German Shipyard Cleared To Receive State Aid

by Ulrika Lomas, for LawAndTax-News.com, Brussels

08 December 2006

The European Commission announced on Wednesday that it has approved, under EC Treaty state aid rules, regional investment aid of EUR4.2 million to the German shipyard Volkswerft Stralsund.

After an in-depth investigation initiated in February 2006, the Commission has concluded that the investment is limited to a modernisation of the yard which will improve its productivity. It will not, therefore, result in a disproportionate capacity increase.

In August 2005 Germany notified its intention to grant regional investment aid to Volkswerft Stralsund. Volkswerft Stralsund is a shipyard located in Stralsund, Mecklenburg-Vorpommern, a region where the standard of living is below the EU average and there is serious unemployment.

In such regions, state aid may be authorised to promote regional development under Article 87(3)(a) of the EC Treaty. The proposed investment aid would enable the yard to build larger ships (so-called panamax vessels – i.e. of the maximum dimensions that will fit through the locks of the Panama Canal – typically with a displacement of 65000 tonnes) at competitive costs, thereby increasing the productivity of the yard.

Investment costs amount to EUR18.7 million. Germany intends to support the project with EUR4.2 million, which corresponds to an aid intensity of 22.5%, the maximum aid intensity allowed under the Framework on State aid to Shipbuilding.

Competition Commissioner Neelie Kroes commented:

"The aid encourages greater efficiency and competitiveness of an EU yard. This is in line with the objective of the State Aid Action Plan of less and better targeted state aid. I am satisfied that the aid is only used to modernise the yard and not to create additional capacity."

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