Brussels Brief - October 28, 2005
October 28, 2005
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KEY DEVELOPMENTS
Energy: The Energy Community South East Europe Treaty
Alana Tervo
The signing of the Energy Community South East Europe Treaty has expanded the European Union (EU) single energy market to South East Europe (Croatia, Bosnia and Herzegovina, Serbia, Montenegro, Albania, the Former Yugoslav Republic of Macedonia, Romania, Bulgaria and the United Nations Mission in Kosovo), creating the largest internal market for electricity and gas in the world. A secure and reliable supply of energy is seen as one of the prerequisites for sustainable economic development and social stability and it is hoped that the Treaty will provide a stable climate for investment in infrastructure within South East Europe. Furthermore, it should enhance security of future energy supply in Europe as a whole by creating a diverse structure of sources. A market development coordination and validation structure has been put in place as well as international investors such as the World Bank and the International Energy Agency. A stable regulatory framework will be created by ensuring that the South East European countries adopt the EU’s single market regulatory framework in areas such as energy, environment and competition.
State Aid: Commission Forces Greece to Immediately Suspend Illegal Tax Exempt Fund
Michal Cieplinski
The European Commission has adopted a “suspension injunction” requiring Greece to immediately cease granting State aid in the form of tax breaks under Greek Law 3220/2004. This law reduces the tax base of many companies in various sectors by 35 per cent of their profit, provided the income is used to finance the construction and expansion or modernisation of plants and buildings, etc. At the same time, the Commission has launched a formal investigation as it suspects that such aid is not compatible with provisions of Article 87 because of the serious risk that it will distort competition in a way liable to affect trade between Member States. If the Commission finds the aid to be contrary to the EC Treaty, it may require Greece to recover the unlawful aid paid to undertakings, including interest. This is the first time in recent years that the Commission has required a Member State to immediately suspend the granting of State aid before a final decision by the Commission.
Mergers: Commission Report of Past Merger Remedies
Mateo Domecq
The European Commission has published an analysis of past merger remedies which will provide guidance for future cases on how well remedies proposed by companies work under the EU Merger Regulation. The study analyses the major problems in the design and implementation of remedies and their effectiveness in maintaining efficient competition in the market. It shows that many remedies need further improvement, in particular concerning monitoring implementation and in the scope, interim preservation and purchaser approval of a divested business. Competition Commissioner Neelie Kroes stated that “it is the merging companies, not their customers, who should bear the risks of potentially inadequate remedies.” The results, along with relevant current practice, will be used in a forthcoming review of the Merger Remedies Notice and of the Model Divestiture Commitments and Trustee Mandate.
Internal Market: Commission Plans for Common Corporate Tax Base
Philip Bentley QC
In a programme that has echoes of the 1984 White Paper on the Completion of the Single Market, the EU Taxation and Customs Commissioner, Lásló Kovács, has proposed several tax and customs measures intended to contribute to the structural adjustment needed to fulfil the Lisbon strategy. The most controversial is a proposal to harmonise the tax base for the calculation of corporate tax while leaving Member States free to set corporate tax rates. This would increase transparency, eliminate many problems of double taxation, and reduce compliance costs. Since five Member States, United Kingdom, Ireland, Czech Republic, Slovakia and Estonia, are not in favour, Mr Kovács proposes to proceed on the basis of the “enhanced co-operation” procedure, whereby only those Member States in favour can move forward to greater harmonisation.
Competition: Commission Closes in on Italian Tobacco Cartel
Anthony Seymour
The European Commission has imposed fines totalling EUR 56 million on four major Italian tobacco processors. Deltafina, Transcatab, Mindo and Romana Tabacchi face financial penalties of EUR 30 million, EUR 14 million, EUR 10 million and EUR 2.05 million respectively for serious breaches of Article 81 of the EC Treaty. Fines for Mindo and Transcatab were reduced as they applied for leniency under the Commission Leniency Notice 2002. The Commission found that between 1995 and 2002 the four companies were engaged in (i) fixing the prices at which they bought tobacco from growers (ii) allocating their suppliers – including growers – on a preferential or exclusive basis and (iii) rigging bids at publicly run tobacco sales auctions. Competition Commissioner Neelie Kroes commented that as Italy is the largest producer of raw tobacco, the decision was all the more significant.
Internal Market: Pan-European Enforcement of Civil Judgments
Iveta Mikelsone
On 21 October 2005 an EC Regulation came into force that facilitates the enforcement of certain civil judgments across the EU with the exception of Denmark. Prior to its introduction, creditors were obliged to follow a special procedure in order to enforce in one Member State a judgment rendered in another. From now on a judgment certified as a European Enforcement Order by the court of origin will be treated in the same way as if it was delivered by the court of the Member State in which enforcement is sought. This Regulation applies to uncontested civil judgments and authenticated instruments and provides a useful alternative to the more complex special enforcement procedure. It is one step towards the abolition of all obstacles regarding the enforcement of civil and commercial judgments rendered within the EU.
State Aid: Commission Launches In-Depth Probe into Appingedam Broadband Aid
Philip Torbøl
For the first time, the European Commission has decided to open a formal investigation into public funding of broadband development. The investigation relates to the intention of the municipality of Appingedam to partly support the deployment of a glass fibre access network in the Dutch city. In previous cases, the Commission had not opposed public support to broadband deployment in areas where broadband was not available, typically in rural and remote areas. Given the existing infrastructure in Appingedam, the Commission doubts that the project is necessary and proportionate. Interested parties will be given the opportunity to provide comments following notification of the case details in the Official Journal.
Agriculture: Greece Wins Feta War
Yannis Virvilis
The European Court of Justice (ECJ) has ruled that only cheese produced in Greece can bear the name “feta”. This was the latest battle between Greece and several European countries (notably Denmark, Germany, United Kingdom and France). These countries had sought to annul the 2002 Commission Decision, by which the name “feta” was registered as a protected designation of origin for cheese produced only in Greece. The ECJ rejected the argument that the name had become generic, as similar products in other countries are known by different names other than feta. The Court also took into account the fact that 85 per cent of the consumption of feta takes place in Greece, and that in Denmark the product is called “Danish feta”, thus accepting that the name “feta” has a Greek connotation.
State Aid: Commission Orders Repayment of EUR 2.4 Million Subsidy Paid to Componenta Corporation in Finland
Mélanie Bruneau
The European Commission has found that a transaction between the city of Karkkila, Finland, and Componenta Corporation ("Componenta"), a company which produces ready-to-install cast, geared and machined components, violates EU State aid rules. In December 2003, Componenta sold its 50 per cent stake in a real estate company to the city of Karkkila for EUR 2.4 million, a sum higher than a private investor would have paid. The payment was conditional on Componenta moving some production from Sweden to Finland to create 50 to 70 new jobs there. In 2004, after having received a complaint, the European Commission opened a formal State aid investigation. The Commission considered that the aid of EUR 2.4 million, which was granted without its prior approval, provided Componenta with funds it would not have received under normal market terms and was distorting competition. The aid must therefore be recovered from Componenta with interest.
NEXT WEEK’S EVENTS
Monday 31 October – Friday 4 November 2005
COUNCIL MEETINGS
No Council meetings scheduled for next week
COURT OF JUSTICE
No sittings scheduled from 31 October – 4 November 2005 inclusive
COURT OF FIRST INSTANCE
Judgments
No sittings scheduled from 31 October – 4 November 2005 inclusive
