EUROPEAN COMMISSION

Brussels, 16.8.2013 C(2013) 5468 final

PUBLIC VERSION

This document is made available for information purposes only.

Subject: State aid SA.36801 (2013/NN) - Germany - Aid scheme to compensate for damage caused by the floods of May and June 2013 (all sectors except agriculture, forestry, fisheries and aquaculture) in Saxony

Sir,

1. PROCEDURE

(1) By electronic submission dated 10 June 2013, the German authorities notified to the Commission, pursuant to Article 108(3) of the Treaty on the Functioning of the European Union (hereinafter "TFEU"), the above-mentioned aid scheme. The information was filed under the reference SA.36801 (2013/N).

(2) On 5, 10, 12 and 18 July and on 2 and 7 August 2013, Germany submitted further information and clarifications. Since Germany already put the measure into effect before Commission approval, the case was transferred to the NN register and filed under the reference SA.36801 (2013/NN).

2. DESCRIPTION OF THE MEASURE

2.1. Objective of the aid measure

(3) The aid measure aims to make good the direct material damage suffered by enterprises and caused by the floods of May and June 2013 in Saxony (hereinafter: "the floods").

Seiner Exzellenz Herrn Dr. Guido Westerwelle Bundesminister des Auswärtigen Werderscher Markt 1 D – 11017 Berlin

Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel – Belgium Telephone: 00.32.(0) 2.299.11.11 - E-mail: [email protected]. (4) The aid measure complements the ex-ante disaster scheme "Elementarschäden" SA.33425 (2011/N)1 under which enterprises which have suffered damages from floods or other natural disasters can apply for soft loans at reduced interest rates. Germany informed the Commission on 12 June 2013 about the application of this approved aid scheme to the recent May-June floods.

(5) First calculations of insurance analysts estimated the material damage for enterprises due to the floods amounting to EUR 300 million in Saxony.

2.2. Legal bases

(6) The following constitute the legal bases of the measure notified by the German authorities: − Haushaltsordnung des Freistaates Sachsen (Sächsische Haushaltsordnung - SäHO); − Verwaltungsvorschriften des Sächsischen Staatsministeriums der Finanzen zur Sächsischen Haushaltsordnung (VwV-SäHO); − RL Hochwasserschäden 20132.

2.3. Ascertainment of the natural disaster and geographic scope

(7) The heavy rainfalls of May3 and June 2013 in the Region Saxony resulted in rising levels of rivers and led to flooding that severely affected the infrastructure and operation of companies in many areas of Saxony.

(8) The areas that were affected by the floods are Vogtlandkreis and Erzgebirgskreis as well as the administrative districts Zwickau, Leipzig, Nordsachsen, Mittelsachsen, Meißen, Sächsische Schweiz-Osterzgebirge, Bautzen and Görlitz as well as the cities Chemnitz, Dresden and Leipzig.

(9) The intensity of the rainfall and the extent of the resulting damage were classified by the German Federal Office for Civil Protection and Disaster Assistance (BBK) as a natural disaster. The German Weather Service declared "century rainfall".

(10) The natural disaster was transnational and affected also several other regions of Germany as well as Austria, Hungary and the Czech Republic. On 3 June 2013, the Commission

1 Commission decision of 23 November 2011 on state aid case SA.33425 (2011/N) (OJ C 2, 5.1.2012). 2 Gemeinsame Richtlinie der Sächsischen Staatskanzlei, des Sächsischen Staatsministeriums für Wirtschaft, Arbeit und Verkehr, des Sächsischen Staatsministeriums des Innern, des Sächsischen Staatsministeriums der Finanzen, des Sächsischen Staatsministeriums der Justiz und für Europa, des Sächsischen Staatsministeriums für Kultus, des Sächsischen Staatsministerium für Wissenschaft und Kunst, des Sächsischen Staatsministeriums für Soziales und Verbraucherschutz und des Sächsischen Staatsministeriums für Umwelt und Landwirtschaft zur Gewährung von Zuwendungen zur Beseitigung der Hochwasserschäden 2013. 3 The rainfall volumes for May 2013 were in most areas of Saxony at 200 to 250% of the long-term average values (1981 to 2010), cf. Gewässerkundlicher Monatsbericht Mai 2013 des Sächsischen Landesamts für Umwelt, Landwirtschaft und Geologie. The report for June is not yet available.

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issued a press communication4 on the event, referring also to the huge floods of 2002 that affected the same countries, and mentioned that in principle the Member States concerned would be eligible for support from the European Solidarity Fund (EUSF).

2.4. Beneficiaries

(11) The measure is addressed to undertakings established in the affected areas in Saxony provided that they have suffered damage which is a proven direct consequence of the floods.

(12) The scope of beneficiaries for the notified measure is limited to: (a) enterprises active in the industrial economy (e.g. manufacturing industry, craft, trade, tourism, services) and to liberal professions with not more than 500 employees; (b) enterprises active in the waste management and public utilities industry; (c) enterprises and municipalities active in the housing industry insofar as they manage their own real estate. (13) The notified aid scheme excludes compensation to undertakings active in the production, processing and commercialisation of agricultural, forestry, fisheries and aquaculture products listed in Annex I of the TFEU.

(14) The number of beneficiaries is above 1 000.

2.5. Duration of the aid measure

(15) All underlying legal bases of the notified measure (see recital (6) above) already entered into force. Germany has expressed its regret that - by paying out a so-called "Sofortgeld" of up to EUR 1 500 per 6 June 2013 - the scheme has already been put into effect before approval by the Commission.

(16) Aid under this measure can be awarded until 31 December 2014.

2.6. Budget of the aid measure

(17) The provisionally allocated budget of the notified measure is EUR 130 million, financed by budgetary funds of the Land Saxony. For beneficiaries mentioned under recital 12 (a) and (b) if they have less than 500 employees, co-financing will be provided by the Bund from the notified measures SA.36785 (2013/N) Emergency measures to compensate for damage caused by the floods of May/June 20135 and SA.36909 (2013/N) Floods 2013 – Reconstruction aid.

4 http://europa.eu/rapid/press-release_MEMO-13-492_en.htm. 5 Commission decision C(2013) 4999 of 29 July 2013 (not yet published in the Official Journal of the European Union). 3

2.7. Eligible expenses

(18) The measure provides for aid to cover eligible costs for material damage to property (fixed and current assets) directly6 caused by the floods.

(19) Aid may be provided in particular to cover the costs for the remedy of direct damages: a) of fixed assets, mainly of land, buildings and structures, buildings, machinery and fixtures and fittings necessary for the operation,

b) of inventories of current assets, for example, raw materials and supplies, work in progress

insofar as they are essential for the continuation of the business operation, any other activity aimed at generating revenue or insofar as they are necessary to make buildings or rooms usable again.

(20) In order to establish the amount of damage caused by the floods, beneficiaries are requested to enclose in their aid application a declaration concerning the material value of the damage, proven by an estimation of costs /an invoice by an independent company specialized for the reparation or reconstruction of the damaged property or a technical report by a licensed professional or other person with specialised knowledge. The costs for such an estimation/technical report will also be eligible for aid.

(21) The value of the damage to objects will be determined taking into account the actual value of the asset at the time of the disaster.

(22) Repair of damage to buildings which at the time of the disaster were not usable or were foreseen for dismantling is excluded from aid under the notified scheme. The exclusion does not apply to buildings that were under construction or in reconstruction and that were for this reason not usable.

(23) Incurred losses and foregone profits associated with temporary interruptions of the production process, the loss of orders, customers or markets as well as other indirect damage shall not be compensated under the notified aid scheme.

2.8. Form of aid and aid intensity

(24) Aid is awarded in the form of direct grants.

(25) The total aid per beneficiary cannot exceed the material damage incurred. The aid intensity is expressed as a percentage of the eligible costs and the scheme foresees that the maximum aid intensity for compensation of damage will not exceed 80 % of the eligible costs.

6 This includes damages caused by rising ground water which was a direct consequence of the floods. 4

2.9. Cumulation

(26) The level of damage is determined for each individual case. The amount of the compensation received cannot exceed the total damage suffered from the natural disaster.

(27) The German authorities confirmed that account will be taken of the rules on cumulation of aid and that the overall amount of compensation received by an individual beneficiary from any public funds combined with insurance payments will not exceed 100 % of the assessed damage in any circumstances.

2.10. Management of the measure

(28) The responsible body for the implementation of the scheme is the regional development bank "Sächsische Aufbaubank". The grants are made available exclusively on the basis of an application by the beneficiary.

(29) In order to avoid overcompensation of damage in case of cumulation with other aid to compensate the same damage, the Region Saxony will keep a record of all contributions made under this measure.

(30) Each beneficiary must submit a legally binding self-declaration of all aid received from other sources in compensation for the same damage. Prior to the final approval of the grant, the beneficiary must demonstrate the proper use of the funds awarded after the completion of repair or reconstruction work. Even after the final approval of the aid, the recipient is obliged to inform the approval authority of further compensation received. In case of overcompensation or if the funds were not used properly, the granting authority is entitled and obliged to recover overpayments. The granting authority shall evaluate the cumulation and shall ensure that any overlap will not exceed 100 % of the cost of repairing the damage.

2.11. Outstanding recovery orders

(31) The German authorities have given assurance that they will suspend the payment of any aid under the notified aid measure to any undertaking that has benefited from earlier unlawful aid declared incompatible by a Commission Decision, until that undertaking has reimbursed or paid into a blocked account the total amount of unlawful and incompatible aid and the corresponding recovery interest.

2.12. Confidential information

(32) Germany indicated that the notification does not contain any confidential information which should not be disclosed to third parties.

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3. ASSESSMENT OF THE MEASURE

3.1. State aid character of the measure

(33) The compensation is aid provided in the form of direct grants, through State resources within the meaning of Article 107(1) TFEU. Since the compensation will be granted to a limited number of undertakings having establishments in one of the areas in Saxony that suffered damage, the measure is considered to be selective. As the measure is intended to provide these undertakings with resources to cover costs which they would normally have to bear themselves, it confers an advantage which may distort or threaten to distort competition. As the measure covers sectors and undertakings involved in trade between Member States, there is a risk that the aid could affect such trade. The proposed aid measure therefore constitutes State aid within the meaning of Article 107(1) TFEU.

3.2. Legality of the aid measure (34) In view of the fact that Germany informed the Commission that the measure has been put into effect before the Commission reached a decision, the Commission has to consider that the German authorities have not fulfilled their obligation to notify the measure in accordance with Article 108(3) of the TFEU, thereby rendering the aid unlawful.

3.3. Compatibility of the aid measure

(35) The Commission has examined the notified measure pursuant to Article 107(2)(b) TFEU7. This assessment has led to the following observations:

3.3.1. Ascertainment of a ‘natural disaster’

(36) Article 107(2)(b) TFEU states that aid to make good the damage caused by natural disasters or exceptional occurrences shall be compatible with the internal market. The Commission has already confirmed in several decisions that floods8 constitute natural disasters in the meaning of Article 107(2)(b) of the TFEU.

(37) The heavy rainfall that took place in May and June 2013 resulted in floods affecting infrastructure and business activities of enterprises over a large territory of several German Federal States including Saxony. The floods and the scale of damages it caused

7 As done previously e.g. for State aid cases N 459/A/2009 and N 174/A/2004 (Italy), N 235a/2010 (Poland), N 32/2008 and N 401/2008 (Slovenia), N 42/B/2003 (Netherlands), N 629/2002 (Austria), N 274b/2010, N 554/2002 and N 632/2002 (Germany). 8 State aid N 274b/2010 – Germany - Disaster Aid Scheme "Bayerischer Härtefonds Finanzhilfen" (beneficiaries in manufacturing and other sectors) (OJ C 164, 02.06.2011, p. 5.); State aid N 359/2010 – Germany – Disaster Aid Scheme "Regelung Hochwasserhilfe 2010 Sachsen" (OJ C 283, 20.10.2010, p. 3); State aid N 386a/2009 – Germany – Scheme on granting of State aid to compensate for damage caused by natural disasters in Rheinland-Pfalz (OJ C 25, 2.2.2010, p. 11); State aid SA.36787 – Germany - Guidelines for a national framework directive on state subsidies for compensation of losses caused by natural disasters or adverse weather conditions in the agricultural sector (Commission decision of 27 June 2013, not yet published in the Official Journal of the European Union).

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can be qualified as natural disaster. The event was recognised as a natural disaster by the German authorities and by the Commission (see recitals (9) and (10) above).

3.3.2. Mechanism to rule out overcompensation

(38) In order to be compatible with Article 107(2)(b) TFEU the aid must be proportional to the damage caused by the natural disaster and the compensation for the damage to property and the damage for economic disadvantage claimed for by the beneficiaries must be a proven direct consequence of the former. Aid must not result in overcompensation of damage; it should only make good the damage caused by the natural disaster.

(39) To meet these requirements, the German authorities established the following criteria: a) Compensation may only be granted to the affected beneficiaries to cover costs caused by damage which is a direct consequence of the floods of May/June 2013. The compensation may not exceed what is needed to restore the beneficiary's situation to the one as from before the floods. b) To determine the damage, the German authorities require that, together with the request for contribution, the beneficiaries of the aid issues a declaration concerning the material value of the damage caused by the floods (see recital (20) above). c) The total amount of the aid and/or the gross grant equivalent cannot exceed the amount of the ascertained damage, reduced by any reimbursement received (e.g. donations, other grants, other funds), including insurance payments. d) The cumulated amount of compensation paid to the individual beneficiary may not exceed 100 % of the eligible costs. e) In case of overpayments, the granting authority is under a legal obligation to recover any overcompensation.

(40) Therefore, the sum of the aid under the present measure and of all compensation from other sources, including insurance payments, may not exceed the value of the damage to the individual beneficiary as proven by the required documents (see recital (20) above).

(41) On the basis of the above the Commission finds that the measure compensates damage caused by the natural disaster only and that it introduces an appropriate mechanism to ensure that there will be no overcompensation.

(42) Therefore, the Commission considers that the objective of the measure is to restore the situation of the affected entities to the status as from before the natural disaster and to enable them to resume their activities, but does not give them an additional advantage.

(43) In view of the above, the Commission considers that the notified aid measure is compatible with the internal market in accordance with Article 107(2)(b) TFEU.

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4. DECISION

(44) The Commission considers that Germany has put the measure into effect prior to the date of this Decision, in breach of Article 108(3) TFEU.

(45) Nevertheless, on the basis of the foregoing assessment, the Commission has decided to consider the aid compatible with the internal market pursuant to Article 107(2)(b) TFEU.

(46) The Commission further reminds the German authorities that all plans to modify this aid measure have to be notified to the Commission.

As the German authorities confirmed that the information provided to the Commission during the notification does not contain confidential information which should not be disclosed to third parties, the Commission will publish the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/competition/elojade/isef/index.cfm

Yours faithfully,

For the Commission

Joaquín ALMUNIA Vice-President

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