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Eduard Kukan Minister of Foreign Affairs Hlboká 2 SK-833 36 BRATISLAVA Slovak Republic

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Eduard Kukan Minister of Foreign Affairs Hlboká 2 SK-833 36 BRATISLAVA Slovak Republic EUROPEAN COMMISSION Brussels, 21.XII.2005 C (2005)5406 Subject: State aid No N 537/05 – Slovak Republic Individual aid for audiovisual production in favour of JAKUBISKO FILM s.r.o. Sir, 1. PROCEDURE 1. By letter of 17 October 2005, registered on 21 October 2005, the Slovak authorities notified individual aid for audiovisual production in favour of the company JAKUBISKO FILM Slovakia, s.r.o. 2. DESCRIPTION OF THE MEASURE 2. JAKUBISKO FILM s.r.o. is a film producing SME situated in the Slovak and Czech Republics. 3. JAKUBISKO FILM is producing the film “Love story Báthory”1. A part from the Slovak and the Czech Republics, other co-producing countries involved are likely to be Hungary, Austria, and Great Britain, possibly Turkey, Germany, Italy, Poland and France. Eduard Kukan Minister of Foreign Affairs Hlboká 2 SK-833 36 BRATISLAVA Slovak Republic 1 Elizabeth Bathory is recorded in the Guinness Book of Records as the greatest murderess in the history of humankind. The film strives to uproot the bloody legend about the wealthy Hungarian noblewoman (her castle was situated in what is today Slovak republic) and to show that it was the political and power intrigues of the renaissance period that stripped the Countess of her property. Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone : (32-2) 299 11 11. 4. The film project was assessed by a special Slovak commission. It was assessed on the basis of (inter alia) the following criteria: financial strategy, project realization, copy-right contracts, quality of literacy artworks (script), and artistic skills of the producing staff (Director, Scriptwriter and Cameraman). 5. The overall production costs amount to appr. SKK 400 million (appr. € 10 million), of which € 4 million will have to be paid by the producer JAKUBISKO film. The proposed aid amounts to SKK 13 mio (appr. € 340 000). The aid intensity amounts to 3.25% of the whole production budget, amounting to appr. € 10 million and 8.5% of the Slovak/Czech share, amounting to € 4 million. 6. Overall cumulated aid can not exceed 50% of the overall production budget. In the case at hand, the notion overall production budget includes the Slovak/Czech contribution as well as the financial contributions to be provided from co-producing partners from other Member States. 7. The film will be realised in Slovak Republic, Hungary and Austria and the Slovak authorities have confirmed, that following the EC rules, out of the € 4 million provided by the Slovak/Czech co-producer, more than 20% can be spent in Member States other than the Slovak and the Czech Republics. The Slovak authorities did not provide the Commission with an exact indication on the degree of territorialisation required. 8. The notified aid shall be awarded on the basis of the decree 480/2004 on granting subsidies within the competence of the Ministry of Culture, law 523/2004 on budgetary rules and law 231/1999 on State aid as amended by law 203/2004. 9. The aid takes the form of a grant which will only be paid out after the Commission’s approval. 3 ASSESSMENT OF THE MEASURE EXISTENCE OF AID 10. The Slovak authorities have complied with the procedural requirements of Article 88(3) of the EC Treaty by notifying the aid measure. 11. According to Article 87(1) of the EC Treaty, save as otherwise provided in the Treaty, any aid granted by a Member State or through State resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall be incompatible with the common market, in so far it affects trade between Member States. 12. In the cases at hand, there are state resources involved. The Slovak authorities grant individual aid to a film producing company in order to support a certain film. Accordingly they favour a certain company and the production of a certain good. Since film and TV productions are traded between Member States, there is a potential distortion of competition and effect on trade. The measure, for the reasons described above, constitutes State aid in the meaning of Article 87 (1) of the EC Treaty. COMPATIBILITY 13. The Commission considers that the measure is to be found compatible with the common market under the cultural derogation in Article 87(3)(d)2 for aid to promote culture. As far as film production is concerned, the so called “Cinema Communication”3 sets out the compatibility criteria, under which aid can be approved. Even though in principle this Communication applies to aid schemes, the criteria can be applied in analogy to individual aid measures and the criteria can give guidance as to the compatibility analyses according to Article 87 (3)(d) of the EC Treaty. 14. For the reasons explained below, the four specific compatibility criteria, as set out in the “Cinema Communication", are met. 15. The aid must be directed to a cultural product. Each Member State must ensure that the content of the aided production is cultural according to verifiable national criteria (in compliance with the application of the subsidiarity principle). 16. The film project was assessed on the basis of “cultural criteria”, inter alia from the point of view of quality of literacy artworks (script), and artistic skills of the producing staff (Director, Scriptwriter, Cameraman). It is a film about a personality of Hungarian/Slovak history, set in Renaissance times. It thus can be considered to be a cultural product. 17. The producer must be free to spend at least 20 % of the film budget in other Member States without suffering any reduction in the aid provided for under the scheme. In other words, the Commission accepted as an eligibility criteria territorialisation in terms of expenditure of up to 80 % of the production budget of an aided film or TV work. 18. In the present case the film will be realised in Slovak Republic, Hungary and Austria and more than 20% of the production budget can be spent in Member States other than the Czech and Slovak Republics. 19. Aid intensity must in principle be limited to 50 % of the production budget with a view to stimulating normal commercial initiatives inherent in a market economy and avoiding a bidding contest between Member States. 20. In the present case aid amounts to 3.25% of the whole production budget and 8.5% of the Slovak/Czech contribution. Overall cumulated aid can not exceed 50% of the overall production budget. 21. Aid supplements for specific film-making activities (e.g. post-production) are not allowed in order to ensure that the aid has a neutral incentive effect and consequently that the protection/attraction of those specific activities in/to the Member State granting the aid is avoided. 2 Article 87(3)(d) states that an aid to promote culture and heritage conservation may be considered to be compatible with the common market where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest. 3 Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on certain legal aspects relating to cinematographic and other audiovisual works (COM(2001)534 final of 26.09.2001,OJ C 43 of 16.2.2002). Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on the follow-up of the Commission communication on certain legal aspects relating to cinematographic and other audiovisual works of 26.09.2001 (COM(2004)171 final of 16.3.2004, OJ C 123 of 30 April 2004. 22. In the case at hand such supplements for specific film-making activities are excluded. CONCLUSION 23. The Commission has therefore come to the conclusion that the aid to JAKUBISKO FILM s.r.o, which is an aid measure within the meaning of Article 87(1) EC, is compatible with the common market pursuant to Article 87(3)(d) of the EC Treaty. 4. DECISION The Commission has accordingly decided to consider the aid to JAKUBISKO FILM s.r.o. to be compatible with Article 87(3) d of the EC Treaty. If this letter contains confidential information, which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://europa.eu.int/comm/secretariat_general/sgb/state_aids/. Your request should be sent by registered letter or fax to: European Commission Directorate-General for Competition State Aid Greffe SPA3 6/5 B-1049 Brussels Fax No: +32.2.296.12.42 Yours faithfully, For the Commission Neelie KROES Member of the Commission.
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