EUROPEAN COMMISSION

Brussels, 11.06.2014 C(2014) 3603 final

In the published version of this decision, some PUBLIC VERSION information has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) This document is made available for No 659/1999 of 22 March 1999 laying down information purposes only. detailed rules for the application of Article 93

of the EC Treaty, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […].

Subject: SA.37058 (2013/N) – Germany

Sachsenring – Reconstruction 2012

Sir,

1. PROCEDURE

(1) On 25 November 2011, the Commission registered a complaint concerning different measures in favour of Sachsenring. The Commission sent several requests for information to Germany.

(2) On 12 July 2013, the German authorities notified the support for the reconstruction of the Sachsenring racetrack for the organisation of Moto GP 2012. On 23 July 2013, 15 October 2013 and 26 November 2013, the Commission sent requests for information targeting both the measures notified and those brought up by the complainant, which

Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1 10117 Berlin DEUTSCHLAND

Commission européenne,1049 Bruxelles/Europese Commissie, 1049 Brussel – BELGIQUE/BELGIË Tel. +32 229-91111.

1 Germany responded to on 15 and 16 August 2013, 31 October 2013, 17 January 2014 and 14 February 2014, respectively.

(3) On 24 March 2014, the complainant withdrew the complaint.

(4) Following Commission's requests for clarifications of 2 April 2014, 24 April 2014 and 8 May 2014, Germany replied on 3 April 2014, 2 May 2014 and 14 May 2014, respectively.

2. DESCRIPTION OF THE MEASURES

2.1 Subject of the case (5) Sachsenring is a motor racetrack which exists since 1927 in Hohenstein-Ernstthal near Chemnitz in Saxony, Germany. The race track is located around 50 km from the border with the Czech Republic. Since 1998, it features the annual German motorcycle Grand Prix (Moto GP) of the Federation of International Motorcycling (FIM) Grand Prix motorcycle racing world championship (on average more than 200.000 visitors at the weekend of the race). Professional races (including MotoGP and the International German Motorbike Championship) as well as the ADAC GT Masters for amateurs and professionals at Sachsenring are limited to maximum ten days annually.1 In the remaining parts of a year, Sachsenring is used for other motorsport competitions of national relevance (Mini-Bike-Championship) and of regional relevance, traffic safety training, free driving (training) of the general public (more than 100 days annually) and car testing operated by VSZ. Apart from motor sport, other sport, cultural, congress and educational activities are carried out there (e.g. the Saxon Traffic Safety Day).

(6) Apart from Sachsenring which is homologised for the organisation of Grand Prix races by the FIM, the following race tracks could in theory organise a MotoGP in Germany: Lausitzring (road distance of 152 km from the Sachsenring), Nürburgring (484 km from the Sachsenring) and Hockenheimring (444 km from the Sachsenring).2 However, none of these race tracks is homologised by FIM for the MotoGP races. In the Czech Republic, the MotoGP is organised in Brno (387 km from the Sachsenring). The race track in Most (111 km from the Sachsenring) is not homologised by FIM and there can be maximum one MotoGP in the Czech Republic.

Ownership and operation of Sachsenring

(7) The land on which the Sachsenring is built is owned mainly by Verkehrssicherheitszentrum am Sachsenring GmbH & Co. KG (VSZ)3 (38%) and Zweckverband “Am Sachsenring” (ZV)4 (31.1%). The remaining owners of the land are the town Hohenstein-Ernstthal (24.5%), the municipality of Bernsdorf (2.6%), the Landkreis Zwickau (2.1%) and others (1.7%).

1 The 10 days refer to the admissibility of exceeding the otherwise allowable noise values. 2 Another race track within a radius of 250 km from the Sachsenring is Oschersleben (248 km). 3 The shareholders of VSZ are: ADAC Sachsen e.V. (26 %), VSZ Beteiligungs-GmbH (26 %), Landkreis Zwickau (16 %), BKP Beteiligungs-GmbH (11 %), BMT Ingenieur-Consulting GmbH (11 %) and Motor Presse Stuttgart GmbH & Co. KG (10 %). 4 The members of ZV are the towns Hohenstein-Ernstthal (65%) and Oberlungwitz (35%). (8) ZV let its land at Sachsenring by a lease contract of 30 July 2002 to VSZ. Following the establishment of Sachsenring-Rennstrecken-Management GmbH (SRM)5 on 20 December 2004, the following contracts were concluded on 6 July 2007:

 ZV and VSZ agreed with the consent of SRM to terminate the lease contract of 30 July 2002 with effect as of 30 June 2007.  ZV let its land at Sachsenring to SRM for its business activities from 1 July 2007 until 31 December 2021. The rent to be paid by SRM to ZV amounts annually to 76 000 EUR plus 50% of a variable part of 50% of variable rent which SRM receives from VSZ.  SRM sublet the land at Sachsenring to VSZ for driving trainings, car tests, presentations, trade fairs and motor sport events from 1 July 2007 until 31 December 2021. The rent to be paid by VSZ to SRM amounts annually to 88 000 EUR plus 10% to 20% of the revenue of VSZ from Sachsenring.

(9) In result of the above contracts, VSZ uses the land of ZV over the whole year. VSZ has to take over all maintenance, beautification and repair costs for the entire lease period of 20 years. In view of the events organised by VSZ, that company incurred a loss of […..] EUR in 2012.6

(10) On the basis of a contract of 10 May 1997, VSZ sublet the totality of land used by it to ADAC Sachsen e.V. (ADAC Sachsen) for the organisation of motor sport events maximum ten days annually until 31 December 2021. The rent to be paid by ADAC Sachsen amounts annually to [...] million DM (around [...] million EUR) plus [...] % of the revenue from the sale of tickets. In view of the motorsport events other than Moto GP, ADAC Sachsen incurred a loss of 1 028 415 EUR in 2012.7

(11) In the remaining days of a year the race track is used by VSZ for driving training against consideration from the participants.

(12) By contract of 26 April 2012, ADAC Sachsen transferred the right to organise Moto GP 2012 from 6 to 8 July 2012 to SRM.8 SRM provides to ADAC Sachsen around 2

5 The shareholders of SRM are Landkreis Zwickau (previously Landkreis Chemnitzer Land) as well as the towns Hohenstein-Ernstthal, Oberlungwitz and Lichtenstein and the municipalities of Gersdorf and Bernsdorf. On 25 July 2013, the shareholders increased by resolution of the general meeting the share capital of the company from 25 000 EUR to 197 500 EUR. On a precautionary basis, Germany classifies the capital injection as de minimis aid. 6 In 2012, VSZ had revenues from organising driving safety training and other events of EUR [...] and costs of EUR [...] . Consequently, VSZ as event organiser had a minus of EUR [...] in 2012. In 2013, VSZ had revenues from organising driving safety training and other events of EUR [...] and expenses of EUR [...]. This results in a minus of EUR [...]. 7 In 2012, ADAC Sachsen had revenues from the motorsport events other than Moto GP of EUR 1 236 824 and costs of EUR 2 265 239. Consequently, ADAC Sachsen had a minus of EUR 1 028 415 in 2012. In 2013, ADAC Sachsen had revenues from the motorsport events other than Moto GP of EUR 434 775 and expenses of EUR 859 401. This results in a minus of EUR 424 626. 8 For MotoGP 2013 at Sachenring, a contract with similar content was concluded between SRM and ADAC Sachsen on 14 January 2013. 000 free tickets for this event and other benefits. In view of Moto GP 2012 SRM incurred a loss of [...] EUR because of bad weather.9

(13) The sport organiser of Moto GP 2012 was ADAC Beteiligungs- und Wirtschaftsdienst GmbH (ADAC Germany). ADAC Germany concluded contracts with third parties, particularly with the licensor DORNA S. L. (DORNA), a Spanish company. The related costs are born by SRM on the basis of a contract concluded between ADAC Germany and SRM on 1 December 2011 for 2012 with an annual prolongation option until 2016.

(14) In summary, with respect to driving safety trainings and free driving VSZ can be regarded as the main operator. Those activities are the main uses of Sachsenring. SRM can be regarded as a sub-operator with respect to the MotoGP. ADAC Sachsen can be regarded as a sub-operator with respect to motorsports with less importance than the MotoGP. Furthermore, DORNA granted ADAC Germany a license to organise the German MotoGP. Until 2011, ADAC Germany gave this right to ADAC Sachsen. From 2012 on until 2016, ADAC Germany delegated the right to organise the MotoGP at Sachsenring to SRM.

(15) Pursuant to Germany, the revenue from the event organisers is not sufficient to finance investments in infrastructure that increase the safety, environmental or other standards which are in the public interest. The net revenues of ZV in the year 2012 amounted to 276 000 EUR.10 The net expenses were around 1 955 000 EUR (including 1 571 485 EUR11 for the curves). The financial gap in the 2012 cashflow thus amounts to about 1 680 000 EUR.

2.2 The aid donors

(16) In the case at hand, three entities grant aid: Land Saxony and the two members of ZV (municipalitites of Hohenstein-Ernstthal and Oberlungwitz).

2.3 The notified measures: safety measures regarding two Sachsenring curves carried out for the organisation of Moto GP 2012

(17) In order to meet safety requirements - not based on administrative law, but set by the FIM12 - the reconstruction in 2012 intended to modernise the racetrack (mainly

9 In 2012, SRM had revenues of EUR [...] and costs of EUR [...] . Consequently, SRM had a minus of EUR [...] in 2012. In 2013, SRM had revenues from the MotoGP of EUR [...] and expenses of EUR [...] . This results in a minus of EUR [...] . 10 The revenues were the rent (76 000 EUR) and the payment by SRM (200 000 EUR). Left out is the credit (1 433 725 EUR), the public financing by the municipalities (66 667 EUR), and also the fictitious revenue from VSZ (61 644 EUR) that so far could not be enforced. 11 Two minor accounts were settled in the first quarter of 2013. Other expenses of ZV in 2012 concerned administrative expenses, minor repairs, interest for the credit and the like of max. 100 000 EUR. Expenses for the race control in 2012 amounted to 21 627.56 EUR (planning) plus 261 514.20 EUR (investment). 12 A report of inspection carried out by a FIM MotoGP inspector on 14 February 2012 states the following: Aim: To finalize the works to be carried out in order to answer the requests of the FIM Grand Prix Safety Commission; Works to be carried out: Turn 1 (outside) - To increase the run-off area by 5 m; Turn 9 (outside) - To move back the guardrail up to the wood noise wall and to increase the gravel bed accordingly. The budget planning of ZV for 2012 states: "Sicherheitstechnische Maßnahmen: Als sicherheitstechnische Maßnahme ist für 2012 der 2. Bauabschnitt der Race-Control eingeordnet. Der Rechteinhaber für den Grand Prix DORNA und die oberste Motorsportbehörde FIM bemängeln seit Jahren die beengten Arbeitsplätze in der gegenwärtigen Überwachungszentrale und dem Sitz der Rennleitung. Mit expansion of gravel traps T 1 and T 10).13 ZV invested in these safety measures. SRM contributed to the financing by paying EUR 200 000 to ZV.

(18) Before the organisation of Moto GP 2012 a reconstruction of curves (mainly starting curve T1 and curve T10) at Sachsenring was done in order to comply with the safety requirements of the FIM. The costs of the reconstruction of both curves amount to 1 571 485 EUR. The Land Saxony intends to finance the 2012 modernisation of curves and racetrack sections with 1.414.336 EUR (the ceilings were 1.5 million EUR or 90% of the costs).14 ZV applied for a grant of up to 90 % of the costs at the Landesamt für Strassenbau und Verkehr of the Land Saxony.15 A preliminary start of the implementation of the reconstruction was approved by the German authorities. However, the award decision was suspended until the Commission takes a decision and the Land Saxony has not yet provided the financial support to ZV.

(19) For the financing of the measures until the subsidy is granted, ZV took a loan of 1 433 725 EUR. The creditor is Deutsche Kreditbank AG.16 The interest rate equals 0.2% p.a. over the valid 3-month-EURIBOR.17

(20) The planning of the curves T1 and T10 in the amount of 106 643.44 EUR were financed by a reserve (Rücklagenentnahme). In the amount of 225 026.49 EUR the curves T1 and T10 were financed from the revenues from the rent.

(21) For the financing of a race control and the 2012 safety measures, its members transferred to ZV capital injections (Kapitalumlagen) in the amount of 66 200 EUR (2011) and 66 667 EUR (2012).

(22) Germany states that the measures were financed with bank loans only temporarily until the Commission clears the public support, that no private creditor would finance

dem Neubau auf dem Boxendach werden international übliche Arbeitsmöglichkeiten geschaffen. Sicherheitsausbau an den Kurven Τ 1 und Τ 10: Die höheren Renngeschwindigkeiten in der MotoGP- Klasse erfordern die Erweiterungen der Sturzräume („Kiesbetten"). Einige Rennunfälle in den letzten beiden Jahren führten zu entsprechenden Auflagen der FIM. Ohne den geforderten Sicherheitsausbau erteilt die FIM dem Sachsenring keine Homologation (Genehmigung) für die Durchführung des Motorrad Grand Prix." 13 The expansions of the gravel traps were measures which had to be terminated before the MotoGP 2012 at Sachsenring. Measures concerning gravel trap T 1 began on 1 March 2012 with the assignment of the measures and were terminated on 31 May 2012 with its acceptance by ZV. Measures concerning gravel trap T 10 began with the assignment of the measures on 30 May 2012 and were terminated on 28 June 2012 with its acceptance by ZV. 14 Referring to Commission decision of 28 April 2010 in case N41/2010 Airport Riga, Germany argues that high to very high aid intensities are justified if infrastructure measures are taken primarily for reasons of operation safety and/or environmental or noise protection. 15 The grant requests by ZV of 1 February 2012, 24 February 2012 and 24 April 2012 give the following description of the measures: "Sicherheitstechnische Maßnahmen Sachsenring 2011/2012 - Streckenverlegung zw. Fußgängerbrücke und Kuppe im Zusammenhang mit der Erweiterung von Sturzzonen - Auflage der FIM (1. BA - Kiesbett Tl)", "Grand-Prix-bezogene Sicherheitsmaßnahmen am Sachsenring - Erneuerung Race-Control (2. BA, Restleistungen) - Änderungsantrag zum Antrag vom 10.02.2012" and "Sicherheitstechnische Maßnahmen Sachsenring 2011/2012 - Streckenverlegung zw. Fußgängerbrücke und Kuppe im Zusammenhang mit der Erweiterung von Sturzzonen - Auflage der F1M (2. BA - Veränd. Leitplanken u. LSW Т10 + weitere Umbauten)". 16 Deutsche Kreditbank AG is a 100% subsidiary of BayernLB Holding AG which is held by the Land Bavaria and Sparkassenverband Bayern (75 Bavarian savings banks). 17 The maximum duration of this repetitive 3 months loan taken on 16 October 2012 is 29 September 2017. The interest rate for the first period from 28 September 2012 to 28 December 2012 was 0.422% p.a. the safety measures on a long-term basis and that ZV is normally not able to finance measures by private loans, because it cannot finance the pay back and the interests from the cash flow revenues.

2.4 Argumentation of Germany (23) The German authorities do not acknowledge the presence of illegal State aid.

(24) The German authorities argue that deployment of a safety infrastructure considered as a task of the State is not State aid. The reconstruction of the curves increased safety for drivers and spectators during all motorsport events and driving trainings.

(25) Germany also argues that by promoting tourism the maintenance of the Sachsenring infrastructure has economic effects on the whole structurally weak region. The maintenance of the Sachsenring infrastructure is in public interest and no private investor could implement the measures profitably. Under these conditions, deployment of infrastructure is not an economic activity and therefore it does not constitute State aid.

(26) Further arguments of Germany are as follows:

 The financing of the safety infrastructure measures concerned would also not constitute State aid, because it is a necessary, proportionate and therefore aid free compensation of costs for the takeover of public tasks by ZV. The reconstruction increases the safety of drivers and spectators during all motorsport events, also of other organiser, e.g. ADAC, and during the driving trainings of VSZ. By the public financing neither directly the planned beneficiary ZV nor indirectly SRM as the organiser of Moto GP receives an advantage. The implementation of the measures does not depend on the decisions of ZV or SRM. As the racetrack can be used for motorsport racing only for maximum 10 days a year, the refinancing of the safety measures by the operation as a racetrack is possible only partially. Although the public authorities are not obliged to implement the safety measures at hand, they have the right to support such measures. It is doubtful that other operators of racetracks in Europe could finance the necessary safety measures for the protection of motor sportsmen and spectators on their own. The safety-technical measures are necessary in order to meet the safety-technical minimum requirements which are internationally common for motor racetracks. The financing of the measures is thus necessary for safety reasons and it therefore belongs to the tasks of public safety and order.

 The measures are not State aid, because of the lack of potential competition distortion and effect on trade, because only the Moto GP is interesting for people outside Germany and should it be eliminated at Sachsenring, it is probable that the race would be transferred outside Europe (e.g. to India).

 If the measures constituted State aid, Germany requests to declare them as compatible under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU).  Sport contributes to the Europe 2020 strategy.18

 Sachsenring is unique because of: 1. its homologisation of the FIM for MotoGP; 2. the characteristics of the race track; 3. its good traffic connection; 4. its motorsport tradition; and 5. the excitement of the audience of the races taking place in Saxony that is an important location of the automotive industry.

 The organizer of the race at the Sachsenring has additional (unsubsidized) costs with devices that are standard for permanent circuits such as creating tribunes for the race and the safeguarding of energy supply generators and additional cables spread over the whole racetrack.

 The aid measures have an incentive effect, despite the necessary temporary financing. The interim financing by ZV had been carried out in confidence that the final financing by the Land is only postponed on the basis of the approved advance commencement of the measures until the approval by the Commission. There were no alternatives to the interim financing of the implementation of the 2012 MotoGP at the Sachsenring.

 It follows from VSZ‘s commercial assessment that when setting its prices, VSZ has to take into account that Sachsenring cannot be used by providers of free driving in the same extent as other circuits since noise protection restrictions have to be respected. Firstly, providers of free driving at Sachsenring cannot provide services to as many people at the same time as providers at other circuits. Secondly, immission control law only allows free driving at Sachsenring using motorcycles suitable for streets. Other circuits do not have to comply with this restriction.

 In the case of Sachsenring as the largest venue for traffic safety training in Saxony, the traffic safety is enhanced by the Traffic Safety Day, driving training (following the granting of driving licence) throughout the year and special training (e.g. for tractor drivers).19 Training for vulnerable road users such as motorbike drivers or elder drivers also takes place.

 Sachsenring serves to the safety during the exercise of public tasks as a place for traffic safety training for police, firemen and servants in charge of the protection of citizens and in case of catastrophes. It is the Member State’s task to safeguard public safety and order and take appropriate measures (Article 72 TFEU).

3. ASSESSMENT OF THE MEASURES 3.1 Existence of aid

(27) The measures consisting in the public financing of the reconstruction of the curves at Sachsenring constitute State aid within the meaning of Article 107 (1) TFEU, if they

18 Germany refers to Commission decision Multiarena Kopenhagen of 2012, point 34. 19 Germany states that in its Communication “Towards a European road safety area: policy orientations on road safety 2011-2020” from 20 July 2010, the Commission set the objective to cut the number of traffic casualties by half between 2011 and 2020, and that in order to achieve this objective, the Commission set seven strategic objectives, including: 1. Improve education and training of road users, and 7. Protect vulnerable road users. support through State resources an economic activity which derives thereby an advantage which could affect competition and trade between Member States.

3.1.1 State resources and imputability

(28) The measures qualify as State resources imputable to the State as direct grants of the Land and capital injections of municipalities are involved.

3.1.2 Economic activity

(29) The position of Germany is that financing of Sachsenring general infrastructure is not subject to State aid rules. The Commission does not agree to that position. On the contrary, motor sport races and tourism can be classified as economic activities.

(30) By analogy with the Leipzig/Halle judgment20, the modernisation of infrastructure can be considered an economic activity if it is intrinsically linked to a commercial exploitation of the infrastructure, which is the case here.

(31) The upgrade of Sachsenring sport infrastructure is thus an economic activity for the investors, even if the revenues from the operation of the infrastructure do not cover the costs of its modernisation and if a major part of sport activities at Sachsenring qualifies as amateur sport. The latter fact plays a role only at the level of users: non- professional users are not undertakings. The financing of the modernisation of the infrastructure at stake is thus subject to the State aid rules.

(32) The argument that the race ring was also used for other activities, like a traffic safety day and similar events, is not relevant. Apart from the fact that the focus of the race ring is indeed the conduct of races, the multifunctional use of an infrastructure does not speak against classification as State aid to the company that invested in the safety measures, here ZV. Also the related argument that all users have non-discriminatory access is without relevance on the level of the management company, here SRM for the MotoGP. At the level of users, mainly providers of free driving and car manufacturers’ test drives benefit indirectly from the measures as a secondary effect, since the expanded gravel traps also improve the safety for these uses.

(33) Germany also claims a public interest for society in providing such infrastructures, as the ring supports the economic strength of the region. An argumentation of regional development could speak in favour of a compatibility assessment under the Regional Aid Guidelines21, but does not take away the selective advantage in favour of the management company.

(34) The Commission needs to ascertain whether the design of safety measures in this case is a public task. Financing of the safety measures at hand is not exempt from the remit of State aid law for the mere reason that they fall under the responsibility of race track operators, not the State. The Commission thus considers the implementation of the safety measures an economic activity.

20 Joined Cases T-443/08 and T-455/08 Freistaat Sachsen, Flughafen Leipzig/Halle et al v Commission [2011] ECR II-1311, upheld on appeal, see Case C-288/11 P Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH v Commission [2012] ECR I-0000. 21 District Chemnitz is an a) funding area in the German regional aid map for 2007-2013. 3.1.3 Selectivity

(35) The Commission considers that the measures, which are of an ad hoc nature, have a selective character for the owner of the infrastructure.

3.1.4 Advantage

(36) In order to assess whether an advantage was conferred to the owner, the market economy investor principle (MEIP) shall be applied. First of all, the measures are not paripassu transactions because Germany had not identified a private investor who would invest under comparable conditions in the modernisation.

(37) The costs of Sachsenring general infrastructure, including the safety measures, should be allocated to the owners of the racetrack. In the case at hand, the owners of the racetrack will pay a limited part of the costs of reconstruction costs and the public authorities will pay the remaining part of these costs, which constitutes an advantage for the operators. Therefore, the market investor principle has not been complied with.

(38) Further, there are no expectations that the State contribution will yield a market- conform return. The Commission thus considers that there is State aid for the modernisation of the infrastructure.

3.1.5 Distortion of competition and effect on trade

(39) There is a distortion of competition since the aid to the Sachsenring infrastructure and the Formula 1 activities promotes the use of this infrastructure. As regards the effect on trade between Member States, Sachsenring competes with other race tracks in the Union organizing top motorsport competitions.

3.2. Compatibility

(40) Germany argues that the financing of the measures at stake is compatible under Article 107(3)(c) TFEU.

(41) The public financing of the reconstruction of the racetrack with the aim to offer it, in part, for commercial use through a lease to the operators of motorsport racing may be compatible with the internal market pursuant to Article 107(3)(c) TFEU if it pursues a policy objective of common interest, is necessary and proportionate and does not cause undue distortion of competition.22

(42) With regard to the achievement of a policy objective of common interest, it has to be noted that Sachsenring serves to the organisation of amateur and professional (motor)sport events23.

(43) The upgrade of venues for sport events of amateurs (motorsport, cycling) and supporting activities which benefit the general public (free driving for groups or

22 Cf. State aid decisions in cases of arenas SA.35135 – Germany, Multifunktionsarena der Stadt Erfurt and SA.35440 – Germany, Multifunktionsarena der Stadt Jena. 23 Germany does not forward any other reasons to declare the measures compatible. There is no apparent legal basis for this kind of aid under the State aid rules. individuals) can be considered a State responsibility towards the general public.24 The Amsterdam Declaration on Sport and Article 165 TFEU both acknowledge the social significance of sport: "The Union shall contribute to the promotion of European sporting issues…".

(44) The Commission highlighted25 that the sport sector has enormous potential for bringing the citizens of Europe together. Sport has an educational role, as well as social, cultural and health dimension. There is an overall European need to better use the potential of sport as an instrument for social inclusion in the policies, actions and programmes of the Union and the Member States.

(45) The participants in Grand Prix and other large events (national and regional competitions) as well as in free driving benefit from the safety measures in the curves. Through the investment, the risk of accidents and their impact has decreased. Although the safety measures serve to the MotoGP in the first place, they increase the safety at the race track in general.

(46) Therefore, the notified measures serve to the promotion of sport as a public policy objective. The safety upgrade of the race track must therefore be regarded as satisfying a policy objective of common interest.

(47) The public financing of the safety measures is necessary because the existing facility had become outdated and it is not duplicating other comparable infrastructures. Non- professional clubs and individual drivers benefit from the safety at professional standards level. The financing is also justified by the fact that such an upgrade of infrastructure for traffic safety training for the general public and for the public safety authorities otherwise would be absent in the region concerned. With the subsidised measures the Sachsenring can serve to the achievement of a public policy objective in a larger extent than without them. In addition, pursuant to Germany, in the distance of 250 km, there is no race track comparable to Sachsenring as regards its technical characteristics and the level of safety.

(48) Furthermore, since ZV has no permanent revenues except for the rent it is evident that it could not finance the curves out of its cashflow (see paragraph 15 above). The revenues of SRM, the organiser of the MotoGP, do not suffice for the financing of the safety measures, either (see paragraph 12 above). According to Germany, since SRM is not the owner of Sachsenring, SRM was not responsible to finance the safety measures. Nevertheless, SRM paid EUR 200 000 to ZV as a financial contribution for the financing of the gravel traps, because the safety measures ensure Sachsenring’s homologation. Data regarding VSZ, the organiser of driving safety training and other events, and ADAC Sachsen, the organiser of the motorsport events other than the MotoGP, show that VSZ and ADAC Sachsen were not able to gain profit from organising the events concerned (see paragraphs 9 and 10 above). As regards VSZ and ADAC Sachsen, it has to be remembered that the improvement of the safety at Sachsenring by the measures at hand was a side-effect with respect to most other uses than the MotoGP. In view of the above, the Commission does not consider that VSZ

24 Sachsenring is used also for cultural events that take place outside the race track. However, the subsidized measure concern only the race track. Therefore, the promotion of culture is not referred to as an objective of common interest in the present case. 25 Commission staff working document on the EU and Sport: Background and context – accompanying document to the White Paper on Sport (COM (2007) 391 final). and ADAC Sachsen should be expected to contribute to the costs of modernising the curves.

(49) Furthermore, the German authorities point out that it is not possible to impose a contribution to the modernisation measures on DORNA since DORNA is not obliged to grant a license for the MotoGP to the organisers of the MotoGP. On the contrary, Sachsenring has to apply like any other European racetrack for organising the MotoGP. In addition, the German authorities do not know of any European professional sports being financially supported by a license holder. For these reasons, Sachsenring is not in a position to demand that DORNA contributes financially to Sachsenring’s infrastructure.

(50) The objective of common interest could not be reached by the adoption of a regulation imposing the safety measures. It would indeed not change the fact that the revenues from the operation of Sachsenring do not allow for the refinancing of safety measures, which thus have to be publicly co-financed.

(51) As regards incentive effect, Germany argues that the owners carried out the investment with temporary bank funding in the expectation of State aid. The internal approval by ZV of the loan demonstrates that this expectation did exist. This cannot be affected by the fact that the aid will be awarded after the investment took place. In the Graphischer Maschinenbau judgment26, the General Court accepted an incentive effect if the beneficiary had started investing while expecting aid which however still needed to be formally awarded.

(52) Currently, the operation of Sachsenring is loss-making, and the lease of Sachsenring does not generate a profit with which ZV as credit receiver could pay off the interest of the credit. In this context, it is evident that market based financing could not prove satisfactory. The Commission understands that the bank provided the interim funding because the bank assumpted – like the German authorities – that the public funding would be cleared under the State aid rules. The aid therefore changes the behaviour of ZV and has therefore an incentive effect.

(53) The public financing of the race track is also proportionate. It is not possible to determine a market price for the rent SRM has to pay for the use of the single existing race track that is homologised by DORNA for MotoGP in Germany. Moreover, according to Germany, VSZ states that it is not able to impose higher prices on the users of Sachsenring (see paragraph 26, bullet point 8 above).

(54) Under the General Block Exemption Regulation (GBER), for investment aid for sport infrastructure, the aid amount shall not exceed the difference between the eligible costs (i.e. the investment costs in tangible and intangible assets) and the operating profit of the investment. For sport infrastructure, the GBER exempts both investment aid and operating aid from the notification requirement of Article 108(3) TFEU, provided that the conditions laid down in the GBER are fulfilled.

(55) The Sachsenring racetrack is open to the general public on a transparent and non- discriminatory basis for a large part of the year. It is not dedicated to a single professional sport user. Apart from motorsport events, also cycling and various open-

26 Case T-126/99, Graphischer Maschinenbau GmbH v Commission [2002] ECR II-2427. air events take place there. The aid intensity of 90% is motivated by the fact that the measures regarding the two curves are carried out for the purpose of safety. Moreover, this intensity does not go beyond what is foreseen in the GBER. Sachsenring is in a 107(3)(a) region, where operating aid is not completely excluded, even though no operational aid has been granted in this case.

(56) The expansion of the gravel traps was carried out with the single aim of maintaining Sachsenring’s homologation. Nevertheless, most of the other uses of Sachsenring benefit from the measures as a secondary effect.

(57) The race track is not for the exclusive use of the MotoGP. One of the objectives pursued by the upgrade of the race ring is to increase through adequate sport infrastructure and safety measures the participation of the general public in sport, here in particular motor sport activities, by inter alia, promoting safety of the drivers.

(58) The measures will result in safer and better infrastructure available to the public since the facilities supported by the measures are used by the general public for free driving. The race track shall also be used for other purposes besides the activities of the MotoGP. This will ensure that several different types of users and sectors will be able to benefit from the subsidized sport infrastructure.

(59) The German authorities will make sure that VSZ and ZV as the owners of Sachsenring keep accounts about the costs and revenues of the infrastructure, separate from the accounts for events in the public interest and other events. Pursuant to the German authorities, by having separate accounts, VSZ will be enabled and obliged to pay its revenues from renting out infrastructure for the MotoGP to ZV. Separating the accounts shall ensure in future that VSZ does not achieve a positive balance by renting out the Sachsenring for the purpose of the MotoGP because with such a positive balance VSZ would be able to cross-subsidize other events or increase its profits. The Commission considers that such separation of accounts complies with the principle of transparency.

(60) Regarding the extent of a possible effect on trade and competition between Member States, the competition regarding the traffic safety training between the Sachsenring and other race tracks is limited, because the participants take into account the specificities of the race track (particularly the traveling distance, the race track profile and the safety standards) when making their decision where to train.

(61) Motorsport activities as well as non-motorsport activities seem to attract mainly visitors from Germany. The organizers estimate that about 90% of the audience of Moto GP 2012 came from Germany and about 10% from other European and non- European countries.

(62) As regards professional sport, Sachsenring as the beneficiary is participating in the international competition of MotoGP. However, DORNA grants maximum one licence for MotoGP per country (except for Spain) and only the Sachsenring meets the requirements of that licence grantor in Germany.

(63) Moreover, the operators of the Sachsenring do not benefit from the sale of international broadcasting rights, international sponsoring or merchandising. These activities only occur in regard to MotoGP as this is the sole event of international relevance. DORNA benefits from advertisement on-site at the race track since DORNA is solely entitled to the revenues generated from advertisement measures and the sale of licenses for television and radio.

(64) The Commission considers that non-professional motorsport clubs organise mostly regional events. The events of these clubs are often traditionally linked to one particular race track. The participants in the free driving at the Sachsenring are coming mostly from the region around Sachsenring.

(65) The Lausitzring and the racetracks in Oschersleben, Most and Brno where motorsport and free driving are also performed are too far for local users. Sponsoring and merchandising would only concern local firms. Therefore, the harm to competition or consumers of this type of aid is likely to be circumscribed. Accordingly, the economic activities of the beneficiaries of the aid, SRM, ADAC Sachsen and VSZ, have only a limited effect on trade and competition between Member States.

(66) The Sachsenring infrastructure is also useful for the conduct of driving training.

(67) The public financing of the reconstruction of the racetrack is therefore pursuing an acknowledged public policy objective, it is necessary and it does not affects trade and competition between Member States to an extent contrary to the common interest, according to Article 107(3)(c) TFEU.

(68) The Commission comes to the conclusion that the notified measures are aid compatible under 107(3)(c) TFEU.

4. CONCLUSION

(69) The Commission has accordingly decided to consider the aid for the safety measures regarding the Sachsenring race track to be compatible with the internal market pursuant to Article 107(3)(c) TFEU. The Commission does not raise objections in this respect.

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://ec.europa.eu/competition/elojade/isef/index.cfm.

Your request should be sent by encrypted e-mail to [email protected] or fax to:

European Commission Directorate-General for Competition State Aid Greffe B-1049 Brussels Belgium Fax No: +32 2 29 61242 Yours faithfully, For the Commission

Joaquin ALMUNIA Vice-President