EUROPEAN COMMISSION Brussels, C (2012) Subject: State aid/bulgaria Aid No SA. 34409 Aid for the realisation of voluntary animal welfare commitments for pigs Sir, The European Commission ("the Commission") wishes to inform Bulgaria that, having examined the information supplied by your authorities on the State aid measure referred to above, it has decided not to raise any objections to the relevant measure as it is compatible with the Treaty on the Functioning of the European Union (hereinafter the TFEU). In taking this decision the Commission has relied on the following considerations: PROCEDURE (1) By letter of 7 Mai 2012, registered by the Commission on the same day, Bulgaria notified, according to Article 108(3) of the TFEU, the above mentioned aid scheme. (2) By letter of 26 June 2012 the Commission asked for supplementary information which the Bulgarian authorities provided on 13 July 2012, registered on the same date. Upon request by the Bulgarian authorities, bilateral technical meeting was held on 8 August 2012. Bulgaria submitted additional information on 28 August 2012, 31 August 2012, 2 October 2012 and 26 October 2012. DESCRIPTION Title (3) Aid for the realisation of voluntary animal welfare commitments for pigs His Excellency Nickolay Mladenov Minister of Foreign Affairs 2, Aleksandar Zhendov Str. Sofia 1040 Bulgaria Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone : (32-2) 299 11 11.
Objective (4) The aim of the State aid scheme is to provide payments for additional costs and income foregone resulting from animal welfare commitments made on a voluntary basis in the pig sector. Beneficiaries (5) According to the Bulgarian authorities, the aid will be granted to agricultural producers occupied with pigs breeding who undertake to commit themselves for one or several animal welfare measures listed below (p. 16) and who satisfy the following conditions: (a) The agricultural producers are registered pursuant to Ordinance No 3 of 1999 of the minister of agriculture on the establishment and keeping of a register of agricultural producers (Наредба 3 от 1999 г. за създаване и поддържане на регистър на земеделските потребители); (b) The agricultural producers do not have due debts towards to the State Fund Agriculture or the state budget; (c) The animal breeding establishments are registered pursuant to art. 137 of the Law on veterinary activity (Закон за ветеринарномедицинската дейност); (d) The agricultural producers are not firms in difficulty within the meaning of the Community guidelines on State aid for rescuing and restructuring firms in difficulty; (e) The number of the reared animals matches to the capacity of the farms. (6) The estimated number of beneficiaries is between 51 and 100. Legal Basis (7) The legal basis for granting the aid is: (a) Point 51 of the Community Guidelines for state aid in the agriculture and forestry sector 2007-2012 (hereinafter: the Guidelines) 1. (b) Agricultural Producers Support Act, art.12, par.1, p.2 (Закон за подпомагане на земеделските производители (чл. 12, ал.2, т. 2) (c) Instructions on application of aid scheme "Aid for realisation of voluntary animal welfare commitments for pigs (Указания за схема за държавна помощ "Помощ за реализиране на доброволно поети ангажименти за хуманно отношение към свинете") (d) Ordinance No 21 of 14 December 2005 on the minimum protection requrements and animal welfare in the pig sector (Наредба 21 от 1 OJ C 319 of 27.12.2006 2
Description of the scheme Form of aid Duration 14 декември 2005 г. за минималните изисквания за защита и хуманно отношение към свинете) (8) Direct grand, paid annually (9) From approval of Commission to 31.12.2017. Primary producers undertake to implement the measures for a minimum period of 5 years. Budget and intensity Cumulation (10) Overall budget for the duration of the scheme: 165 102 000 leva (approximately 85 mio Euro). The annual amount of aid will be decided every year by the Managing Council of State Fund Agriculture (11) The aid intensity will be up to 100%. (12) The Bulgarian authorities confirmed that the present State aid can not be cumulated with aid received from other local, regional, national or Union schemes to cover the same eligible costs. (13) The Bulgarian authorities confirmed that rural development measure code 215 for animal welfare commitments has not yet been put in place. (14) In addition, the draft national legal basis specifies that aid under the notified scheme will not be available, if the applicant received aid from any public funding for the same eligible costs. Public funding includes both the state budget and the budget of the European Union, regardless who provides the support. In case of double funding, the state aid becomes due and repayable, together with the legal interest from the date of its receipt. With a view to avoid double funding, the following controls are put in place: before providing the aid: official information will be requested from the competent departments of the Ministry of Food and Agriculture on any public funding for the same costs. If this check results in the affirmative, an inquiry will be made with regard to each recipient of aid. Eligible costs (15) The Bulgarian authorities envisage implementing three sub-measures related to voluntary animal welfare commitments which go beyond the current mandatory requirements under Article art. 4 and 5 of and Annex II to Council Regulation (EC) No 73/2009 2 and other mandatory requirements which are established in the national legislation. The current obligatory animal welfare 2 COUNCIL REGULATION (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003, OJ L 030, 31.1.2009, p.16 3
standards in the pig sector as described by the Bulgarian authorities are: Council Directive 2008/120/EC of 18 December 2008 laying down minimum standards for the protection of pigs, Ordinance No 21 of 2005 of the Minister of Agriculture on the protection requirements and animal welfare in the pig sector and Ordinance 44 of 2006 of the Minister of Agriculture on the veterinary requirements for the animal breeding establishments. The Bulgarian authorities guarantee, in addition, to fully comply with the EU legislation concerning pigs feeding (in particular Regulation (EC) No 1831/2003 of the European Parliament and of the Council of 22 September 2003 on additives for use in animal nutrition (OJ L 268, 18.10.2003) and Directive 2002/32/EC of the European Parliament and of the Council of 7 May 2002 on undesirable substances in animal feed (OJ L 140, 30.5.2002). (16) In order to be entitled to apply for aid, the agricultural producers must undertake to fulfil for at least five years one or several of the following three sub-measures: a) Provide unobstructed floor area above the required standard (17) To be eligible under this category, the agricultural producers must ensure that the unobstructed floor area available to the animals is not less than the following: Category of animals Minimum unobstructed floor area according to the voluntary upgraded standard Minimum % of increase compared to the current obligatory baseline standard Sow 2,48 m2 10 Fattening pigs from 30 0,46 m2 15 to 50 kg Fattening pigs from 50 0,63 m2 15 to 85 kg Fattening pigs from 85 to 110 kg 0,75 m2 15 (18) As explained by the Bulgarian authorities the methodology for calculation of the additional costs and the income foregone takes into account that the provision of bigger unobstructed floor area causes reduction of the number of the reared animals and respectively reduction of the farmers' incomes. Respectively, the reduction of the daily costs for rearing fewer animals has been set off against the reduction of the incomes. Thus, the aid is calculated as such: for sow - 49,50 leva/lu and for fattening pig -106,96 leva/lu. b) Ensure provision of artificial light for 11 hours (19) To be eligible for this measure, the agricultural producers must ensure 11 hours of artificial light (40lux/m 2 ) in the premises where the pigs are kept. The current requirement applicable in Bulgaria is to ensure 8 hours of artificial light (40lux/m 2 ) in the premises where the pigs are kept. 4
(20) As explained by the Bulgarian authorities the methodology for calculation of the additional costs takes into account the increased consumption of energy of 40% and respectively the additional energy costs based on average energy price for the industry. Thus, the aid is calculated as such: for sow - 26,10 leva/lu and for fattening pig - 18,00 leva/lu. c) Use of feed containing deoxynivalenol of not more than 2.5 mg/kg (21) To be eligible for this measure the agricultural producers must ensure that the compound feed given to the animal has content of deoxynivalenol of not more than 2.5 mg/kg. Currently there is no requirement in Bulgaria to give feed to pigs where the level of deoxynivalenol is limited to be not more than 2,5 mg/kg. The aim of this sub-measure is to reduce the harmful effects of deoxynivalenol on the health and welfare of pigs. (22) As explained by the Bulgarian authorities the methodology for calculation of the additional costs takes into account the additional actions imposed to the beneficiaries with regard to the regular laboratory control of the level of deoxynivalenol (every three months) and the storage of the grain and feed (in particular the conditions for outdoor and indoor storage, record of the temperature, insects elimination, limitation of humidity). Consequently, the aid is calculated as such: for sow - 46,00 leva/lu and for fattening pig - 36,24 leva/lu Maximum amount of aid (23) The amounts of aid per sub-measure and per 1 livestock unit (1 sow = 0,5 LU and one fattening pig = 0,3 LU) is following: Aid per 1 LU in leva Submeasures For Fattening pig For Sow a 106,96 49,50 b 18,00 26,10 c 36,24 46,00 Total: 161,20 121,60 Aid per 1 LU in EURO Submeasures For Fattening pig For Sow a 54,69 25,31 b 9,20 13,34 c 18,53 23,52 Total: 82,42 62,17 (24) The aid will not exceed the maximum rate laid down in the Annex to the Council Regulation (EC) No 1698/2005 on support for rural development by 5
the European Agricultural Fund for Rural Development (EAFRD) (hereinafter: the Rural Development Regulation) 3, which is 500 EUR per LU. (25) The Bulgarian authorities submitted detailed methodology for calculating the additional costs and the income foregone for the animal welfare sub-measures 4. The Bulgarian authorities also confirmed that transaction costs will not be compensated for the continuation of animal welfare commitments already entered into the past. (26) The Bulgarian authorities ensured that the animal welfare payments cover only those commitments going beyond the relevant mandatory standards established pursuant to art. 4 and 5 of and Annex II to Regulation (EC) No 73/2009 and other relevant mandatory requirements established by national legislation or, in absence of such mandatory standards, the usual farm practice which are identified in the scheme description. Furthermore, they have explained that the reference level for calculating income foregone and additional costs resulting from the commitments given are the relevant standards and requirements referred to in Article 40(2) of the Rural Development Regulation. (27) Information was provided by the Bulgarian authorities to demonstrate how the state aid measure fits into and is coherent with the Bulgarian Rural Development Plan (RDP) for the period of 2007-2013. Moreover, the Bulgarian authorities have committed to adapt the present scheme to future amendments in the applicable state aid and rural development legislation (Section 13.4 of the draft national legal basis). (28) The draft national legal basis provides for the details on the application procedure, the documents accompanying the application in order to demonstrate compliance with the requirements as well as a description of the control measures put in place for each animal welfare commitment in order to ensure the respect of the above commitments in the long-term. Incentive element (29) The Bulgarian authorities have confirmed that aid will be granted in conformity with p. 15 and 16 of the Guidelines. No aid will be granted retrospectively in respect of activities already undertaken by the beneficiary. Only those activities, which are undertaken after the schemes has been set up and declared compatible with the TFEU by the Commission, will be entitled to the aid. ASSESSMENT Application of Article 107(1) of the TFEU (30) Pursuant to Article 107(1) of the TFEU, aid granted by a Member State or through state resources in any form whatsoever that distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is prohibited, insofar as it affects trade between Member States. 3 OJ L 277, 21.10.2005 4 Mетодика за изчисление на извършените разходи при реализиране на доброволно поети ангажименти за хуманно отношение към животните 6
(31) It is clear that the measure in question confers advantage on its recipients. This advantage is granted through State resources and it favours pig breeders. 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. 5 (32) Pursuant to case law of 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. 6 The beneficiaries of aid operate on a market where intratrade takes place. In 2011 the intra-eu trade with pigs and pig meat amounts to 7 731 000 ton expressed in carcass weight and in 2010 the intra-eu trade with live animals reached a value of 6,619 mio Euro 7. Therefore, the present measure is liable to distort competition and to affect trade between Member States. (33) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the proposed measure constitutes State aid within the meaning of that Article. The aid may only be considered compatible with the common market if it can benefit from one of the derogations provided for in the TFEU. Application of Article 107(3)(c) of the TFEU (34) Under Article 107 (3) (c) an aid may be considered compatible with the common 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. For this derogation to be applicable, aid measures must fulfil the requirements of the relevant Community State aid legislation. (35) The Commission Regulation 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 8 is not applicable, since the notified aid scheme is not limited to small and medium-sized enterprises and Regulation 1857/2006 does not cover aid for animal welfare commitments. Application of the Guidelines (36) With regards to the notified aid scheme Chapter IV C "Environmental and animal welfare aid"(p. 48-58) of the Guidelines is applicable. 5 Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission of the European Communities [1980] ECR 2671. 6 See in particular the judgment of the Court of 13 July 1988 in Case 102/87 French Republic v Commission of the European Communities [1988] ECR 4067. 7 Source: DG Agriculture and Rural Development, AGRICULTURE IN THE EUROPEAN UNION- STATISTICAL AND ECONOMIC INFORMATION, 2011, published under http://ec.europa.eu/agriculture/statistics/agricultural/2011/index_en.htm, and Eurostat, External and intra-eu trade - a statistical yearbook, published under http://epp.eurostat.ec.europa.eu 8 OJ L 358 of 16.12.2006, p 3 7
(37) According to p. 51 of the Guidelines aid for animal welfare commitments shall be declared compatible with Article 107(3)(c) of the TFEU if it fulfils all the requirements as set out in Article 40 of the Rural Development Regulation, and of the relevant implementing rules adopted by the Commission. (38) Article 40 the Rural Development Regulation imposes the following requirements: Animal welfare payments shall be granted to farmers who make on a voluntary basis animal welfare commitments; Animal welfare payments cover only those commitments going beyond the relevant mandatory standards established pursuant to Article 5 and Annex II of Regulation (EU) No 73/2009; These commitments shall be undertaken as a general rule for a period between five and seven years; The payments shall be granted annually and shall cover additional costs and income foregone resulting from the commitment made. Where necessary, they may cover also transaction cost; Support shall be limited to the maximum amount laid down in the Annex I (39) In addition, Article 27, paragraph 7 of Rural Development Implementing Regulation 9 requires that any animal welfare commitment shall provide upgraded standards in at least one of the following areas: (a) water and feed closer to their natural needs; (b) housing conditions, such as space allowances, bedding, natural light; (c) outdoor access; (d) absence of systematic mutilations, isolation or permanent tethering; (e) prevention of pathologies mainly determined by farming practices or/and keeping conditions. (40) The Commission considers that all these conditions have been fulfilled by the aid scheme at stake for the following reasons: (41) The aid scheme concerns only commitments which the beneficiaries undertake to perform on voluntary basis. These commitments go beyond the relevant mandatory standard laid down in Article 40 (2), first sub-paragraph of the Rural Development Regulation and they provide upgraded standard as referred 9 Commission Regulation (EC) No 1974/2006 of 15 December 2006 laying down detailed rules for the application of Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ L 368, 23.12.2006, p. 15) 8
to letter (a) and (b) of Article 27, paragraph 7 of Rural Development Implementing Regulation 10. (42) Regarding the sub-measure a) to provide bigger unobstructed floor area and the sub-measure b) to provide artificial light for 11 hours the Commission considers than this voluntary commitments go beyond the current obligatory standards laid dawn in Council Directive 2008/120. Regarding the sub-measure c) to provide feed containing deoxynivalenol up to 2.5 mg/kg, the Commission takes into regard that it sets up lower values that 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 11 and thus it establishes voluntary commitment for the welfare of the animals going beyond the applicable EU standard. The Commission also takes into regard its previous decisions for similar animal welfare aid schemes 12. (43) The duration of the scheme and beneficiary's commitments cover 5 years period and thus corresponds to those required by Article 40(2), second subparagraph of the Rural Development Regulation. (44) The payments are granted annually and shall cover the additional costs and income foregone resulting from the commitment made. The aid is calculated on the base of livestock unit and does not exceed the maximum allowed by Article 40 (3) and Annex I of Rural Development Regulation. The conversion rate of animals to livestock unit corresponds to Article 27 (13) of Rural Development Implementing Regulation. (45) The reference level for calculating income foregone and additional costs resulting from the commitments given are the relevant standards and requirements referred to in Article 40(2) of the Rural Development Regulation, as explained by the Bulgarian authorities. Therefore, the condition in Article 27 (8) of the Rural Development Implementing Regulation is considered to be met. (46) With regard to the transaction costs the Bulgarian authorities confirmed that transaction costs for the continuation of animal welfare commitments undertaken in the past will not be compensated. Point 56 of the Guidelines is therefore fulfilled. (47) Given the detailed explanations by the Bulgarian authorities to circumvent cumulation of aid for the same eligible costs, the Commission considers that the requirement to avoid cumulation of aid is met. (48) Points 15 and 16 of the agricultural guidelines on the incentive effect requirements are met. The Bulgarian authorities included it in the draft national legal basis and confirmed it expressly. 10 Commission Regulation (EC) No 1974/2006 of 15 December 2006 laying down detailed rules for the application of Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ L 368, 23.12.2006, p. 15) 11 OJ L 229, 23.8.2006 12 In particular, similar sub-measures were authorised by Commission decisions N 209/2007 and N 211/2007 (Hungary) and N 341/2010 and N 342/2010 (Romania) 9
(49) The Bulgarian authorities undertake to adapt the scheme to any relevant modification of Regulation (EC) No 1698/2005 or its implementing rules adopted by the Commission. Thus, the condition of Point 52 of the Guidelines is met. (50) Firms in difficulty within the meaning of the Community Guidelines on State aid for rescuing and restructuring firms in difficulties 13 are excluded from support, as explicitly laid down in the draft national legal basis. (51) In light of all the above, the aid scheme in question is considered to be in conformity with Chapter IV C "Environmental and animal welfare aid"(p. 48-58) of the Guidelines. 4. CONCLUSION (52) On the basis of the above considerations, the Commission concludes that the aid scheme constitutes state aid pursuant to Article 107(1) of the TFEU. However, the aid scheme is in accordance with the Guidelines and thus can be considered compatible with the internal market under Article 107(3) of the TFEU. (53) If this letter contains confidential information, which should not be published, please inform the Commission within fifteen working days from the receipt of the present letter. If the Commission does not receive a reasoned request by this deadline, you will be deemed to have agreed to the publication of the full text of this letter in the authentic language on the following webpage: http://ec.europa.eu/competition/elojade/isef/index.cfm. Your request should be sent by registered letter or fax to: European Commission Directorate-General for Agriculture and Rural Development Directorate Agricultural Legislation Office: Loi 130 5/98A B-1049 Brussels Fax No: 0032 2 2967672 Yours faithfully, For the Commission Dacian CIOLOŞ Member of the Commission 13 OJ C 244, 1.10.2004, p. 2 17 10