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Commission Authorizes Polish Tax Breaks For Shipyard

by Ulrika Lomas, Tax-News.com, Brussels

27 July 2009


Following an in-depth investigation opened in June 2005, the European Commission has authorised under EC Treaty state aid rules various support measures, including tax breaks, worth EUR251m, spread over several years and extending into the future, in favour of the Gdansk Shipyard in Poland.

Privatised in 2007, the yard recently presented a restructuring plan that will to a large extent be financed from private resources raised by the yard and its owner. The Commission concluded that the plan will ensure the viability of the yard and that the distortions of competition, caused by years of subsidised operations, will be adequately reduced by production capacity closures.

Competition Commissioner Neelie Kroes commented: "This has been one of the longest and most difficult cases I have had to deal with but I am very pleased that we have now found a constructive solution for this exceptional place and the people working there. We have made a tremendous effort to make sure that the yard will be viable for many years to come. Genuine restructuring is the only way to secure stable jobs for the yard's workers."

Since 2002, Gdansk Shipyard has benefited from various aid measures such as capital injections, guarantees, loans and tax write-offs designed to keep it afloat. Based on the notification of restructuring aid to the yard by Poland in October 2004, the Commission opened a formal investigation in June 2005 to scrutinise in detail the restructuring plan. In November 2007, the yard was privatised and the new owner first attempted to merge shipyards in Gdansk and Gdynia. A plan for this common project was rejected by the Commission, in the context of its decision on state aid to Gdynia Shipyard of November 2008, mainly because it was not sufficient to ensure a return of the yards to long-term viability.

Subsequently, the owner of Gdansk Shipyard, Ukrainian industrial group ISD, submitted a stand-alone restructuring plan for this yard. The Commission is satisfied that the plan is in line with the requirements of its Guidelines on rescue and restructuring aid. In particular, the plan proposes a sustainable business strategy based on a diversification of the yard's activities and synergies with other companies in the same group.

The Commission’s decision authorises state aid granted to Gdansk Shipyard since 2004 when Poland entered the EU (EUR94m) as well as a further EUR35m of aid still planned to finance the yard's restructuring. The decision also authorises production guarantees from the Polish Export Credit Insurance Corporation of a nominal value of EUR122m (EUR80m already received and EUR42m planned in the period 2009-2012). The decision does not however cover the state aid received by the yard prior to Poland's accession to the EU: between 2002 and 2004, the yard received a further EUR36m (which falls outside the scope of Commission’s decision).

As the continuous subsidies for the yard's production since 2002 caused a significant distortion of competition on the shipbuilding market, the yard's shipbuilding capacity has to be reduced substantially. According to the restructuring plan, the yard will close two out of the three existing slipways. The yard has made a commitment to operate with a single slipway or alternative launching facility, with a maximum production of 100,000 compensated gross tonnage (CGT) annually.


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