Italian law on disaster aid: the Commission says the aid must be linked with and in proportion to the damage caused
Wed, 20/10/2004
The European Commission today ruled that an aid scheme resulting from the extension of the term of validity to 2002 of an Italian law of 2001 benefiting firms carrying out investment in municipalities affected by natural disasters in 2002 is incompatible with the state aid rules of the EC Treaty. The reason for this is that the law seems to be linked to the amount of investment rather than the damage suffered. The Commission points out that this decision is without prejudice to individual cases which might meet the conditions for this kind of aid.
By a law adopted in 2002, the Italian Republic extended Law No 383 of 18 October 2001 in order to compensate firms located in municipalities affected by natural disasters in 2002. The disasters in question included eruptions of Mount Etna in Catania province, earthquakes on 31 October 2002 in the province of Campobasso, and freak weather conditions (floods) in the regions of Liguria, Lombardia, Piemonte, Veneto, Friuli-Venezia Giulia and Emilia-Romagna.
The Commission can approve aid to make good the damage caused by natural disasters or exceptional occurrences (Article 87(2)(b) of the EC Treaty).
Since it had doubts regarding the guarantees aimed at ensuring that only victims of the disasters would be compensated and that the amount of aid would not exceed the damage, the Commission launched a formal investigation procedure on 17 September 2003 (see IP/03/1258).
Despite the Commission’s efforts, the detailed investigation has failed to dispel these doubts. There is no connection between the aid mechanisms established by the scheme and the damage actually suffered. The amount of the aid depends on the volume of investment made during a certain period, the amount of investments made over the previous years and the existence of taxable income. This being so, even in cases where the recipient actually had suffered damage as a result of these natural disasters, the amount of aid could exceed the cost of the damage.
The Commission acknowledged that certain individual aid payments granted on the basis of the scheme could meet the conditions for compatibility even if the scheme is declared illegal.
When the procedure was launched a year ago, the Commission had also said that it would examine whether the measures could benefit from the exemptions provided in the EC Treaty for regional aid and/or aid for small and medium-sized undertakings (Article 87(3)(a) and (c) of the EC Treaty). Here, too, however, doubts remained. The Italian authorities did not provide the necessary information to enable the Commission to examine the compatibility of the scheme in the light of these exemptions, considering that a subsequent examination on the basis of this information was not necessary.
The Commission can approve aid to make good the damage caused by natural disasters or exceptional occurrences (Article 87(2)(b) of the EC Treaty).
Since it had doubts regarding the guarantees aimed at ensuring that only victims of the disasters would be compensated and that the amount of aid would not exceed the damage, the Commission launched a formal investigation procedure on 17 September 2003 (see IP/03/1258).
Despite the Commission’s efforts, the detailed investigation has failed to dispel these doubts. There is no connection between the aid mechanisms established by the scheme and the damage actually suffered. The amount of the aid depends on the volume of investment made during a certain period, the amount of investments made over the previous years and the existence of taxable income. This being so, even in cases where the recipient actually had suffered damage as a result of these natural disasters, the amount of aid could exceed the cost of the damage.
The Commission acknowledged that certain individual aid payments granted on the basis of the scheme could meet the conditions for compatibility even if the scheme is declared illegal.
When the procedure was launched a year ago, the Commission had also said that it would examine whether the measures could benefit from the exemptions provided in the EC Treaty for regional aid and/or aid for small and medium-sized undertakings (Article 87(3)(a) and (c) of the EC Treaty). Here, too, however, doubts remained. The Italian authorities did not provide the necessary information to enable the Commission to examine the compatibility of the scheme in the light of these exemptions, considering that a subsequent examination on the basis of this information was not necessary.