EUROPEAN COMMISSION. The Commission has based its decision on the following considerations:

Transcription

1 EUROPEAN COMMISSION Brussels, C(2017)5463 final Subject: State aid Bulgaria SA (2017/N) Aid for the realisation of voluntary animal welfare commitments for pigs Madam, The European Commission ("the Commission") wishes to inform Bulgaria that, having examined the information supplied by your authorities on the State aid scheme referred to above, it has decided not to raise any objections to the relevant scheme as it is compatible with the internal market pursuant Article 107(3)(c) of the Treaty on the Functioning of the European Union ("TFEU"). The Commission has based its decision on the following considerations: 1. PROCEDURE (1) By letter of 1 June 2017, registered by the Commission on the same day, Bulgaria notified, according to Article 108(3) TFEU, the above mentioned aid scheme. 2. DESCRIPTION 2.1. Title (2) Aid for the realisation of voluntary animal welfare commitments for pigs Objective (3) With the present notification the Bulgarian authorities wish to support animal breeders in the pig sector to voluntarily undertake animal welfare commitments in Ekaterina Zaharieva Minister for Foreign Affairs Aleksandar Zhendov Str. 2 Sofia 1113, Bulgaria Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË

2 the field of housing conditions and quality of feed in accordance with the natural needs of the animals. The present notified aid scheme is a continuation of the existing aid scheme SA (2012/N) "Aid for the realisation of voluntary animal welfare commitments for pigs" Legal basis (4) The legal basis comprises the following national acts: (a) Article 12, para 1 point 2 of the Law on aiding agricultural producers [Закон за подпомагане на земеделските производители]; (b) Article 137 of the Law on veterinary activity [Закон за ветеринарномедицинската дейност]; (c) (d) Ordinance 21 of 14 December 2005 laying down the minimum requirements for animal protection and welfare on pig farms [Наредба 21 от 14 декември 2005 г. за минималните изисквания за защита и хуманно отношение при отглеждане на свине]; Instructions on application of the aid scheme for "realisation of voluntary animal welfare commitments for pigs" [Указания за схема на държавна помощ помощ за реализиране на доброволно поети ангажименти за хуманно отношение към свине ] Duration (5) From to Budget (6) Overall budget is BGN (approximately EUR 91.5 million). The annual budget is determined annually by the State Fund Agriculture Beneficiaries (7) Beneficiaries are large enterprises as well as small and medium-sized enterprises that are animal breeders in the pig sector and fulfil the following conditions 2 : (a) (b) registered under Ordinance No 3 of 1999 for the establishing and keeping a register on agricultural producers [Наредба 3 от 1999 г. за създаване и поддържане на регистър на земеделските производители]; are active farmers in the meaning of Article 9 of Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and 1 Approved by the Commission with Decision C(2012) 8355 final of The duration of this scheme is until Section 4 of the Instructions for the State aid scheme "Aid for the realisation of voluntary animal welfare commitments for pigs". 2

3 repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/ ; (c) are not undertakings in difficulty in the meaning of point 35(15) of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to (hereinafter "the Guidelines"); (d) their animal breeding establishments are registered pursuant to Article 137 of the Law on veterinary activity; (e) (f) (g) the number of reared animals (sows and fattening pigs) matches the capacity of the farm; have no debts towards the State Fund Agriculture; have no debts towards the State budget, including debts arising from previous non recovered unlawful and incompatible State aid Description of the aid scheme (8) The Rural Development Programme (RDP) of Bulgaria for the period recognises the importance of voluntary animal welfare commitments for the agricultural sector and thus includes a measure to support such commitments in the sub-sector of ruminant breeding (measure 14 of the RDP of Bulgaria for the period ). Under the current notified scheme, support for voluntary animal welfare commitments will be granted from the national budget to the subsector of pig breeding only. The current notified aid scheme is hence coherent with the Rural Development policy and overlapping of public support is excluded. (9) The Bulgarian authorities explained the advantages of granting the aid for animal welfare commitments in the pig sector outside the scope of the RDP. The SWOT analysis 5 of the RDP showed that the available resources will only be sufficient for the support in the sector of ruminant breeding. Taken into account that financial constraint, and having in mind that an existing State aid scheme in the pig sector is already operating, the Bulgarian authorities decided to use the European Agricultural Fund for Rural Development (EAFRD) to support animal welfare commitments in the sector of ruminant breeding and to continue to finance the aid for animal welfare commitments in the pig sector from the national budget only. (10) The aid will be granted to pig breeders who undertake to commit themselves for one or several of the following sub-measures for a period of at least five years: a) provision of unobstructed floor area above the required standard; b) provision of artificial light for at least 11 hours; 3 OJ L 347, , p OJ C 204 of , p. 1. Amended by the Notice published in OJ C 390, , p. 4 and by the Corrigendum published in OJ C 265, , p SWOT analysis is an evaluation method of the strengths, weaknesses, opportunities, and threats or a specific project, programme, policy etc. 3

4 c) use of feed containing maximum 2,5 mg/kg deoxynivalenol. (11) The Bulgarian authorities indicated the current obligatory standards in the pig sector: Council Directive 2008/120/EC of 18 December 2008 laying down minimum standards for the protection of pigs 6, transposed into national law by Ordinance No 21 of 14 December 2005 laying down minimum requirements for the protection and welfare of pigs (SG No 64/2006). (12) The Bulgarian authorities stated that it is not required under either Union legislation or national legislation that farmers increase the available floor space or the hours of artificial light above the mandatory requirements, or that farmers undertake activities which lead to reducing the level of deoxynivalenol up to 2.5 mg/kg in animal feed. They explained that these requirements go beyond the current mandatory requirements established by Union and national legislation and in particular they go beyond the relevant statutory management requirements (SMR) 12 of Annex II of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/ (13) The voluntary animal welfare commitments are described by the Bulgarian authorities as follows: (14) Regarding sub-measure a): This sub-measure aims at providing sows and fattening pigs with additional unobstructed floor space according to the table below. The measure should contribute to making more space per animal available for exercise and to improving overall animal health and welfare and maximising fertility and milk production in lactating sows. The control of the sub-measure is conducted through on-the-spot checks. Pig category Unobstructed floor space increased from to increase Sows 2.25 sq.m 2.48 sq.m 10% Fattening pigs up to 50 kg 0.40 sq.m 0.46 sq.m 15% Fattening pigs up to 85 kg 0.55 sq.m 0.63 sq.m 15% Fattening pigs up to 110 kg 0.65 sq.m 0.75 sq.m 15% (15) As explained by the Bulgarian authorities, the methodology for calculating the additional costs and the income foregone takes into account that the increase of the unobstructed floor area requires a reduction of the number of the reared animals and consequently a decrease of the farmers' income. Respectively, the reduction of the daily costs for rearing fewer animals has been set off against the reduction of income. 6 OJ L 47, , p OJ L 347, , p

5 (16) The income foregone for farmers for providing sows with an additional 10% floor surface is BGN per sow. The income foregone for farmers for providing fattening pigs with an additional 15% floor surface is BGN per pig. (17) Regarding sub-measure b): The aim of this measure is to provide 11 hours of artificial lights (40lux/m 2 ) in the premises where the pigs are kept, which is 3 hours more than the mandatory standard of 8 hours. Extending the hours of artificial light will improve the nutrition regimen of fattening pigs and improve their general health and welfare. It will also have a positive impact on the exercise regimen, and on fertility and milk production in lactating sows. The sub-measure will increase electricity costs by approximately 40%. The control of the submeasure is conducted on the basis of internal orders extending the artificial light from 8 to 11 hours to be issued by the owner or manager of each farm and the readings of the respective metering devices. (18) As explained by the Bulgarian authorities, the methodology for calculating the additional costs takes into account the increased consumption of energy of 40% and respectively the additional energy costs based on the average energy price for industrial purposes. (19) The additional cost for farmers for providing sows with an additional 3 hours of light is BGN per sow. The additional cost for farmers for providing fattening pigs with an additional 3 hours of light is BGN 5.65 per pig. (20) Regarding sub-measure c): The aim of this sub-measure is to reduce the harmful effects of deoxynivalenol on the health and welfare of pigs and sows by limiting the presence of deoxynivalenol to 2,5 mg/kg. This will be achieved via regular laboratory controls of the feed (produced and purchased) and by adequate storage of the grain and feed. For storage shorter than 10 days, special silos situated outside of the premises are required. For storage longer than 10 days, the holdings should regularly check the temperature and use appliances to eliminate insects and to limit the appearances of humid zones. The control of the sub-measure is based on: laboratory analysis of the feed to control the level of deoxinivalenol every three months, keeping record to follow up the temperature in the premises (not lower than 5 C) and the purchase and installation of special devices to destroy insects and absorbents. (21) As explained by the Bulgarian authorities, the methodology for calculating the additional costs takes into account the additional actions imposed on the beneficiaries with regard to the regular laboratory control of the level of deoxynivalenol (every three months) and the storage of grain and feed (in particular the conditions for outdoor and indoor storage, record of the temperature, insects elimination and limitation of humidity). (22) The additional costs that arise from these actions to reduce the level of deoxynivalenol to 2,5 mg/kg is BGN per sow and BGN per fattening pig. (23) The aid will be granted in the form of a direct grant to be paid annually. The aid is granted to cover the additional costs and income foregone arising from the fulfilment of the voluntary commitments related to sub-measures a), b) or c). No transaction costs will be covered. 5

6 (24) The total amounts of aid (in BGN and per livestock unit (LU 8 )) to be granted per pig category are as follows: Pig category Measure Fattening pigs (0.3 LU) Sows (0.5 LU) А B C Total: The total amounts of aid expressed in EUR per livestock unit are as follows (EUR 1 = BGN ): Pig category Measure Fattening pigs (0.3 LU) Sows (0.5 LU) А B C Total: (25) The calculation of the additional costs and incomes foregone and of the aid amounts is based on a standard cost approach and is verified by external experts. It specifies the source of the data and does not contain investment costs. The Bulgarian authorities have provided the detailed methodology and the confirmation by the Agricultural academy, which is a scientific institution specialised in agricultural research. (26) The Bulgarian authorities found that the measure can have an environment impact. They provided information showing that the applicable Union and national environment protection legislation is respected, in particular as regards the protection of water from nitrate pollution caused by agricultural activities 9. 8 LU Livestock unit 9 Ordinance No 2 of 2007 on protection of water from nitrate pollution caused by agricultural activities and Order of the Minister of Agriculture and Foods and the Minister of environment and waters approving a Programme containing measures to limit and prevent nitrate pollution caused by agricultural activities in vulnerable zones for the period

7 (27) The application procedure is laid down in detail in the Instructions for the implementation of the State aid scheme on "Aid for the realisation of voluntary commitments for animal welfare for pigs". The applicants submit an application before the start of the activity. The application includes personal data of the applicants, information about the fulfilment of the eligibility criteria (see recital (7)) and a list of the sub-measures to be implemented. Large enterprises also describe the counterfactual scenario in absence of aid and present documentary evidence. The granting authorities will carry out a credibility check of the counterfactual scenario and confirm that the aid has the required incentive effect. (28) The commitment period starts on the date of submission of the application and continues 5 years as from that date. (29) The instructions also provide for an adaptation of the voluntary commitments in case of amendment of the mandatory standards. (30) Cumulation with other public funds for the same eligible costs is excluded. The beneficiary provides information to the granting authority on the financing of the activity and the granting authority suspends the aid in case of other public support. (31) The granting authority is the State Fund Agriculture. (32) Bulgaria has informed the Commission that in order to comply with the transparency requirement the publication of the aid scheme and the individual aid awards above EUR will be done through the following web page: Bulgaria committed that the information will be kept for at least 10 years and will be available for the general public without restrictions. (33) The Bulgarian authority committed to adapt the notified scheme to the new rules applicable to State aid in the agriculture sector after the expiry of the Guidelines ( ). 3. ASSESSMENT 3.1. Existence of aid - Application of Article 107(1) TFEU (34) According to Article 107(1) of the TFEU, "[s]ave as otherwise provided in the Treaties, 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, in so far as it affects trade between Member States, be incompatible with the internal market". (35) The qualification of a measure as aid within the meaning of this provision therefore requires the following cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and affect trade between Member States. (36) The scheme in question confers an advantage on its recipients. This advantage is granted through State resources (see recital (8)), is imputable to the State (see 7

8 recital (4)) and it favours undertakings active in pig breeding (see recital (7)). According to the case law of the Court of Justice, the mere fact that the competitive position of an undertaking is strengthened compared to other competing undertakings, by giving it an economic benefit which it would not otherwise have received in the normal course of its business, points to a possible distortion of competition. 10 (37) Pursuant to the case law of the Court of Justice, aid to an undertaking appears to affect trade between Member States where that undertaking operates in a market open to intra-eu trade. 11 The beneficiaries of aid operate on a market where intra- EU trade takes place. In 2015 the EU-intra trade in live pigs amounted to EUR million for imports and EUR million for exports 12. The sector concerned is open to competition at EU level and therefore sensitive to any measure in favour of the production in one or more Member States. Therefore, the present scheme is liable to distort competition and to affect trade between Member States. (38) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the proposed scheme constitutes State aid within the meaning of that Article. The aid may only be considered compatible with the internal market if it can benefit from one of the derogations provided for in the TFEU Lawfulness of the aid Application of Article 108(3) TFEU (39) The aid scheme was notified to the Commission on 1 June It has not been implemented yet. Therefore, Bulgaria has complied with its obligation under Article 108(3) TFEU Compatibility of the aid Application of Article 107(3)(c) TFEU (40) Under Article 107(3)(c), an aid may be considered compatible with the internal market, if it is found to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. (41) For this derogation to be applicable, the aid must comply with the relevant Union State aid rules Application of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (42) As regards the notified aid scheme, Part II, Section "Aid for animal welfare commitments" of the Guidelines is applicable. Thus, the Commission will examine below whether the notified scheme complies with the common 10 Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission of the European Communities, ECLI:EU:C:1980: See in particular the judgment of the Court of 13 July 1988 in Case 102/87 French Republic v Commission of the European Communities, ECLI:EU:C:1988: EUROSTAT 8

9 assessment principles of the Guidelines as well as the specific conditions in Part II, Section Contribution to a common objective (43) The notified aid scheme pursues rural development objectives as provided for in the RDP of Bulgaria for the period The RDP recognises the importance of the support for animal welfare and contains such a measure. According to point 46 of the Guidelines the Commission considers that such measures are per se consistent with and contribute to the objectives of rural development (cf. recital (8)). (44) The Bulgarian authorities have provided information about the environmental impact of the scheme and have demonstrated that the applicable legislation will not be infringed as required by point 52 of the Guidelines (cf. recital (26)). Need for State intervention (45) According to point 55 of the Guidelines, the Commission considers that the market is not delivering the expected objectives without State intervention concerning the aid measures fulfilling the specific conditions laid down in Part II of the Guidelines. Therefore, such aid should be considered necessary to achieve the objectives of common interest specified under Section 3.1. of Part I of the Guidelines. The current aid scheme fulfils the specific conditions laid down in Part II, Section of the Guidelines, as described in recitals (60)-(70) below, and therefore point 55 of the Guidelines is complied with. Appropriateness of aid (46) The notified aid scheme is financed exclusively from the national budget although a similar rural development measure (animal welfare measure) exists in the Bulgarian RDP for the ruminant sector. In such cases, according to point 58 of the Guidelines, Member State should demonstrate the advantages of such a national aid compared to the rural development programme measure at stake. (47) As shown in recital (9) Bulgaria provided an explanation. Thus, aid for animal welfare commitments in the pig sector will be financed exclusively from the national budget, whereas aid for animal welfare commitments in the ruminant sector will be financed under the RDP. This leads to a more targeted distribution and use of public funds. (48) As regards the choice of the appropriate aid instrument, the direct grant (see recital (23)), it can be concluded that, on the one hand, it is consistent with the RDP and, on the other hand, it is in line with the specific requirement of Part II, Section of the Guidelines on annual grant (point 237 of the Guidelines). (49) Therefore, the principle of appropriateness of the aid is complied with. Incentive effect (50) The aid will be granted only for commitments that start after the submission of the application form (see recital (28)). 9

10 (51) The application form contains the data required under point 71 of the Guidelines. According to the national law, the date of submission of the application is automatically the start date of the activity and the activity ends automatically 5 years as from that date. (52) Large enterprises are required to submit a counterfactual scenario and documentary evidence which will be verified by the granting authority in accordance with point 72 of the Guidelines (see recital (27)). (53) Therefore, the incentive effect requirements of the Guidelines are complied with. Proportionality of the aid (54) The notified aid respects the eligible costs and the aid intensities as provided for in Part II, Section of the Guidelines (see recitals (68)-(70) below). (55) The aid amounts are fixed on the basis of standard assumptions of additional costs and income foregone, in accordance with point 93 of the Guidelines. The calculation presented by the Bulgarian authorities is verified by an external expert (see recital (25)). (56) Cumulation with other public funds for the same eligible costs is excluded, as explained in recital (30). (57) Therefore, the proportionality requirement is complied with. Avoidance of undue negative effects on competition and trade (58) According to point 113 of the Guidelines, the Commission considers that, where an aid fulfils the conditions laid down in the applicable Sections of Part II of the Guidelines, the negative effect on competition and trade is limited to the minimum. The aid scheme fulfils the conditions laid down in Part II, Section of the Guidelines, as described in recitals (60)-(70) below, and therefore point 113 of the Guidelines is complied with. Transparency (59) The transparency requirement of point 128 of the Guidelines is complied with, as shown in recital (32) Specific assessment according to the category of aid (60) According to point 232 of the Guidelines, animal welfare payments must be granted to undertakings active in the primary agricultural production which undertake, on a voluntary basis, to carry out operations consisting of one or more animal welfare commitments and which are active farmers. These conditions are fulfilled as the beneficiaries are registered agricultural producers, breeding pig and are active farmers (see recital (7), in particular letters (a) and (b) thereof). (61) According to point 233 of the Guidelines, the aid covers only those commitments going beyond the relevant mandatory standards. The Bulgarian authorities have identified the relevant mandatory standards (see recital (11)) and explained how the voluntary commitments go beyond them (see recital (12)). In particular, the 10

11 voluntary commitments go beyond SMR 12 of Annex II of Regulation (EU) No 1306/2013 which refers to Council Directive 2008/120/EC as follows. (62) Regarding sub-measure a) to provide sows and fattening pigs with % additional floor space according to the text and table in recital (14), the Commission takes into regard Article 3(1)(a) and (b) of Council Directive 2008/120/EC, which sets out the mandatory requirements for the unobstructed floor space for fattening pigs and sows. The commitment in the notified scheme goes beyond the mandatory requirement inasmuch as it provides for additional % floor space. (63) Regarding sub-measure b) to provide sows and fattening pigs with 3 hours additional artificial light as described in recital (17), the Commission takes into regard Annex I, Chapter 1, point 1 of Council Directive 2008/120/EC, which sets out the mandatory requirements for the amount of light for fattening pigs and sows. The commitment in the notified scheme goes beyond the mandatory requirement inasmuch as it provides for additional 3 hours of light for pigs and sows. (64) Regarding the sub-measure c) to provide feed for pigs, which contains deoxynivalenol up to 2.5 mg/kg, the Commission notes that this sub-measure sets up lower values than the values laid down in Commission Recommendation of 17 August 2006 on the presence of deoxynivalenol, zearalenone, ochratoxin A, T-2 and HT-2 and fumonisins in products intended for animal feeding 13, thus, it establishes a voluntary commitment for animal welfare going beyond the applicable EU standard. (65) Therefore the conditions of point 233 of the Guidelines are fulfilled. (66) According to point 234 of the Guidelines, the animal welfare commitments eligible for aid must provide upgraded standards of production methods in one of the areas listed there. The animal welfare commitments under the notified scheme provide upgraded standards in the area listed in letter (a) of point 234 of the Guidelines, namely water, feed and animal care in accordance with the natural needs of animal husbandry (see recital (10)). Therefore the condition of point 234 of the Guidelines is fulfilled. (67) According to point 235 of the Guidelines, the animal welfare commitments must be undertaken for a renewable period of one to seven years. The commitment period under the current notified scheme is five years (see recital (28)) and therefore this condition is fulfilled. (68) According to point 237 of the Guidelines, the aid must be granted annually and may compensate undertakings active in primary agricultural production for all or part of the additional costs and income foregone resulting from the commitment made by them. These conditions are fulfilled as shown in recital (23). (69) As no transaction costs are foreseen (see recital (23)), points 238 and 239 of the Guidelines are not applicable. 13 OJ L 229, , p

12 (70) The aid amounts (see recital (24)) are set below the maximum level provided for in point 240 of the Guidelines which is 500 EUR per livestock unit Duration of the scheme (71) In addition, Bulgaria committed to adapt the aid scheme to the new Guidelines which will enter into force after 31 December 2020 (recital (33)) Other general conditions (72) The legal basis excludes from the scope of beneficiaries undertakings in difficulty within the meaning of point 35(15) of the Guidelines and undertakings which are subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market (recital (7)(c) and (g)). Therefore, the conditions of points 26 and 27 of the Guidelines are fulfilled. 4. CONCLUSION The Commission has accordingly decided not to raise objections to the notified aid on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) TFEU. If any parts of this letter are covered by the obligation of professional secrecy according to the Commission communication on professional secrecy in State aid decisions 14 and should not be published, please inform the Commission within fifteen working days of notification of this letter. If the Commission does not receive a reasoned request by that deadline Bulgaria will be deemed to agree to the publication of the full text of this letter. If Bulgaria wishes certain information to be covered by the obligation of professional secrecy please indicate the parts and provide a justification in respect of each part for which non-disclosure is requested. Your request should be sent electronically via the secured system Public Key Infrastructure (PKI) in accordance with Article 3(3) of Commission Regulation (EC) No 794/ , to the following address: agri-state-aids-notifications@ec.europa.eu. For the Commission Phil HOGAN Member of the Commission Commission communication C(2003) 4582 of 1 December 2003 on professional secrecy in State aid decisions, OJ C 297, , p. 6. Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU) 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 140, , p. 1). 12