Dear Mr K.,

On 8 January 2001, you lodged a complaint with the European Ombudsman against the European Commission, on behalf of Furness Enterprise. Your complaint concerned the setting of regional aid guidelines for the Furness and West Cumbria areas of England.

You had previously sent on 23 October 2000, another complaint to the Ombudsman (ref.: 1360/2000/JMA) on the same subject matter which had been declared inadmissible on the grounds that no previous administrative approaches had been made.

On 13 February 2001, I forwarded your complaint to the President of the European Commission with a request for comments by 31 May 2001. On 10 May 2001, the Commission sent its opinion, which I forwarded to you on 23 May 2001, with an invitation to make observations. You sent me your observations as regards the Commission's opinion as well as a request for information on 13 and 29 June, and 12 September 2001.

I am now writing to let you know the results of the inquiries that have been made.

THE COMPLAINT

The complainant first complained to the Ombudsman on 23 October 2000 (ref.: 1360/2000/JMA), on behalf of Furness Enterprise. According to the complainant, the way in which the Commission defined its Regional Aid Guidelines led to a halving of the standard maximum aid limit from 20 to 10% for the Furness and West Cumbria areas of England. The complainant alleged that the setting and application of the Regional Aid Guidelines by the Commission had been unjust and inequitable, since it had led to a more severe treatment of these two areas than that applied to less deprived regions. He also alleged that the Commission had based itself on inaccurate statistics. He claimed that the Commission should take into account all relevant factors, such as the real economic and social conditions in Furness and West Cumbria, in its setting and application of Regional Aid Guidelines. The complainant mentioned as examples of this approach the areas of Northern Ireland (UK) and Teruel (Spain).

In the light of the information submitted by the complainant in his first letter, it did not appear that any previous administrative approaches had been made towards the responsible institution. In the apparent absence of any previous administrative approaches, as required by Article 2 (4) of the Ombudsman Statute(1), the complaint was declared inadmissible and the Ombudsman decided to close the case by letter dated 4 December 2000.

On 8 January 2001, the complainant forwarded additional information which showed that he, jointly with several British MEPs, had had several exchanges with the Commission services concerning the economic and social situation in Furness and West Cumbria. The Ombudsman decided to open a new complaint (53/2001/JMA) and to start an inquiry into the matter. The new information furnished by the complainant described his written correspondence with the responsible Commission services, and included copies of these letters. In his new correspondence, the complainant described again the situation, and restated the claims and allegations made in his first complaint.

In summary, the complainant alleged that the Commission acted unjustly and inequitably by halving the standard maximum aid limit from 20% to 10% for the Furness and West Cumbria areas of England in its Regional Aid Guidelines. He also alleged that the Commission had based itself on inaccurate statistics. He claimed that the Commission should take into account all relevant factors, such as the real economic and social conditions in Furness and West Cumbria, in its setting and application of the Regional Aid Guidelines.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission explained that the areas of Furness and West Cumbria had become a part of the NUTS III region of Cumbria. It then referred to the Commission's Guidelines on National Regional Aid which explicitly provide in point 4.8 that the intensity of regional aid must not exceed 10% NGE [net grant equivalent] in regions eligible under Article 87(3)(c) which have both a higher per capita Gross Domestic Product (GDP) and a lower unemployment rate than the respective Community average.

The Commission pointed out that the region of Cumbria had a per capita GDP of 101.5% (1994-1996 average) and an unemployment rate of 67.1% (1995-1997 average) of the Community average. On the basis of these figures, it concluded that the decision to limit the regional aid intensity ceiling applicable in Furness and West Cumbria to 10% NGE was in conformity with the relevant provisions of the Regional Aid Guidelines, which the Commission adopted on 16 December 1997, after extensive consultations with the Member States and which include the criteria to limit State regional aid (per capita GDP/PPS and unemployment rates).

As for the statistics, the Commission stated that the GDP and unemployment statistics had been provided by Eurostat. This Agency calculated regional GDP and regional unemployment figures according to a methodology agreed with all Member States. After the publication by Eurostat of the statistics concerning these two criteria no objection had been raised by any Member State.

As regards the specific situation in the UK, the Commission explained that on 24 February 1998, it had informed the British authorities of the new Regional Aid Guidelines. The UK authorities expressed their support for the Commission's scheme by letter dated 29 June 1998. By letters dated 3 May, and 15 June 2000, respectively, the UK authorities notified the Commission of their regional aid map for the period 2000 to 2006, as well as their proposal regarding regional aid intensity ceilings. In this submission, the UK authorities proposed an aid intensity ceiling for the region of Cumbria of 10% NGE. The Commission approved this set of proposals on 17 August 2000.

In this context, the Commission referred to the relevant case-law of the European Court of Justice. It stated that the Guidelines applicable to State aid in a particular sector, as set out by the Commission in a communication on its policy in that area and accepted by the Member States, have a binding effect and the Commission cannot, therefore, alter their objective significance or binding effect. The Commission concluded therefore that it did not have the legal authority to deviate from the provisions of the Regional Aid Guidelines. It could not accept a higher aid intensity ceiling for Furness and West Cumbria since this would clearly constitute a breach of the Guidelines in the regional aid area.

The complainant's observations

In his observations, the complainant maintained the allegations made in the complaint. He considered that the Commission's position to act in accordance with existing rules was unacceptable since it led to an unjust and inequitable situation. The complainant explained that, on the basis of more up-to-date statistical data the decision taken by the Commission appears nowadays even more unreasonable. He pointed out the fact that Cumbria is suffering badly from the effects of the Foot and Mouth epidemic which has caused a further decline of GDP per capita which in 1998 was already substantially below the EU average. The NUTS 3 areas of West Cumbria in 1998 had a GDP per capita of 84% of the EU average while Cumbria in 1998 had a GDP per capita of 91% of the EU average.

THE DECISION

1. The allegation of injustice and unfairness.

1.1. The complainant alleged that the Commission acted unjustly and inequitably by halving the standard maximum aid limit from 20 to 10% for the Furness and West Cumbria areas of England in its Regional Aid Guidelines.

1.2. The Commission argued that its decision to limit the regional aid intensity ceiling applicable in Furness and West Cumbria to 10% NGE [net grant equivalent] was in conformity with Point 4.8 of the Regional Aid Guidelines and that it could not accept a higher aid intensity ceiling for Furness and West Cumbria since this would clearly constitute a breach of the Guidelines.

1.3. The Ombudsman notes that, according to Art. 87 (3) of the EC Treaty, Member States' regional aid may be compatible with Community law if it is aimed at, among others, (i) promoting the economic development of areas where the standard of living is abnormally low or where there is a serious underemployment(2); and/or, (ii) facilitating the development of certain economic areas(3). The Commission is responsible for monitoring and reviewing aid and proposals for aid to be granted by Member States, and if necessary, requesting that such aid be abolished or altered(4). According to established case-law, the Commission generally enjoys a wide discretion in monitoring and implementing these tasks(5).

1.4 The Ombudsman notes that, in order to define how this discretionary power is to be exercised, the Commission adopts policies in the form of measures such as Codes, Communications and Guidelines setting out the course of conduct which the Institution intends to follow. The Commission enjoys discretionary powers to establish the contents of these measures, provided that they do not depart from the rules of the Treaty(6). In the case of national regional aid, the Commission defined the criteria that it intended to apply in its Regional Aid Guidelines(7).

1.5 The Ombudsman therefore considers that the Commission was entitled to adopt and correctly apply the Regional Aid Guidelines concerned, even though the consequence could be to limit the aid available to the complainant's region. The Ombudsman therefore finds that there is no evidence of maladministration in relation to this aspect of the case. The question of whether the Commission applied the Guidelines correctly is examined in the next section.

2 The allegation that the Commission based itself on inaccurate statistics.

2.1 The complainant alleged that the Commission based itself on inaccurate statistics.

2.2 In its opinion, the Commission argued that it took account of the data supplied by Eurostat, which showed that on average, the region's per capita GDP in the 1994-1996 period was 101,5%, whereas its rate of unemployment in the period 1995-1997 was 67,1% of the EC average. On the basis of that data, aid to the Cumbria region could only benefit from the derogation provided in Art. 87 (3)(c) of the EC Treaty(8), and within the 10% ceiling on NGE [net grant equivalent] foreseen in point 4.8 of the Commission's Guidelines(9).

2.3 No evidence has been presented in the course of the Ombudsman's inquiry which could call into question the validity of the above figures for the period to which they relate. The Ombudsman therefore finds no maladministration in relation to this aspect of the case.

3 The claim that the Commission should take into account all relevant factors in the setting and application of Regional Aid Guidelines.

3.1 The complainant claimed that the Commission should take into account all relevant factors, such as the real economic and social conditions in Furness and West Cumbria, in its setting and application of the Regional Aid Guidelines. In his observations, he pointed out that Cumbria is suffering badly from the effects of the Foot and Mouth epidemic which has caused a further decline of GDP per capita.

3.2 In its opinion, the Commission argued that the proposal to limit regional aid for the whole of the Cumbria region had been put forward by the UK authorities, which had not subsequently suggested any change.

3.3 The Ombudsman notes that the Regional Aid Guidelines foresee a potential modification of the applicable rules in response to social or economic changes. Thus point 5.6 of the Guidelines states that:

"During the period of validity of the map, Member States may request adjustments to it, if it is shown that socio-economic conditions have changed significantly. Such changes may relate to the rates of intensity and the eligible regions [...]"

According to the information available to the Ombudsman, the UK authorities do not appear to have addressed any such request to the Commission.

3.4 The complainant therefore has the possibility to pursue the substance of his claim by making appropriate representations to the UK authorities. He also has the additional possibility to address a petition on the matter to the European Parliament.

4. Conclusion

On the basis of the European Ombudsman's inquires into this complaint, there appears to have been no maladministration by the European Commission.

The Ombudsman therefore closes the case.

The President of the European Commission will also be informed of this decision.

Yours sincerely,

 

Jacob SÖDERMAN

 

c.c.: Mr Brian Simpson MEP

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(1) "A complaint [...] must be preceded by the appropriate administrative approaches to the institutions and bodies concerned"

(2) Art. 87 (3) (a) EC Treaty.

(3) Art. 87 (3) (b) EC Treaty.

(4) Art. 88 (1) and (2) EC Treaty.

(5) Case C-156/98 Federal Republic of Germany v Commission [2000] ECR I-6857.

(6) Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125, par. 34 and 36; see also, case 310/85 Deufil GmbH & Co. KG v Commission [1987] ECR 901.

(7) OJ C 74, 10.3.1998, p. 9.

(8) As set out in point 3.5 of the Commission's Guidelines, the derogation of Art. 87 (3)(a) is only applicable if the region, being a NUTS level II geographical unit, has per capita gross domestic product (GDP) [...] of less than 75,0% of the community average.

(9) "In the regions eligible [...] which have both a higher per capita GDP/PPS and a lower unemployment rate than the respective Community average, the intensity of regional aid must not exceed 10% NGE [net grant equivalent]".