2008/626/EC: Commission Decision of 30 April 2008 State aid C 40/06 (ex NN 96/05) Loan assistance schemes implemented by the United Kingdom (notified under document number C(2008) 1612) (Text with EEA relevance)

• Published date: 31 July 2008
• Official Gazette Publication: Gazzetta ufficiale dell’Unione europea, L 202, 31 luglio 2008,Diario Oficial de la Unión Europea, L 202, 31 de julio de 2008,Journal officiel de l’Union européenne, L 202, 31 juillet 2008

31.7.2008 EN Official Journal of the European Union L 202/62

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COMMISSION DECISION

of 30 April 2008

State aid C 40/06 (ex NN 96/05)

Loan assistance schemes implemented by the United Kingdom

(notified under document number C(2008) 1612)

(Only the English version is authentic)

(Text with EEA relevance)

(2008/626/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having regard to Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (1), and in particular Article 7(2) and (3) thereof,

Having called on interested third parties to submit their comments pursuant to the provisions cited above (2),

Whereas:

I. PROCEDURE

(1) By letter dated 15 June 2004, the Commission was informed by a citizen of the United Kingdom of aid granted by the Shetland Islands Council, the public authority in the Shetlands Islands of the United Kingdom to the fisheries sector, which possibly concerned illegal State aid. By letters dated 24 August 2004, 4 February 2005, 11 May 2005 and 16 December 2005, the Commission requested the United Kingdom to provide information about such aid. The United Kingdom provided the Commission with further information by letters dated 10 December 2004, 6 April 2005, 8 September 2005 and 31 January 2006.

(2) By letter dated 13 September 2006, the Commission informed the United Kingdom of the decision to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of the aid. The United Kingdom provided its comments on the aid by letter dated 16 October 2006. Following the requests from the Commission dated 31 January 2007 and 5 February 2008, additional information was provided by letters dated 4 September 2007 and 27 February 2008.

(3) The Commission decision to initiate the procedure was published in the Official Journal of the European Union on 30 November 2006 (3). The Commission invited any interested parties to submit their comments on the aid. The Commission received no comments from interested parties.

II. DETAILED DESCRIPTION

(4) The Shetland Islands Council made payments to the fisheries sector under the scope of two general aid measures named ‘Aid to the Fish Catching and Processing Industry’ and ‘Aid to the Fish Farming Industry’, which actually consisted of several different types of aid schemes. Amongst these schemes were the so-called Loan assistance schemes (‘the scheme’).

(5) Aid has been granted to salmon farmers, by way of loan assistance granted through the Fish Farming Association and to fish processors, by way of loan assistance granted through the Fish Processors' Association.

(6) The Salmon Farming Loan Assistance was established in 2000 for the purpose of providing working capital loans to individual salmon farming companies to on-grow fish to a harvestable size. The loans granted under the scheme vary from GBP 87 000 to GBP 250 000, those amounts representing a maximum of 75 % of the costs of buying smolts (young salmon). The total amount of the loans granted is GBP 3 477 130.

(7) The loans were made to companies that could demonstrate viability through the production of an acceptable business plan and financial projections for a period covering at least three years. The loans were subject to interest at rates generally corresponding to the applicable UK base rate plus 2 %. In order to secure the loan, it was granted under the condition that the lender took the ‘right of title’ on the smolts, thus securing the loan on the basis of the sale value of the adult fish.

(8) Under the Loan scheme for fish processing, five loans were granted during the period from 1996 to 2002. The loans varied from GBP 73 000 to GBP 200 000, with a total of GBP 698 300. The loans were made to companies that during the period of the loan undertook to provide professionally audited accounts, to work to the relevant national and Community standards on hygiene, health and safety, and to be a member of the Shetland Fish Processors' Association.

(9) The Commission considered that it could not be established from the information available whether the loans under the schemes were granted under conditions acceptable to normal private lenders on the market. As the loans appeared to have been granted under more favourable circumstances or with more favourable conditions than would be acceptable to a normal private lender, the beneficiaries appeared to have been granted a benefit which they would not have received under normal economic circumstances. As, moreover, the companies concerned were considered to be in direct competition with other companies in the fisheries sector, the loans appeared to be State aid within the meaning of Article 87 of the EC Treaty.

(10) As regards the compatibility of the loans, as State aid, with the Guidelines for the examination of State aid to fisheries and aquaculture applicable at the time the aid was granted, the Commission doubted that the loans could be considered commercial loans and therefore considered them to be State aid. As regards the compatibility of the loans with the common market, the Commission moreover doubted that, on the basis of the information available, they could be considered to comply with the conditions of the respective Guidelines for the examination of State aid to fisheries and aquaculture, applicable at the respective times of granting the aid.

III. COMMENTS FROM THE UNITED KINGDOM

(11) In its letters dated 16 October 2006, 4 September 2007 and 27 February 2008, the United Kingdom provided further information on the loans granted under the schemes.

(12) The United Kingdom stated that the loans had been granted under circumstances acceptable to a normal private lender and that, therefore, the loans did not constitute State aid within the meaning of Article 87(1) of the Treaty.

(13) In this respect, the United Kingdom provided a description of the interest rate policy applied with regard to granting the loans. The interest rates had been set by reference to achievement of a return on capital consistent with the EC (UK) base rate and following an assessment of the risk. This resulted in an interest rate policy giving indicative interest rates of UK base rate plus 2 % for low-risk loans, UK base rate plus 3 % for medium-risk loans and UK base rate plus 4 % for high-risk loans. The United Kingdom considered this policy to be in line with the market economy investor principle.

(14)

As regards the loans granted to salmon farmers under the Salmon Farming Loan Assistance, 15 loans were granted during the period from September 2000 to January 2003. The conditions and interest rates of the loans varied as follows: Beneficiary Date Amount (GBP) Loan as % of total project Loan term Interest rate in % Johnson Seawell Ltd 06-2000 250 000 24 20 months 8,0 North Atlantic Salmon Ltd 06-2000 211 500 71,8 2 years 8,0 Hoove Salmon Ltd 06-2000 87 000 51,1 21 months 8,0 Dury Salmon Ltd 06-2000 250 000 64,3 2 years 8,0 Hoganess Salmon Ltd 09-2000 213 000 72 2 years 8,0 North Isles Seafood Ltd 08-2000 250 000 74,7 2 years 8,0 Bressay Salmon Ltd 06-2000 156 300 74,9 2 years 8,0 Wester Sound Salmon Ltd 10-2000 250 000 56,8 2 years 8,0 Scord Salmon (Shetland) Ltd 02-2001 107 100 72,6 2 years 7,5 Hoove Salmon Ltd 07-2001 226 481 73,2 2 years 7,5 Skerries Salmon Ltd 07-2001 249 750 75,7 2 years 7,5 Unst Salmon Ltd 08-2001 250 000 28,9 2 years 7,5 SSG Seafoods Ltd 04-2002 250 000 30,2 2 years 6,5 Cro Lax Ltd 05-2002 250 000 49,6 2 years 6,5 Aqua Farm Ltd 09-2002 250 000 34,8 15 months 6,5

(15) The United Kingdom stated that majority of these loans had been granted by applying the Bank of England base rate plus 2 %, sometimes plus 3 %. The repayments terms had been designed to reflect the growing cycle of the smolts. Typically the term was approximately 2 years with interest being paid monthly and capital being repaid on expiry of the loan period, which was structured to coincide with the harvest. The loan to value ratios ranged from 24 % to 75 %.

(16) In order to secure the loans, they were granted under the condition that the lender took the ‘right of title’ on the smolts, thus securing the loan on the basis of the sale value of the adult fish. The United Kingdom claimed that, in a normal market, it would be anticipated that the value of the smolts would increase over the on-growing period, and therefore the loan to value ratio would improve over the same period. In addition, security had been held for the loans advanced by way of floating charges, which provided security not only through the value of the fish, but also through all tangible assets held by the company, for example, fish cages, licences, etc.

(17) The United Kingdom finally provided details of the undertakings to which the loans were granted, their registered capital, the percentage of lost capital at the time of the investments and in the 12 months before the investments, information showing that none of the undertaking had been subject to insolvency proceedings at the respective times of grant, and the financial projections submitted by the undertakings demonstrating their financial viability at the moment of application, as well as information on

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