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The interstate effect of state aid and port infrastructure

The interstate effect of state aid and port infrastructure

On 29 April 2015, the European Commission provided orientation assistance on local support measures by means of a press release and seven decisions. The last decision has now been published: concerning investment aid for the port of Lauwersoog.

The case
The port of Lauwersoog is mainly used by prawn fishers. In addition to the fishing port there is also a very small marina for recreational vessels. The port is owned by the Exploitatiemaatschappij Havencomplex Lauwersoog (EHL), which also operates the port.
The investment project reported by the Dutch authorities consists of three parts:

  1. lengthening of the fishing quay
  2. modernisation of the marina and
  3. the construction of a floating platform for sport fishing to ensure that the recreational and commercial activities of the port can be kept separate and that the new quay will exclusively be used for commercial fishery and not in combination with other (recreational) activities.

The project involves a sum of 4.161 million euros. This sum will be financed from a subsidy from the Province of Groningen in the amount of 3.329 million euros (80% of the total investment costs). The remaining 0.832 million euros will be financed by EHL itself.

European Commission’s assessment
EHL is designated as the beneficiary of the subsidy from the Province of Groningen. No benefit is being afforded to the fishers that use the port infrastructure, since EHL charges prices in line with the market. Furthermore, these prices will be increased so that every increase in the economic value of the port because of the investment project is chargeable to the fishers.

Just as in the six decisions published earlier, the European Commission checked:

  1. whether the beneficiary undertaking provides goods or services in a limited area within a member state and it is unlikely that customers will be attracted from other member states, and
  2. whether it is foreseeable, with “an adequate degree of likelihood”, that the measure will not have “more than marginal effect” on the conditions for cross-border investments or the establishment of firms.

The European Commission first looked at the fishing port of Lauwersoog and determined that the geographic area served by this port is limited in size. This is mainly because of the fuel costs. As a result, fishers tend to opt for a port that lies as close as possible to the fishing grounds. This is supported by the fact that the fishers that use the port of Lauwersoog virtually exclusively come from the region and very few foreign ships put in here.

The Committee then looked at the marina. With just 60 moorings, the Lauwersoog marina accounts for approximately 0.03% of the Dutch and 0.006% of the European market for moorings. Based on this, the European Commission concluded that the market impact of the Lauwersoog marina is very limited. Furthermore, the marina’s annual turnover represents approximately 3% of the total turnover of the EHL, which comes to an amount of approximately 22,320 euros.

In relation to the consequences for the conditions for cross-border investments or establishment of firms, the European Commission first looked at the limited scope of the activities in the Lauwersoog port. The income from the commercial activity amounts to approximately 275,000 euros only. After realisation of the reported investment project, this income will increase by a maximum of 55,000 euros. Secondly, the European Commission pointed out that the port’s capacity is not being expanded. The reported investment project is oriented more at eliminating a number of bottlenecks in the port which cause safety problems. Finally, the European Commission noted that the relatively low sum in government financing (at least for an investment project in a port) of 3.3 million euros is an extra indication that any impact the project may have will have very little, if any, impact on cross-border trade.

The Commission’s conclusion is that the investment aid will in all reasonableness at most have a marginal effect on the conditions for cross-border investments or the establishment of firms. Consequently the investment aid does not qualify as state aid.

Comments
It is striking that the European Commission took the relatively low sum of government financing into account in assessing the possible impact of the granting of the aid on cross-border trade. It is established case law that there is no threshold or percentage
below which trade can be regarded as not being detrimentally affected. After all, the fact that the aid amount is relatively low or the beneficiary undertaking relatively small does not automatically exclude the possibility that trade between member states will be detrimentally affected. Without prejudice to this case law, it follows from the De minimis Regulation that if an undertaking receives a maximum of 200,000 euros over a period of three years, this de minimis aid must be considered unable to detrimentally affect trade between the member states. There are decisions in which the European Commission ruled that if the aid rises above the ceiling set down in the De minimis Regulation, trade between the member states can be detrimentally affected. The relatively low level of the aid amount is usually relevant for assessing whether an aid measure is compatible. A recent example is the decision from 4 April 2014 concerning the Danish framework scheme for aid from local governments to art house cinemas. It is unfortunate therefore that the European Commission fails to explain in this decision why the relatively low level of government financing is an extra indication in the case at hand that the aid measure has no or only very limited effects for interstate trade.

By Eric Janssen

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