Brussels, 24/03/2003 (Agence Europe) - On Wednesday, the European Commission concluded that the EUR 4.6 million subsidy paid by Germany to Linde AG in 1997 is not aid according to the EC Treaty.
In 1993, the German privatisation agency Treuhandanstalt (THA) had sold an amine production plant located in Leuna (Saxony-Anhalt) to Union Chimique Belge (UCB). At the same time, it had entered into a long-term supply obligation promising to deliver carbon monoxide to UCB at a fixed price. The production costs of carbon monoxide, however, exceeded the initial expectations of THA. At the contractually agreed price, execution of the contract would cause THA high losses. In order to cut such losses, THA was looking for an investor to take over its loss-making supply obligation. The only investor interested and objectively suited to taking over THA's carbon monoxide delivery obligation was Linde AG as this company had been established in the Leuna area as a gas producer since 1994. The cost of building the new facility was EUR 6.4 million. Linde contributed part of this (EUR 1.8 million), while BvS (the successor to THA) contributed EUR 4.6 million. This subsidy was lower than the cost of a completely new plant, which would have amounted to around EUR 10.3 million.
The Commission opened a formal investigation procedure in July 1999, because of its doubt as to whether the subsidy awarded to Linde constituted aid or not. In January 2000, it closed the procedure with a partially negative decision, declaring that, pursuant to the provisions relating to regional aid, the part of the subsidy exceeding 35% of the eligible investment costs for the facility (around EUR 2.3 million) was incompatible with the Treaty. With a ruling on 17 October 2002, the Court of First Instance cancelled the Commission's decision, stating that no State aid had been paid to Linde AG. In the light of this ruling, the Commission reviewed the measure and noted that the subsidy did not constitute aid, since it had no effect on trade and did not distort competition. Linde was in fact the only company objectively likely to produce carbon monoxide for UCB, and it did indeed deliver all its production to that company. The German government considered Linde was just the means of assuring the continuation of its delivery obligation for carbon monoxide to UCB. The subsidy was therefore limited to the necessary minimum for this purpose, the European Executive said.