303/88 Italy v. Commission (ENI-Lanerossi) -1991- ECR I-1433.
8) See supra note no. 3.
Court established that the tolerance shown by the and CETM12) - a Spanish law whereby the state
Belgian ONSS towards DMT should be compared to subsidised loans for the purchase industrial that of a private creditor, who may also decide to vehicles by physical persons, SMEs, public postpone payments from debtors in financial difficulty institutions and public transportation companies.
for the purpose of allowing them to recover, and thus Admittedly to this date the selectivity condition is eventually pay their debts. In Seleco,9) the ECJ
addressed the question of whether the acquirer of assets jurisprudence. The Commission and the EC courts is liable for the recovery of illegal aid that was granted seem to apply a presumption of selectivity to all to the seller prior to the acquisition (a question of high measures that do not have a straightforward relevance in privatisation contexts). The Seleco general character, thus passing the burden of judgment establishes that, if the acquirer has paid a proving the contrary to the Member State where market price for its acquisition, it has not received the measure was initiated.13) Moreover, support
through the transaction any economic advantage that measures that apparently have a general character could be considered as state aid, and thus it cannot be will nevertheless be qualified as selective if the considered liable for the repayment of the illegal aid institutions/bodies empowered to implement them enjoy a certain degree of discretion in their Selectivity. Article 87(1) EC is applicable to application. In Ecotrade14) and Piaggio15) an Italian
law establishing a procedure for passing large undertakings or the production of certain goods”, firms in difficulty under the administration of the or in other words, are selective. The selectivity Ministry of Industry in view of their restructuring criterion entails a distinction between support was found to be selective because: i) the criteria
measures of a general character, which are for selecting the firms to benefit from this available on the same conditions to all firms, procedure were discretionary; ii) the Ministry of
irrespective of the economic sector in which they Industry was given discretion to decide which of operate or their location within the same the selected firms could continue their activity. In jurisdiction, and those that confer an advantage DMT,16) the Belgian ONSS was in the position to
only to certain firms or sectors of activity, and decide in a discretionary way whether and for how whose distorting potential is presumably higher.10)
long the payment of social security contributions selective are Maribel bis/ter11) – a Belgian law
Some specific issues arise in the application of reducing the rate of social security contributions the selectivity test to taxation measures. In a for manual workers, which favoured manual Notice on fiscal aid17) the Commission indicated
labour-intensive sectors with respect to others – that some tax measures normally qualifying as 9) Joined Cases C-328/99 and C-399/00 Italian Republic and SIM 2 Multimedia SpA v. Commission (Seleco) -2003- ECR I-4035.
10) See e.g. Case C-241/94 France v. Commission -1996- ECR I-4551; Case C-200/97 Ecotrade -1998- ECR I-7907; Case C-75/97 Belgium v.
Commission -1999- EC I-3671.
11) Case C-75/97 Maribel bis/ter -1999- ECR I-3671.
12) Case T-55/99 CETM -2000- ECR II-3207.
See Malcolm Ross (2000), as cited in supra note no. l, at p. 406. Case C-295/97 Piaggio -1999- ECR I-3735.
Commission Notice on the application of state aid rules to measures relating to direct business taxation, OJ C 348 of 10.12.1998.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION selective might nevertheless be considered not to involve state aid if the selectivity element is exemptions from this ban mentioned in Article “justified by the nature of the [general taxation] 87(2) EC – including social aid, aid granted system”. The distinction between selective tax directly to consumers, aid granted to compensate schemes and those where selectivity is justified in damages resulting from natural disasters and other the general context of the taxation system exceptional occurrences – are automatic, whereas applicable in a given jurisdiction is not very clear.
those listed in Article 87(3) EC are applied by the More straightforward is, however, that taxation Commission, following an evaluation of the facilities which are available to all firms, objectives and effects of aid. In particular, the irrespective of sector or location, and on the same terms, and where the fiscal authorities do not • “aid to promote the economic development enjoy discretion in implementation, qualify as of certain areas where the standards of living having a general character and therefore fall are very low or unemployment is very high” outside the scope of EC state aid rules.
Cross-border distortion of competition. Article • “aid to facilitate the development of certain 87(1) EC applies only to support measures that distort competition on a cross-border dimension. The Commission presumes that this condition is met affect trading conditions contrary to the whenever the aided firm operates on a market where common interest” (Article 87(3)(c) EC). there is intra-community trade.18) Moreover, even if the
The Commission has the discretion to assess aided firm is not engaged in exporting, aid is assumed whether the conditions for granting the above- to help maintain or increase domestic production, mentioned exemptions are met. In order to render with the consequence of limiting the possibilities of the enforcement policy more transparent and provide producers from other Member States to export on that legal certainty, the Commission issues policy- market.19) In other words, there appears to be an almost
guidance documents (regulations, communications, automatic assumption that aid to firms operating on a notices, frameworks, guidelines and letters addressed market where there is intra-community trade will harm to the Member States) explaining the criteria competition, with the exception of de minimis aid (i.e.
according to which different categories of aid may be cases where total aid received over a period of three approved. What follows is a brief description of how years by one beneficiary, irrespective of form and the above-mentioned exemptions are applied to objective, does not exceed 100,000 euro20)).
Taking into account the policy objectives pursued and the economic situation of the beneficiary firms, we can distinguish two broad Article 87 EC establishes a general ban on categories of aid measures: those aiming at the support measures that qualify as involving state recovery of inefficient firms, and those aiming to aid according to the above-mentioned criteria, but stimulate some sort of investment by profitable See the Commission’s Vademecum (2003), as cited in supra note no. 1, at. Pp. 3-4. See e.g. Joined Cases C-278/92 and C-280/92 Spain v. Commission -1994 - ECR I-1403, para. 40.
See Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis firms – for example, to attract initial investment being related to the carrying out of a restructuring into a certain region, or stimulate firms to programme) is exceptionally allowed in such undertake investment projects that are desirable regions, although otherwise forbidden throughout from a social point of view (R&D, environmental the EU, on condition that it be granted on a protection, employment, training, etc.). In short, temporary basis and gradually reduced. 22) Finally,
the above-mentioned exemptions apply to the aid for other types of investment (e.g. R&D, various categories of aid as follows.
environmental protection, SMEs, employment, Article 87(3)(a) EC is mainly the ground for training, etc.)23) in such regions is subject to less
approving regional aid, namely aid measures strict limitations in terms of total amount allowed.
aimed to attract/stimulate initial investment in the Article 87(3)(c) EC is the ground for approving: poorest regions of the Community, where GDP per aid for initial investment granted in regions capita (PPS) is below 75% of the EU average. The enjoying “assisted area” status under this methodology for selecting the regions enjoying paragraph – as a general rule, regions affected by “assisted area” status under this paragraph, as well industrial decline, and those where the standards as the conditions for approval of investment aid in of living are lower by comparison to other regions such regions, are laid down in the so-called within the same Member State;24) rescue and
Regional Aid Guidelines.21) In addition, the
restructuring aid granted to firms in difficulty, irrespective of their location;25) and aid to other
towards aid for the recovery of inefficient firms types of investment (R&D, environmental that operate in the regions enjoying “assisted area” protection, employment, training, etc.).26)
status under this paragraph. For example, aid aiming at the rescue or restructuring of firms operating in such regions is approved under lessstrict conditions regarding the reduction of excess Article 88 EC establishes a system of ex ante production capacities. Moreover, operating aid (or control and ex post monitoring by the Commission aid reducing the current expenses of firms without of aid measures initiated by the Member States. In 21) See Commission Guidelines on National Regional Aid, OJ C 74 of 10.3.1998. The current Guidelines are up for revision towards the end
of 2005.
22) See Point 4.15 of the 1998 Regional Aid Guidelines, as cited at supra note no. 21. See also cases T-459/93 Siemens v. Commission -1995-
ECR II-1675, T-214/95 Vlaams Gewest v. Commission -1998- ECR II-717, and T-55/99 CETM -2000- ECR II-3207, establishing that aid covering
modernization costs which must be undertaking periodically by a firm because of the very nature of its activity qualifies as operating aid.
23) For the rules applicable to R&D aid, see Community Framework for state aid for research and development, OJ C 45, 17.02.1996, and
Commission Communication amending the Community Framework for state aid for research and development, OJ C 48, 13.2.1998. For
environmental aid, see Community Guidelines on state aid for environmental protection, OJ C 37, 3.2.2001. For employment aid, see
Commission Regulation (EC) No 2204/2002 of 5 December 2002 on the application of Articles 87 and 88 of the EC Treaty to state aid for
employment, OJ L 337, 13.12.2002, and successive amendments. For training aid, see Commission Regulation (EC) No 68/2001 of 12 January
2001 on the application of Articles 87 and 88 of the EC Treaty to training aid, OJ L 10, 13.1.2001 and successive amendments. For aid to
SMEs, see Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to state aid
to small and medium-sized enterprises, OJ L 10, 13.1.2001 and successive amendments.
24) See Regional Aid Guidelines, as cited at supra note no. 21. For a detailed discussion on the methodology for selecting the “assisted areas”
currently covered by this paragraph, see also Fiona Wishlade (1998): “Competition Policy or Cohesion Policy by the Back Door? The
Commission Guidelines on National Regional Aid”, European Competition Law Review no. 6, pp. 346 et seq.
25) See Community Guidelines on state aid for rescuing and restructuring firms in difficulty, OJ C 244 of 1.10.2004. For a discussion of the
elements of novelty in this recent version of the Guidelines on aid to firms in difficulty, see Hansen, van Ysendyck and Zühlke (2004), as
cited in supra note no. 6.
26) See supra note no. 23.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION particular, paragraph (3) of this Article obliges the authority to order the retroactive full recovery of unlawful aid.29) Following notification of plans to
• notify to the Commission, for control and approval, any plan to introduce aid measures preliminary examination procedure (Article 4 of the Procedural Regulation), to be concluded approved (the notification obligation); and within two months from the receipt of the • not to implement such measure until the complete notification form. At this stage the Commission may decide either to declare the notified measure as compatible with the Treaty The detailed procedures according to which commented above) or open a formal investigation procedure (Article 6) if there are doubts as to the monitoring attributions with respect to state aid compatibility of aid with the Treaty. The formal were codified within a Council Regulation, adopted investigation procedure shall be concluded in March 1999.27) The Regulation lays down distinct
procedures applicable to four categories of aid (Article 7(6)), and may result in a “positive measures: “new (notified) aid”, “unlawful aid”, decision” (declaring aid compatible with the “misuse of aid” and “existing aid”.28) In what follows
Treaty), or a “conditional decision” (approving aid we summarise the procedures applicable to each.
subject to certain conditions, implying that for the New aid. Articles 2 and 3 of the Procedural
future the Commission would monitor compliance Regulation confirm the notification obligation and with these conditions), or a “negative decision” the stand-still clause applicable to “plans to grant new aid” as resulting from Article 88 EC. The Unlawful aid. Article 1(f) of the Procedural
notification obligation applies in principle only to Regulation defines “unlawful aid” as aid that has support measures that clearly involve an element been put to effect in breach of the notification of state aid according to the four criteria obligation and stand-still clause. The procedures applicable to unlawful aid are similar to those uncertainty as to whether a given support measure applicable to new aid, but include some additional involves state aid, the Member States are well instruments, some having provisional effects lasting advised to notify it to the Commission for for the duration of the investigation procedure, assessment. This will spare them the consequences others concerning the recovery of unlawful aid from of a possible future qualification of the measure in the beneficiary. Thus, during the investigation question as involving “unlawful aid” – which, as procedure the Commission may adopt suspension we will show below, has important practical injunctions, ordering the provisional suspension of consequences, since the Commission has the the measure under inquiry (Article 11(1)), as well as 27) Council Regulation (EC No 659/1999 of 22 march 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, OJ
L 83 of 27.3.1999.
28) For a detailed discussion of the Procedural Regulation, see Adinda Sinnaeve (1999): “State aid procedures: the reform project”, in Bilal
Sanoussi and Phedon Nicolaides, eds., Understanding State Aid Policy in the European Community: Perspectives on Rules and Practice,
Maastricht: European Institute of Public Administration, pp. 209-230.
29) See Adinda Sinnaeve (1999), as cited at supra note no. 28, in particular pp. 216-217.
provisional recovery injunctions (Article 11(2)), beneficiary in contravention of the approval ordering the provisional recovery of aid already paid conditions established in the Commission’s on the basis of the investigated measure. Provisional decision. The main practical differences between recovery injunctions may be adopted only if three “misuse of aid” and “unlawful aid” is that, in the cumulative conditions are met: there are no doubts about the aid character of the measure concerned, examination of the aid measure the Commission there is an urgency to act, and there is a serious risk cannot order the provisional recovery of aid, and of substantial and irreparable damage to a competitor of the aid beneficiary. Non-compliance Existing aid. Article 1(b) of the Procedural
by the Member States with such interim injunctions Regulation defines this concept as covering, inter constitutes an infringement of the obligations alia, aid that was put to effect before, and is still assumed under the Treaty. Finally, when the applicable after, the accession of Austria, Finland investigation procedure concludes with a negative and Sweden to the EU,30) and aid that at the time
decision by the Commission (establishing that the when the measure was put into effect did not measure involves aid incompatible with the Treaty) qualify as involving aid according to the EC the Commission can order the retroactive recovery legislation in place at the time, but which of aid already granted on its basis, including interests subsequently became state aid according to the on the aid at an appropriate rate fixed by the evolution of the common market and EC state aid Commission (Article 14). The Member States are regulation (an example in this sense is that of fiscal obliged to put to effect the recovery decision without aid measures implemented in certain Member delay, according to procedures available under States before the adoption of a tighter discipline national law, provided they allow the immediate on this aid category in 1998). The essential and effective recovery (Article 14(3)). In practice, difference between “existing aid” and “new aid” is however, the recovery of unlawful aid is often that the Commission can alter the former category delayed by the beneficiaries through initiating only for the future, meaning that aid amounts proceedings under national law against the Member disbursed in the past under existing aid measures State that have the effect of suspending the carrying are protected from retroactive recovery.31)
out of the Commission’s recovery order. Last but not 2. The acquis for the “sensitive sectors”: least, it is worth mentioning that the Commission cannot ask recovery after more than 10 years sincethe award of unlawful aid (article 15). Aid with Due to the strategic importance of the steel regard to which the limitation period of 10 years has and coal sectors in the European economy, state expired shall be qualified as “existing aid”, with the aid granted to (parts of) these sectors were subject to specific, tighter rules than those applicable to Misuse of aid. Article 1(g) of the Procedural
other economic sectors under the EC Treaty.
Regulation defines this category as aid used by the Article 4 of the ECSC Treaty prohibited state aid to 30) This provision (Article 1(b)(i) of the Procedural Regulation) was amended following the May 2004 enlargement to include, by the same
token, aid put to effect before, and still applicable after, the entry into force of the Accession Treaty in the 10 new Member States, without
prejudice to Annex IV, point 3 and the Appendix to the said Annex to the Accession Treaty.
31) See Georg Roebling (2003): “Existing Aid and Enlargement”, Competition Policy Newsletter no. 1, pp. 33-37.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION steel and coal in any form whatsoever, yet Article 95 of the same Treaty was often used by the concluded that it was necessary to maintain a Commission and Council to exempt aid granted in stricter state aid discipline even after the expiry of the context of restructuring. As a matter of the ECSC Treaty, so as to safeguard the outcome of principle, following the expiry of the ECSC Treaty previous restructuring efforts.34) In March 2002 the
on 23 July 2002, the steel and coal sectors became Commission published a Communication on aid subject to the general state aid regime (Articles 87- to steel firms in difficulty (applicable until the end 89 EC and the secondary legislation developed in of 2009),35)
their application). Nevertheless, at present these restructuring aid in whatever form to this sector.
sectors continue to be subject to more restrictive prohibition of aid for large initial investment projects undertaken in this sector (i.e. projects Steel. The European steel industry traditionally
whose total cost exceeds 50 million euro, or concentrated in few regions, with the local where the amount of aid proposed exceeds 5 population predominantly employed in activities million euro) as already established in the context related to steel production. The structural crisis of the regime for regional aid to large investment that affected the sector during the 1970s and projects.36) This prohibition also applies to aid for
1980s brought about a real subsidy war between large initial investment projects undertaken by the Member States, who sought to support the SMEs, as defined by Article 6 of the Commission restructuring of their own steel industry while Regulation on aid to SMEs (i.e., cases where the total cost of the investment project exceeds 25 consequences of restructuring at regional level. To million euro or the total amount of aid awarded keep under control subsidy levels and coordinate exceeds 15 million euro).37)
Turning to the aid categories that are allowed implemented a series of successive State Aid for the steel sector, the 2002 Communication lists types of closure aid that may be granted and the conditioning the approval of aid on the reduction conditions for their approval. These include: of excessive production capacities.32) The last Steel
compensations for early retirement and for Aid Code, 33) covering the period from 1996 to the
workers losing their jobs (if granted for the first expiry of the ECSC Treaty, further narrowed the time to each beneficiary, and up to 50% of the range of support measures allowed in this sector to R&D, environmental and closure aid. After compensate the costs of closing production plants evaluating the condition of the European steel (for companies registered and regularly producing 32) For a historic overview of the EC Steel Aid Codes and their application, see e.g. Alexander Schaub (1997): “State Aid in the ECSC Steel
Sector”, Competition Policy Newsletter no. 2.
33) Decision No. 2496/96/ECSC of 18 December 19996 establishing Community rules for state aid to the steel industry, OJ L 338 of 18.12.1996.
34) Communication form the Commission to the Council, the European Parliament and the ESCS Consultative Committee (1999): The State of
Competitiveness of the Steel Industry in the EU, COM(1999) 453 final.
35) European Commission (2002): Communication on Rescue and Restructuring Aid and Closure Aid for the Steel Sector, OJ C 70 of 19.3.2002.
36) See European Commission (2002): Multisectoral framework on regional aid to large investment projects, OJ C 70 of 19.3.2002 (amended
version of the 1998 text).
37) See supra note no. 23.
before January 2002, and if this type of aid is aid for the coal industry.41) The Regulation takes
granted for the first time; when the firm to be closed is owned or controlled by another steel firm restructuring and re-dimensioning of the hard coal remaining in business, the beneficiary must be production in the EU needs to continue (and be legally separated from the owned at least 6 months supported by the state) beyond the expiry of the before the award of aid, and its financial situation ECSC Treaty, and on the other hand, the EU is will be checked by independent experts appointed becoming ever more dependent on imports from by the Commission). In addition to closure aid, third countries of primary energy resources, thus it steel firms are also allowed to receive regional aid being necessary to maintain a minimum level of for reduced investment projects undertaken by domestic coal production as part of the strategy to SMEs (only when the beneficiary SMEs are located ensure security of energy resources. Thus, the in a region enjoying “assisted area” status under Regulation allows the granting of certain Article 87(3)(a) or (c) EC; aid must not exceed categories of aid for hard coal extraction that aim 15%, respectively 7.5% of the overall cost of at one of the following two broad objectives: investment),38) and aid for other types of
maintaining a minimum strategic level of domestic investment (R&D, environmental protection, hard coal production, and alleviating the social employment, training).39)
Coal. Starting with the 1960, coal extracted in
surplus extraction units. In particular, the the EC Member States ceased to be competitive Regulation allows the following categories of aid: with coal imports from third countries. Similar to • Operating aid covering the losses of
what occurred in the steel sector, for the past four extraction units about to be completely closed by the end of 2007 (Article 4). This provision covers undergone a long and painful restructuring extraction units that were notified to the process. The Member States subsidised the re- Commission by end of December 2002, and for dimensioning of production and implemented which the Member States presented a plan for total programs (often co-financed by the EC) offering closing of production by the end of 2007. Aid financial compensations, re-training, re-location should not lead to a decrease of prices for hard schemes for the redundant miners. At present, after coal extracted in the EU under the price levels of four decades of restructuring, only four of the EU- equivalent imports from third countries.
15 countries are still producing hard coal - the UK, • Aid for maintaining a minimum level of
Germany, France and Spain – and only the UK domestic hard coal extraction (Article 5). We extraction units are relatively efficient, while underline that this provision envisages the granting extraction in the other locations continues to be of either investment aid or operating aid to each subsidised.40) Following the expiry of the ECSC
specific beneficiary. Investment aid may be granted Treaty the Council adopted a Regulation on state up to the end of the year 2010, to firms that have 38) See Regulation 70/2002 on state aid for SMEs, as cited at supra note no. 23. It is important to note that aid for initial investment satisfying
the criteria in this Regulation does not need to be notified for approval.
39) For the exact conditions for the approval of each of these types of aid, see the policy documents cited in supra note no. 23.
40) Report from the Commission on the application of Community rules for state aid to the coal industry, COM (2002) 176 final.
41) Council Regulation No. 1407/2002 of 23 July 2002 on state aid to the coal industry, OJ L 205 of 2.8.2002.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION not received similar aid in the past, and in support of an investment plan of demonstrable viability.
legislation and endowing them with the adequate The maximum amount of aid in this category administrative resources necessary for this task; and granted to each beneficiary cannot exceed 30% of establishing a credible enforcement record with the total cost of the supported investment plan.
respect to state aid. While all 10 countries invited to Operating aid, instead, may be approved for firms join the EU in May 2004 succeeded relatively early included in the national strategic plan for to comply with the first two conditions, the maintaining a minimum level of domestic coal development of a credible enforcement record in extraction (presented to the Commission before the the field of state aid was slower. 43) Some of the 10
end of 2002). Aid should not lower the prices of the candidate countries started a proper enforcement domestic coal under the level of equivalent imports activity with respect to state aid after the year 2001.
By the end of the year 2002, however, it was • Aid covering debts stemming from the
implementation of a restructuring/ rationalization plan, such as the expenses related to the ecological In the context of negotiations on the Competition rehabilitation of former extraction fields.
Chapter, two categories of aid measures used in the • R&D, environmental protection and training
aid, under the conditions laid down in the
problematic: fiscal aid (in particular tax incentives to corresponding EC regulation.42)
attract FDI and the establishment of so-called “freezones”, tax waivers and deferrals for companies in difficulty) and aid to firms in difficulty from the sensitive sectors, steel and coal in particular. With respect to fiscal aid, the Commission agreed with the candidate countries some arrangements Copenhagen established a series of political and meant to bring such measures in line with the acquis economic criteria for the accession of the Central within a reasonable time period. For example: and Eastern European countries to the EU. The Hungary agreed to phase out incompatible fiscal aid economic criteria implied that the candidate to SMEs by end 2011, for off-shore companies by end countries demonstrate the existence of a functional 2005, and incompatible aid granted by local market economy and the capacity to withstand authorities by end 2007; Poland accepted to phase competitive pressures within the internal market. In out incompatible fiscal aid for small firms by end the context of accession negotiations on the so- 2011 and for medium-sized firms by end 2010, and called Competition Chapter, these economic to modify incompatible fiscal incentives for large criteria were translated into three conditions to be investment projects according to the criteria for fulfilled by the candidate countries: adopting the approval of regional aid in the EU; Slovakia undertook competition acquis in full into their national to discontinue fiscal aid to a beneficiary in the motor legislation prior to accession; establishing national vehicles sector by end 2008 and to another 42) See supra note no. 23.
43) See Janne Känkänen (2003): “Accession Negotiations Brought to Successful End”, Competition Policy Newsletter no. 1, pp. 24-28.
beneficiary in the steel sector by end 2009 (or when aid reached a pre-determined total amount).
As to aid for the sensitive sectors, steel in Equally important during the negotiations on circumstances to authorise, in the context of procedures for the screening of aid granted during special transitional arrangements, the granting of the pre-accession period which would continue to restructuring aid as a “last opportunity” for be implemented and produce effects following restoring the viability of these firms (thereby as an accession.45) In the case of the 1994 enlargement
exception from the “one time, last time” rule (involving Austria, Finland and Sweden), the otherwise applicable to restructuring aid in the Accession Treaty stipulated that all aid measures EU), conditional upon the achievement of a approved by the EFTA Surveillance Authority (ESA) certain level of productivity at the end of the before accession would be treated as “existing restructuring process and the carrying out of a pre- aid” following accession. As we mentioned above, determined reduction of excess production this qualification has important practical capacities. Transitional arrangements for the consequences, because aid disbursed in the past restructuring of the steel industry were concluded under an existent aid measure is protected from with three candidate countries: the Czech recovery – the Commission can alter it only for the Republic and Poland (in both cases, restructuring future. The model of the 1994 enlargement could to be completed by end 2006), and Slovakia not be transposed ad literam to the case of the (where fiscal aid to one particular beneficiary shall 2004 enlargement: ESA, as a supra-national be discontinued by end 2009). In the cases of Poland and the Czech Republic, the transitional arrangements regarding aid to the steel sector establish a maximum amount of aid to be granted “objectivity” of its decisions on aid, whereas the to each beneficiary, the aid being approved control of state aid granted in the candidate conditional upon the fulfilment of certain countries during the pre-accession period was obligations regarding levels of productivity to be exercised by a national authority operating under attained following restructuring and the reduction certain domestic political and legislative of excess production capacities. Compliance with constraints. To keep under control the process of these conditions is monitored by the Commission approving during the pre-accession period aid on a regular basis. In the case of the Czech measures continuing to be implemented after Republic, for example, the maximum amount of accession, or having effects after the same date, aid approved for the steel sector was of 413 the Commission proposed a two-tier review million euro, to be paid over the period 1997- system. This system recognised the authority of the 2003, while a productivity comparable to that of national authorities responsible for state aid as a steel firms in the EU should be achieved by first instance of review, but added a second 2006.44)
(lighter) layer of review by the Commission itself, 44) See infra note no. 46.
45) See Georg Goebling (2003), as cited in supra note no. 31.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION aiming essentially at identifying unlawful pre- accession aid that had escaped review by the • aid to the agriculture and transport sectors, national authorities (and therefore not implying a which are subject to separate regimes.
fully-fledged assessment of each aid measure). Pre-accession aid measures that passed the two- According to this system, aid measures put tier test mentioned above were included in a list into effect during the pre-accession period and attached to the Accession Treaty. Since aid measures continued after accession would qualify as proposed to be implemented in the candidate “existing aid” only if having passed the two-tier countries during the period between the finalisation of review. It is important to note that the two-tier the Accession Treaty and the actual date of accession review system was applied also to aid measures could no longer be included on such a list, a distinct that, if awarded within the EU itself, would not interim procedure was set up for this period.
have needed to be notified for approval, as being Under the interim procedure, the candidate countries were requested to notify to the (applicable under specific conditions to aid for Commission for review any plans to introduce new SMEs, employment and training aid).46) If, by
aid measures. Such notifications were to be contrast, a new Member State wished to continue supplemented with a list of all existing aid measures an aid measure that was approved by its national already approved by the national state aid authority.
authority before accession, but in relation to If the Commission did not raise any objections with which the Commission had expressed doubts on regard to a notified measure within 3 months from the compatibility with the acquis, upon accession the receipt of a complete notification (i.e. a it had to notify the measure to the Commission for notification containing all the information review as “new aid”. In practical terms, this meant necessary for the assessment of the case), the aid in that, following notification, the new Member State question was to be considered as approved. If, would have to discontinue the application of the aid measure in question until the Commission objections, this triggered a formal investigation pronounced a decision. Breach of this standstill under the Procedural Regulation, investigation that obligation would result in the qualification of the measure as “unlawful aid”, with the consequences thereof deriving regarding the retroactive recovery aid measures under the two-tier review system, which are listed as existing aid in an Annex to the The two-tier review system did not apply to the Accession Treaty.47) Other 278 existing aid
• aid covered by transitional arrangements under the interim procedure until September 2004. By the same date, 106 other aid measures • aid put into effect in the candidate countries were still under assessment – the majority of which were proposed by the Czech Republic and accession was to be treated as “existing aid” Poland. A significant number of aid measures were 46) See European Commission (2004): State Aid Scoreboard – autumn 2004 update, COM(2004) 750 final. For the block exemption
regulations, see supra note no. 23.
47) See European Commission (2004): State Aid Scoreboard – autumn 2004 update, COM(2004) 750 final.
submitted for review under the interim procedure, restructuring plan, restoring the economic right to the date of accession. Around 78% of the overall aid expenditure in the new Member States • the amount of aid given should be limited to during the period 2002-2003 was earmarked for what is strictly necessary in order to restore particular sectors – for example, 56% of the aid expenditure in Poland was directed towards the • the support to any given beneficiary should restructuring of the coal industry, and 35% of the aid expenditure in Slovakia was related to the • the aided restructuring plan should include measures of rationalization and reduction ofexcessive production capacities.
prolonged until the end of 2005 through the Likewise to the countries that joined the EU in Association Agreement (as Protocol 2 did not May 2004, Romania had previously concluded an contain a clause envisaging the possibility of Association Agreement with the EU, in the context prolongation). This new Protocol takes over the of which it undertook to apply the acquis already-mentioned criteria for the approval of aid communautaire on state aid in full.48) The
for the restructuring of Romanian steel firms, and Association Agreement foresaw two exceptions in introduces a two-tier review system: aid measures this respect. One was that, for the first five years of would have to be approved by the Romanian implementation of the Agreement, Romania’s Competition Council and the Commission, and entire territory would be treated for the purposes of state aid control in the same (more lenient) way implementation of the aided restructuring plan.
as the European regions enjoying “assisted area” We need to underline that the expiry of this status under Article 87(3)(a) EC - with the practical Protocol at the end of 2005 places Romania in a consequences mentioned in Section I above. This different situation from that of other steel- status was eventually prolonged until the end of producing countries which joined the EU in May 2005.49) The second concerned aid to the steel
2004 (i.e. Poland, the Czech Republic, Slovakia) industry. Article 9(4) of Protocol 2 annexed to the in the sense that the latter were covered by a similar Protocol on steel aid up to the date of their approval of rescue and restructuring aid for the accession. At the time of writing it is difficult to steel sector for a period of 5 years from the entry speculate upon the regime that will eventually be into force of the Agreement, as long as the agreed for the period comprised between the end of 2005 and the date of accession. However, in the • aid should be given in relation to a feasible absence of another prolongation running up to the 48) Agreement establishing an association between the European Economic Communities and their member States, of the one part, and Romania,
of the other part, OJ L 357 of 31.12.1994. For state aid control, see in particular Article 64 of the Agreement.
49) See Decision No 2/2000 of the Association Council of 17 July 2000 extending by five years the period within which any public aid granted by
Romania will be assessed taking into account the fact that Romania is to be treated as an area identical to those areas of the Community described
in Article 87(3)(a) of the Treaty establishing the European Community, OJ L 230 of 12.9.2000.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION date of accession, Romania will not be allowed to granted to steel firms, “specific rules will have to grant rescue and restructuring aid to steel firms be observed with priority”, but it does not make after the end of 2005. Moreover, even if the any reference where the relevant rules in question Protocol were to be prolonged until the date of can be found. Moreover, the Competition Council accession, Romania would still probably not be could meet procedural difficulties in the attempt to allowed to continue payments of aid in this enforce a negative decision in this area based category after the date of accession, unless exclusively on the provisions of the Protocol. negotiations on this subject resulted in a transitional arrangement of the kind that was Competition Council adopted a framework for this concluded with Slovakia (see above).
sector in July 2004,52) transposing the principles
The general framework for the control of state and provisions of the EC Regulation of July 2002.53)
aid in Romania is given by Law No. 143/1999, as According to this Regulation, closure aid cannot modified by Law No. 603/2003. This normative be extended beyond the end of 2007, while aid for act defines the legal concepts relevant in this area initial investment and operating aid cannot be of competition law enforcement (the definition of paid after the end of 2010. Any plans to grant aid state aid, categories of aid measures, the notions for initial investment and operating aid must be of aid grantor and aid beneficiary, etc.) and notified to the Competition Council for approval empowers the Romanian Competition Council to by the end of 2004. The notification information perform ex ante control and ex post monitoring must include an accompanying “plan for access to functions modelled after those performed by the coal reserves” that is compatible with the governmental Strategy for the mining industry Article 14(1) entitles the Competition Council during 2004-2010, by the end of 2004.
to issue regulations, instructions or specific Critical issues in the negotiation of the guidelines transposing the state aid acquis. We do not intend to list in full in this context theregulations adopted by the Competition Council in this sense. Suffices it to mention here that a comments on two aspects relevant to the current regulation transposing the special regime debate in Romania on closing the negotiations on applicable to steel aid, as resulting from the the Competition Chapter. It seems that the two Commission’s Communication of March 2002,50)
remaining points to clarify before finalising has not been adopted to the date of our writing. In negotiations on this chapter are the Competition the absence of such a specific framework, the Council’s “lack of credible enforcement record” in legal regime applicable in Romania to steel aid the area of state aid (we remind that proof of a remains somewhat unclear. For example, the credible enforcement record is one of the three Competition Council’s Regulation on rescue and conditions to be satisfied for closing negotiations restructuring aid51) stipulates that, when such aid is
on the Competition Chapter) and state aid for the 50) See supra note no. 35.
51) Official Journal of Romania no. 470, part I, of 2.7.2002.
52) Regulation on state aid for coal mining, Official Journal of Romania no. 736, of 16.8.2004.
53) See supra note no. 41.
restructuring of the steel sector. 54)
whose jurisdiction the aid grantor or the aid Lack of a credible enforcement record means in this context that probably the number of administrative act granting the aid” and order the negative decisions (i.e. decisions prohibiting suspension of the measure and recovery of incompatible or unlawful aid) adopted so far by unlawful aid already paid on its basis. To be noted, however, that this provision refers to the reduced than estimated in the case of a rigorous annulment of administrative acts by means of application of the state aid law according to the which the unlawful aid was paid, and not to the criteria resulting from the state aid acquis.
normative act on the basis of which payments are Furthermore, the Competition Council has no made. Indeed, the normative acts on the basis of enforcement record with respect to the prohibition which unlawful aid is granted cannot be annulled and recovery of unlawful aid. Leaving aside or modified in the course of administrative possible considerations related to the Competition contentious proceedings, and on grounds of their Council’s institutional independence, this situation being in conflict with the state aid law, which is in is, at least in part, due to the fact that the its turn a normative act ranking equal with those Competition Council’s enforcement powers, as resulting from Law No. 143/1999 on state aid, are In order to circumvent this legal trap, Article First, the Competition Council does not have 17 of Law 143/1999 establishes at paragraphs 3 to the ability to adopt itself interim measures in the 6 an informal procedure whose legal effects and course of investigations on unlawful aid (which, consequences are not very clear. According to this we remind, is defined as aid granted in breach of the notification obligation and stand-still clause), learning about unlawful aid, sends notice to the such as the information, provisional suspension body that issued the normative act on the basis of and provisional recovery injunctions that may be which it is being granted (the government, in the ordered by the Commission on the EU side (see case of Emergency Ordinances, or the Parliament, Section I above). According to Article 17(2) of Law in the case of organic laws). The issuing body and No. 143/1999, interim suspension and recovery the aid grantor are requested to suspend the orders can only be issued by the Court of Appeals, application of this act within 10 days from receipt on request from the Competition Council. of the Competition Council’s notice, and to notify Second, in cases of unlawful aid granted on the measure to the Competition Council for review the basis of a normative act, the Competition within 30 days from receipt of the notice. Finally, Council cannot intervene directly for the the issuing body and the aid grantor are required annulment of the normative act in question and to “take into account” the Competition Council’s the recovery of unlawful aid already paid on its eventual decision on the measure if the later basis. According to Article 17(1) of Law No.
requests to amend the normative act in question 143/1999, the Competition Council has the and recover unlawful aid already paid on its basis.
possibility to request to the Court of Appeals in A similar procedure is established at Article 18(1) 54) See Adevarul of 3.12.2004.
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION with respect to aid that was prohibited by the overcome through the two-tier review system Competition Council following notification, but involving the Competition Council and the which nevertheless is being granted on the basis of Commission (see Section II above), which will a normative act adopted in disregard of the probably render the initiators of aid measures Competition Council’s prohibition decision. exclusively on the willingness of the body that As to state aid for the steel industry, we issued the normative act in question to act already mentioned in the sub-section above that until the end of the year 2005 Romania still recommendations, as there are no provisions as enjoys the more lenient treatment resulting from to how the latter could enforce its decisions Protocol 2 to the Association Agreement, which against the issuing body (be it the government or allows the granting of rescue and restructuring aid the Parliament). Admittedly it is not easy to find to this sector whereas such aid is currently the legal and procedural solutions for this banned in the EU. In spite of this permitting problem of conflict between the state aid law regime, aid expenditures for the Romanian steel industry were relatively low during the 2000- Romanian legal order. Possibly one way to 2003 period (see Table below). An all-time record circumvent it would have been to amend the Romanian Constitution by introducing an article privatisation of Sidex Galati, and remained establishing that freedom of competition is a relatively high over the following two years as the constitutional principle – the Competition privatisation process was extended to other firms Council could have acted on its basis in order to in the sector. The aid expenditure reported below request directly the annulment of the normative for the period 1993-2002 are exclusively related acts conflicting with the state aid law. At any to restructuring, and mainly took the form of debt rate, at an advanced stage of the preparations for write-offs and rescheduling, or debt-equity swaps.
accession, the problem could be partially These commitments are also reflected in the Aid to Romanian steel plants during 1993-2002 and forecasts for 2003-2010 (million USD)
2003-2010
Ispat-Sidex
Siderurgica
Hunedoara
Târgoviste
IS Câmpia
CS Resita
Steel Otelul
Siderurgica
Calarasi
Sidermet
Source: ”The Restructuring Strategy of Romania’s iron and steel industry for the 2004-2010 period”; Romanian
Ministry of Economy and Commerce, April 2004.
“Strategy for the restructuring of Romania’s steel industry during the period 2004-2010”, as issuedby the Romanian government in Spring 2004, Our concluding remarks relate to the following which, together with individual restructuring three main aspects: the regime currently applicable plans and the Competition Council’s decision in the EU to steel and coal aid; lessons to be drawn regarding aid granted to each steel firm, will be from the experience of the countries that joined the EU in May 2004 in terms of what lies ahead for eventually submitted for approval to the European Romania in the area of state aid control; and topical Council. In this respect, a series of specific issues for Romania in the negotiation of state aid conditions will have to be met, in terms of the aspects under the Competition Chapter.
credibility and viability of the plans proposed, Following the expiry of the ECSC Treaty, the EU proportionality of aid with the costs of the implemented special regimes for steel and coal aid, restructuring operation, and proposals for maintaining a tighter discipline on aid with respect capacity reduction.55)
to that applicable to other economic sectors. The One of the questionable aspects related to 2002 Communication on aid to steel firms in difficulty prohibits aid for the rescue and restructuring of steel firms, as well as aid for large proposed for the future were not structured by initial investment projects undertaken in this sector.
Steel firms in the EU may receive, instead, closure particularly considering uncertainty about aid (if satisfying certain criteria), aid to reduced whether the Steel Protocol to the Accession initial investment projects undertaken by SMEs, Agreement will be extended beyond the end of and aid for other types of investment (R&D, 2005. Another possibly problematic aspect environmental protection, employment, training).
The 2002 Council Regulation on state aid for the Competition Council did not appear to take coal industry allows, broadly speaking, aid for this into account restructuring aid measures that sector aiming at one of the following two broad were initiated before the coming into force of objectives: maintaining a minimum strategic level of domestic hard coal production, or alleviating the continued to be applied after that date, when social and economic consequences of closing the approving restructuring aid measures proposed surplus extraction units. This includes: operating at the beginning of 2004. Finally, in 2002 the aid for extractions units about to be closed by the Competition Council approved restructuring end of 2007; investment aid up to 30 % of the total aid given in the context of the privatization of investment cost if related to maintaining a minimum level of hard coal production (aid criticised by the Commission for not applying allowed up to 2010); operating aid for firms correctly the viability and proportionality included in a national strategic plan for maintaining a minimum level of domestic coal 55) Eva Szymanska and Max Leinemeyer (2004): “Guidance for making a steel restructuring program”, European Commission, DG
Competition, Brussels (mimeo).
STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION restructuring, such as the expenses related to the (therefore including steel aid) did not fall under ecological rehabilitation of former extraction fields; the scope of the two-tier review mechanism, R&D, environmental protection and training aid.
established in order to offer to the Commission the Likewise to the case of Romania, some of the possibility to exert control over aid measures countries that joined the EU in May 2004 faced initiated during the pre-accession period but severe problems related to the restructuring of their steel and coal industries. While no special accession. According to this system, aid measures allowances were made for the coal sector during put into effect during the pre-accession period and the pre-accession period, these countries enjoyed, continued after accession would qualify as under the Steel Protocols to the Association “existing aid” only if having passed the two-tier Agreements, a more lenient treatment towards aid review of the national state aid authority and for the steel sectors, including in particular the Commission. By contrast, measures approved the possibility to grant rescue and restructuring aid. In national authority only before accession would the context of accession negotiation, the EU have to be notified after accession to the agreed to special transitional arrangements on aid Commission as “new aid”. Pre-accession aid for the restructuring of the steel industry in the measures that passed the two-tier test mentioned Czech Republic and Poland (where restructuring above were included in a list attached to the should be completed by the end of 2006), and Accession Treaty. For aid measures proposed Slovakia (where fiscal aid to one particular during the period between the finalisation of the beneficiary shall be discontinued by end 2009).
Accession Treaty and the actual date of accession, With the exception of the case of Slovakia, the the Commission established an interim procedure, steel transitional arrangements concluded by this time involving the full notification of aid plans Poland and the Czech Republic exclude the to the Commission. If the Commission raised possibility of any aid payments after the date of objections, a formal investigation was considered accession – in practice, the period of time to be triggered, investigation that would be comprised between the date of accession and the expiry of the transitional arrangement covering In Romania, the Protocol to the Association only compliance with the conditions of viability, Agreement allowing the granting of restructuring productivity and re-dimensioning of production aid to the steel sector is applicable until the end of on which restructuring aid was approved in the 2005. The Competition Council has not yet transitional arrangement. For the case of Romania, adopted a regulation transposing the special where most restructuring aid for the steel industry regime applicable to steel aid as resulting from the seems to be granted in the form of fiscal aid, one Commission’s Communication of March 2002. In may envisage of a transitional arrangement of the the absence of such a specific framework, the type concluded with Slovakia. In the absence of legal regime applicable in Romania to steel aid such an arrangement, restructuring aid offered in remains somewhat unclear. The Competition other forms will have to be discontinued upon the Council could meet procedural difficulties in the attempt to enforce a negative decision in this area based exclusively on the provisions of the a normative act may in part explain the poor Protocol. For the coal sector, instead, the enforcement record so far in this area of competition law. The problem may partly be framework the principles and provisions of the EC overcome with the application of the two-tier Regulation of July 2002. Closure aid cannot be review system, performed jointly with the extended beyond the end of 2007. Aid for initial Commission, on aid measures to be continued investment and operating aid cannot be paid after beyond accession. As to the negotiation of a the end of 2010. Any notification of a plan to grant transitional arrangement for restructuring aid to aid for initial investment or operating aid must be the Romanian steel sector, it is important that the conditions required by the Commission for the accompanying “plan for access to coal reserves” approval of restructuring aid under a transitional compatible with the Strategy for the mining arrangement in terms of the credibility and viability of the individual restructuring plans proposed, proportionality of aid with the costs of Competition Council’s limited powers to deal with the restructuring operation, and proposals for unlawful or prohibited aid granted on the basis of STATE AID TO THE ROMANIAN STEEL AND COAL SECTORS: ISSUES RELATED TO ACCESSION Adinda Sinnaeve (1999): “State aid procedures: the reform project”, in Bilal Sanoussi and Phedon Nicolaides, eds., Understanding State Aid Policy in the European Community: Perspectives on Rules andPractice, Maastricht: European Institute of Public Administration, pp. 209-230. Alexander Schaub (1997): “State Aid in the ECSC Steel Sector”, Competition Policy Newsletter no. 2.
Carl Baudenbacher (1999): A Brief Guide to European State Aid Law, London: Kluwer Law Eva Szymanska and Max Leinemeyer (2004): “Guidance for making a steel restructuring program”, European Commission, DG Competition, Brussels (mimeo).
Fiona Wishlade (1998): “Competition Policy or Cohesion Policy by the Back Door? The Commission Guidelines on National Regional Aid”, European Competition Law Review no. 6, pp. 346 et seq. Georg Roebling (2003): “Existing Aid and Enlargement”, Competition Policy Newsletter no. 1, pp. 33-37. Gheorghe Oprescu, Isabela Atanasiu, Mariana Papatulica and Petre Prisecaru (2004): State Aid Control in the Sensitive Sectors – Coal, Steel, Shipbuilding, Motor Vehicles (English and Romanianversions available at http://www.ier.ro). Giuseppe Abbamonte (1996): “Market Economy Investor Principle: A Legal Analysis of an Economic Problem”, European Competition Law Review no. 4, pp. 259-268.
Isabela Atanasiu (2001): “State Aid in Central and Eastern Europe”, World Competition vol. 24, no.
Janne Känkänen (2003): “Accession Negotiations Brought to Successful End”, Competition Policy Malcolm Ross (2000): “State aids and national courts: definitions and other problems”, Common Marc Hansen, Anne van Ysendyck, Susanne Zühlke (2004): “The Coming of Age of EC State Aid Law: A Review of the Principal Developments in 2002 and 2003”, European Competition Law Review no. 4,pp. 202-233. Agreement establishing an association between the European Economic Communities and their member States, of the one part, and Romania, of the other part, OJ L 357 of 31.12.1994.
Commission Communication amending the Community Framework for state aid for research and Commission Guidelines on National Regional Aid, OJ C 74 of 10.3.1998. The current Guidelines are up for revision towards the end of 2005. Commission Notice on the application of state aid rules to measures relating to direct business Commission Regulation (EC) No 2204/2002 of 5 December 2002 on the application of Articles 87 and 88 of the EC Treaty to state aid for employment, OJ L 337, 13.12.2002, and successive amendments. Commission Regulation (EC) No 68/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to training aid, OJ L 10, 13.1.2001 and successive amendments. Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid, OJ L 10 of 13.1.2001.
Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to state aid to small and medium-sized enterprises, OJ L 10, 13.1.2001 andsuccessive amendments. Communication form the Commission to the Council, the European Parliament and the ESCS Consultative Committee (1999): The State of Competitiveness of the Steel Industry in the EU, COM(1999) 453 final. Community Framework for state aid for research and development, OJ C 45, 17.02.1996. Community Guidelines on state aid for environmental protection, OJ C 37, 3.2.2001. Community Guidelines on state aid for rescuing and restructuring firms in difficulty, OJ C 244 of 1.10.2004. Council Regulation (EC No 659/1999 of 22 march 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, OJ L 83 of 27.3.1999.
Council Regulation No. 1407/2002 of 23 July 2002 on state aid to the coal industry, OJ L 205 of Decision No 2/2000 of the Association Council of 17 July 2000 extending by five years the period within which any public aid granted by Romania will be assessed taking into account the fact thatRomania is to be treated as an area identical to those areas of the Community described in Article87(3)(a) of the Treaty establishing the European Community, OJ L 230 of 12.9.2000.
Decision No. 2496/96/ECSC of 18 December 19996 establishing Community rules for state aid to the steel industry, OJ L 338 of 18.12.1996.
European Commission (2004): State Aid Scoreboard – autumn 2004 update, COM(2004) 750 final.
European Commission (2002): Communication on Rescue and Restructuring Aid and Closure Aid for the Steel Sector, OJ C 70 of 19.3.2002.
European Commission (2002): Multisectoral framework on regional aid to large investment projects, Vademecum – Community Rules on State Aid (available at http://europa.eu.int/comm/competition/ state_aid/others/Vademecum/Vademecumen2003_en.pdf). Law No. 143/1999 on state aid, Official Journal of Romania no. 470, part I, of 2.7.2002.
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