PhDr. Lubomír Zaorálek

Ministerstvo zahraničních věcí České republiky

Loretánské náměstí 5

118 00 Praha 1

Česká republika

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË

EUROPEAN COMMISSION

Brussels, 16.10.2017

C(2017) 7035 final

Subject: State aid/Czech Republic

SA.47177 (2016/N)

Welfare of pigs

Sir,

The European Commission ("the Commission") wishes to inform the Czech Republic

that, having examined the information supplied by your authorities on the State aid

scheme referred to above, it has decided not to raise any objections to the relevant

scheme as it is compatible with the internal market pursuant to Article 107(3)(c) of the

Treaty on the Functioning of the European Union ("TFEU").

The Commission has based its decision on the following considerations:

1. PROCEDURE

(1) By letter of 23 December 2016, registered by the Commission on the same day,

the Czech Republic notified, according to Article 108(3) TFEU, the above

mentioned scheme. The Commission sent a request for additional information to

the Czech authorities on 16 February 2017, 17 May 2017 and 24 July 2017. The

Czech authorities submitted additional information by letters of 17 March 2017, 4

April 2017, 21 April 2017, 3 July 2017, 19 September 2017 and 5 October,

registered by the Commission on the same date.

2. DESCRIPTION

2.1. Title

(2) Welfare of pigs.

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2.2. Objective

(3) With the present notification the authorities of the Czech Republic wish to

improve the welfare of pigs by :

(a) reducing heat stress during summer,

(b) improving of housing microclimate

(c) eradicating fly and biting insects,

(d) improving light conditions,

(e) using anaesthesia, analgesia and anti-inflammatory medication for

castration,

(f) increasing the not slatted floor area and

(g) having a permanent presence of a qualified keeper.

2.3. Legal basis

(4) The following acts constitute the legal basis of this aid scheme:

(a) Act No 252/1997 Coll., on agriculture as amended, incl. Principles for

granting aid based on §2 and 2d thereof;

(b) Act No 246/1992 Coll., on the protection of animals against mistreatment

as amended;

(c) Act No 154/2000 Coll., on breeding and livestock registration as amended;

(d) Act No 166/1999 Coll., on veterinary care as amended;

(e) Principles laying down the conditions for granting subsidies under §§2 and

2d of Act no. 252/1997 Coll.

2.4. Duration

(5) From its approval by the Commission until 31 December 2020.

2.5. Budget

(6) The overall budget amounts to CZK 1,200 million (EUR 44.405 million). The

annual budget is estimated at CZK 300 million (EUR 11.1 million). Aid will be

granted by the Ministry of Agriculture.

2.6. Form of the aid

(7) The measure takes the form of direct grant premium. This form has been chosen

with respect to the objective of the aid scheme, which is to incentivise animal

welfare commitments by providing compensations for additional costs incurred.

The scheme will be financed from the State budget.

2.7. Beneficiaries

(8) The aid can be granted to pig breeders who are active farmers and to all

undertakings active in the field of pig breeding. The number of beneficiaries is

estimated to be over 1,000.

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(9) The Czech authorities confirmed that undertakings in difficulty within the

meaning of the definition stipulated in point 35 (15) of the European Union

Guidelines for State aid in the agricultural and forestry sectors and in rural areas

2014 to 20201 (hereinafter "the Guidelines") will be excluded from receiving aid

under the present scheme.

(10) Likewise, the Czech authorities committed to suspend the payment of the aid if

the beneficiary still has at its disposal an earlier unlawful aid that was declared

incompatible by a Commission Decision (either concerning an individual aid or

an aid scheme), until the beneficiary has reimbursed or paid into a blocked

account the total amount of the unlawful and incompatible aid including the

corresponding recovery interest.

2.8. Description of the aid scheme

2.8.1. General

(11) The scheme aims to compensate for additional costs resulting from commitments

towards the improvement of the welfare of pigs, made on a voluntary basis and

going beyond the relevant mandatory standards established at EU level and other

relevant standards established by the national legislation.

(12) In compliance with the national budgetary rules, the commitments will be

undertaken for a renewable period of one year. Therefore, the beneficiaries will

have to lodge their application annually. Indeed, according to the Czech

authorities, all national grant programs lay down the obligation of an annual

evaluation of the effectiveness of the grant program. Annual commitments will

allow a better evaluation of the benefits of higher welfare standards. In view of

the Czech authorities, the one-year commitment offers more incentives to

breeders.

(13) Aid can be granted up to 100% of eligible costs.

(14) Eligible for aid will be additional costs incurred in the implementation of the

welfare commitment. Transaction costs will not be eligible for aid. Likewise,

VAT will not be eligible for aid except where it is not recoverable under the

national VAT rules.

(15) The aid calculation was based on actual additional costs, on the basis of an expert

analysis of the Institute of Agriculture Economics and Information ("Ústav

zemědělské ekonomiky a informací"). The Czech authorities provided a detailed

description of data and figures relating to the method of calculation of the aid

amount for each of the sub-measures. They confirmed that the calculation will

take into account only elements that are verifiable and based on figures

established by appropriate expertise, that clearly indicate the source of the figures

used and that do not contain elements linked to investment costs.

(16) Aid will be granted annually and it will be calculated by the granting authority

when granting the aid and the eligible costs will be supported by clear,

contemporary documentary evidence. For the purposes of calculating the aid

1 OJ C 204 of 1.7.2014, p. 1., as amended by the Notice of the Commission of 23 November 2015,

OJ C 390, 24.11.2015, p.4.

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amount and the eligible costs, all figures used will be taken before any deduction

of tax or other charge. The eligible costs will be supported by clear, contemporary

documentary evidence.

(17) The aid amount will be calculated as the fixed amount per individual animal. The

Czech authorities provided detailed figures demonstrating the possible maximum

aid amounts. These data show that the maximum aid amount is estimated at up to

EUR 311 per livestock unit, i.e. EUR 155.5 per sow.

(18) According to the Czech authorities, all the proposed measures go beyond the

minimum mandatory legal requirements of Regulation (EU) 1306/20132, as

further detailed below.

(19) The Czech authorities undertook to adjust the animal welfare commitments of the

present aid scheme in case of amendment of the relevant mandatory standards

above the current standards.

(20) The Czech authorities confirmed that the primary objective of the aided activities

is not to provide for an increase in the number of animals.

(21) They have also confirmed their commitment to respect all obligations stemming

from the environmental legislation in force, including those under Council

Directive 91/676/EEC3 and under the constantly updated Nitrate Action Plan of

the Czech Republic. The measure is therefore not expected to have any adverse

impact on the environment. While not being subject of the eligible costs, the

scheme will also be fully compatible with Directive 2010/75/EU on industrial

emissions, which applies, inter alia, to the intensive rearing of poultry and pigs

(threshold for pigs is 2000 places for production pigs or 750 places for sows).

According to this directive, operators shall operate under a permit aimed at

minimising pollutant emissions to air, water and soil, through the application of

"Best Available Techniques (BAT)". The Commission has recently adopted BAT

conclusions for the sector of poultry and pigs (Decision (EU) 2017/302 of 15

February 2017), and relevant permits must be updated within 4 years of their

publication. All the proposed measures must therefore comply also at least with

the minimum mandatory legal requirements of the Industrial Emissions Directive

and Commission Implementing Decision 2017/302/EU. Further, insofar as these

pieces of environmental legislation also include standards addressing welfare of

pigs, the state aid scheme should go beyond those standards. The same would

apply in case the state aid scheme would include environmental objectives, such

as the reduction of emissions of ammonia into the environment.

(22) The aid for the same eligible costs cannot be cumulated with aid received from

other local, regional, national or Union schemes, with ad hoc aid or de minimis

aid. In order to avoid overlap, the Czech authorities committed to request a

declaration from the applicants that s/he has not received a payment from another

source for the same eligible costs. Furthermore, as regards second sub-measure "

reducing emissions of ammonia", in order to exclude any risks of overlapping

2 Regulation (EU) No 1306/2013 of 17 December 2013 on the financing, management and monitoring

of the common agricultural policy, OJ L 347, 20.12.2013, p. 549. 3 Council Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against

pollution caused by nitrates from agricultural sources, OJ L 375, 31.12.1991, p. 1.

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financing of the costs, in cases where the pig breeder has decided to comply with

BAT 3 by using authorized feed additives restricting total nitrogen excretion, s/he

will not be able to apply simultaneously for aid under this aid scheme.

(23) The proposed welfare measures are not included in the Rural Development

Program ("RDP") of the Czech Republic 2014-2020. However, the scheme is

consistent with the animal welfare objectives pursued by that RDP.

(24) The Czech authorities confirmed that aid under this scheme will be granted after

its approval by the Commission and after a beneficiary has submitted each year

an application for aid. No aid will be granted for costs incurred prior to the

submission of the application.

(25) The aid application shall include inter alia: the applicant's name, the size of the

undertaking, the location to which the commitment relates, the dates on which the

aid-related commitment begins and ends, the amount of aid needed to carry it out

and the eligible costs.

(26) In addition, large enterprises will also have to describe in the application the

situation that would have occurred without the aid and to submit documentary

evidence in support of that counterfactual scenario. The national authorities will

carry out a credibility check of the counterfactual scenario in order to confirm that

the aid has an incentive effect.

(27) The Czech Republic has informed the Commission that in order to comply with

the transparency requirement the publication of the aid scheme and the individual

aid grants above 60 000 EUR will be done through the following web page:

https://webgate.ec.europa.eu/competition/transparency/public/search/home/.

Additional information on state aid matters can be found on the web page

https://www.szif.cz/cs/seznam-prijemcu-dotaci .

(28) Aid is proposed to be granted for specific welfare commitments as described in

recital (3).

2.8.2. Specific welfare commitments

1. Reduction of the heat stress of pigs in summer:

(29) The intention is to support the improvement of the stable environment of

farrowing sows by reducing the heat during the summer period by farrowing sows

using the cooling systems. The objective is to ensure that a so-called comfort zone

provides optimum conditions. This zone is described as the thermal equilibrium

zone or the thermo-neutral zone. The measure shall help to eliminate the negative

effects of heat on health and reduce mortality. Two cooling methods are to be

used:

Cooling by an increased airflow by properly installed venting system or by using

more fans. This method increases the air velocity and thereby reduces the feeling

perception of temperature, thereby eliminating the thermal stress of animals.

Dispersion of water in airflow can increase the effects of the airflows.

Cooling by water dispersion by using the low-pressure of high-pressure stationary

systems. The spraying is run in 30 minute interval for 30 seconds.

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(30) The minimum basis requirements as regards the temperature and air circulation

are stipulated in Article 4 of Directive 98/58/EC4 and in its Annex in point 10,

whereby "the Members States shall ensure that the conditions under which

animals are bred or kept, having regard to their species and to their degree of

development, adaptation and domestication, and to their physiological and

ethological needs in accordance with established experience and scientific

knowledge, comply with the provisions set out in the Annex". In compliance with

point 10 of the Annex "air circulation, dust levels, temperature, relative air

humidity and gas concentrations must be kept within limits which are not harmful

to the animals".

(31) The Czech authorities ensured that the above basis requirements are respected.

The measure offers a higher standard than prescribed because it will provide not

only with the air circulation and temperature which are not harmful, but it will

offer the comfort temperature zone which is the optimal condition not requiring

any effort by an animal to maintain its body temperature.

(32) Additional costs of cooling by ventilators shall be CZK 794 (EUR 29.38).

Additional costs of water spraying shall be CZK 2.48 (EUR 0.09). The total

additional costs are calculated at CZK 796.64 (EUR 29.47) per sow and per year.

2. Improvement of housing microclimate:

(33) The aim of this sub-measure is to reduce the emissions of ammonia and other

undesirable gases and to reduce odor by using the biotechnological products

applied in water, feed or litter.

(34) The minimum basis requirements as regards the temperature and air circulation

are stipulated in Article 4 of Directive 98/58/EC and in its Annex in point 10,

whereby "the Members States shall ensure that the conditions under which

animals are bred or kept, having regard to their species and to their degree of

development, adaptation and domestication, and to their physiological and

ethological needs in accordance with established experience and scientific

knowledge, comply with the provisions set out in the Annex". In compliance with

point 10 of the Annex "[…] gas concentrations must be kept within limits which

are not harmful to the animals". The Recommendation of the EU Scientific

Veterinary Committee sets the levels of the undesirable gasses at 10 parts-per-

million (ppm).

(35) The Czech authorities aim at reducing this level by 5% to reach 9.5 ppm. In

addition, no obligation to use the bio-products is stipulated either in the European

or in the national legislation. Since these products are more expensive compared

to standardly used ones, the Czech authorities intend to incentive their use. In

parallel to eliminating gasses and reducing odor, the natural products have the

side effect of reducing mortality and consumption of veterinary medicines.

(36) The Czech Republic confirmed that the aid beneficiary will take the

measurements of ammonia concentration in a stall at the level of the pigs'

heads before adding the biotechnology supplements and then after their

4 Council Directive 98/58/EC of 20 July 1998 concerning the protection of animals kept for farming

purposes, OJ L 221, 8.8.1998, p.23

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administration. The granting of the aid will be conditioned by providing the

evidence of ammonia concentration reduction by declaring the difference of the

start and the end values.

(37) The Czech Republic confirmed that within 4 years from the publication of

emissions' limit values based on the BAT associated emission levels the permits

will be updated in compliance with § 18 (3) of Act No 76/2002 Coll., so as to

ensure that the obligatory conditions of integration permit are in compliance with

these limit values.

(38) The additional costs have been calculated at CZK 928 (EUR 34.34) per sow.

3. Improve the housing environment - fly and biting insect eradication:

(39) The objective is to reduce the incidence of unwanted insects and germs in

breeding of sows, gilts and pre-fattening piglets. During the flight season of insect

(May to October) 4 applications of the treatment shall be administered against

insects and against maggots. The most frequent insect species concerned are

houseflies, stomoxys calcitrans, haematopota pluvialis and simulium.

(40) The treatment is done mainly by chemical means. However, biological

alternatives are also possible in organic farms and are eligible under this aid

scheme. These involve the deployment of species of parasitic wasps and flies that

prevent the reproduction of insects in various stages of their development. The

Czech authorities showed that both chemical and biological treatments had

similar costs.

(41) Article 3 of Directive 98/58/EC and its Annex in point 4 stipulate the obligation

of the Member States to ensure that the owners or keepers take all reasonable

steps to ensure the welfare of animals under their care and to ensure that those

animals are not caused any unnecessary pain, suffering or injury. In compliance

with point 4 of the Annex to that Directive "any animal which appears to be ill or

injured must be cared for appropriately without delay and, where an animal does

not respond to such care, veterinary advice must be obtained as soon as possible.

Where necessary sick or injured animals shall be isolated in suitable

accommodation with, where appropriate, dry comfortable bedding".

(42) However, neither the EU rules nor the national Czech legislation regulate the

preventative measures. No rules lay down specific procedures for treating housing

environment. The systematic regulation of unwanted insects is not standardly

performed in pig farms in the Czech Republic. The measure therefore proposes

the animal welfare measure which goes beyond the current zero legislative

standards or common practices of pig farmers.

(43) The additional costs for these 4 applications have been calculated at CZK 283

(EUR 10.47) per sow and per year.

4. Improvement of light conditions:

(44) The program aims to improve the living conditions of farrowing sows and of

pregnant sows in stalls by ensuring an optimal light regime – increased length and

intensity of light. According to the Czech authorities a prolonged photoperiod

improves energy metabolism of weanling pigs and reduces aggression. Agonistic

interactions are significantly higher among pigs receiving a lower level of

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illumination (40 lux), while pigs exposed to the higher level of illumination

(80 lux) show a tendency towards a higher proportion of tactile social

interactions.

(45) Therefore, the Czech authorities propose granting aid to compensate for the

additional energy costs incurred by illuminating stalls at the lighting level 75 lux

for farrowing sows and at the lighting level 100 lux in the stables for pregnant

sows during 14 hours.

(46) The minimum standards of the light conditions are stipulated in Article 4 of

Directive 2008/120/EC5 and its Annex I, whereby "Member States shall ensure

that the conditions for rearing pigs comply with the general provisions laid down

in Annex I". Pigs must be kept in light with an intensity of at least 40 lux for a

minimum period of eight hours per day". The same obligation of ensuring at least

8 hours of the minimum light intensity of 40 lux is laid down in the Czech

Governmental Decree No. 208/2004 on minimum standards for livestock

protection, paragraph 3.

(47) Additional costs were calculated on the basis of the average number of days in a

year spent by sows in the different types of stables. It was established that sows

spent 80.5 days in farrowing houses and 282.9 days in stables or insemination

halls. The costs per sow based on kWh price were estimated at CZK 256 (EUR

9.47) for farrowing sows and CZK 653.6 (EUR 24.19) in the stables for pregnant

or to-be-inseminated sows.

5. Castration with anaesthesia and analgesia and anti-inflammatory medication:

(48) The objective of the sub-measure is to use the castration methods reducing pain

during the intervention in cases where the castration is considered necessary.

Specifically, the Czech authorities propose to grant aid to compensate for the

additional costs of castration of piglets up to the seventh day of life, performed

under anaesthetic or analgesia and the administration of anti-inflammatory

medication.

(49) The minimum legal requirements as regards the castration are laid down in

Article 4 of Directive 2008/120/EC and in its Annex I, Chapter I point 8, whereby

"all procedures intended as an intervention carried out for other than therapeutic

or diagnostic purposes or for the identification of the pigs in accordance with

relevant legislation and resulting in damage to or the loss of a sensitive part of the

body or the alteration of bone structure shall be prohibited with the following

exceptions: […] castration of male pigs by other means than tearing of tissues

[…]. Any of the procedures described above shall only be carried out by a

veterinarian or a person trained as provided in Article 6 and experienced in

performing the applied techniques with appropriate means and under hygienic

conditions. If castration or docking of tails is practiced after the seventh day of

life, it shall only be performed under anesthetic and additional prolonged

analgesia by a veterinarian." The Czech authorities propose to use anaesthetic,

5 Council Directive 2008/120/EC of 18 December 2008 laying down minimum standards for the

protection of pigs, OJ L 47, 18.2.2009, p.5

9

analgesia and the anti-inflammatory treatment also for the castration of piglets

carried out up to seventh day of life.

(50) Additional costs of anaesthetic, analgesia and of the anti-inflammatory treatment

are estimated at CZK 23.3 (EUR 0.86) per animal.

6. Increase of non-slatted floor area for piglets up to 30 kg:

(51) In the Czech Republic the majority of swine herds is housed on slatted floors that

comply with the current legislative requirements. However, all-day movement on

the slatted surface can result in limping or foot lesions, thereby worsening the

welfare of the pigs housed.

(52) The minimum legal requirements are stipulated in Council Directive

2008/120/EC, Article 3(1) as well as in the Czech Governmental Decree

No. 208/2004 on minimum standards of livestock protection that lay down

minimum requirements regarding the unobstructed floor area. Article 3 of

Directive 2008/120/EC requires the Member States to "ensure that all holdings

comply with the following requirements: a) the unobstructed floor area available

to each weaner or rearing pig kept in a group, excluding gilts after service and

sows must be at least:

Live weight m²

Not more than 10 0.15

More than 10 but not more than 20 0.20

More than 20 but not more than 30 0.30

More than 30 but not more than 50 0.40

More than 50 but not more than 85 0.55

More than 85 but not more than 110 0.65

More than 110 1.00

b) the total unobstructed floor area available to each gilt after service and to each

sow when gilts and/or sows are kept in groups must be at least 1.64 m² and

2.25 m² respectively. When these animals are kept in groups of fewer than six

individuals the unobstructed floor area must be increased by 10 %. When these

animals are kept in groups of 40 or more individuals the unobstructed floor area

may be decreased by 10 %." Legislation does not deal with specific parameters

for the non-slatted floor.

(53) The objective of this sub-measure is therefore to increase non-slatted floor to at

least 20% of the total surface to offer to pigs the possibility to rest on a full floor.

The additional costs to cover the additional manpower necessary for maintaining

the non-slatted surfaces are estimated at CZK 846 (EUR 31.30) per sow and per

year.

7. Improvement of care for sows and piglets in farrowing units:

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(54) The objective of this sub-measure is to ensure the permanent presence for

24 hours of a qualified keeper in farrowing units in view of decreasing piglets'

mortality.

(55) The most effective techniques targeting the most common mortality causes

(intrapartum stillbirth, hypothermia, starvation, disease, crushing, and savaging)

include early intervention to assist dystonic sows, measures to prevent and treat

sow hypogalactia, good hygiene, providing newborn piglets with a warm

microenvironment, early fostering of supernumerary piglets, assisting to small

and weak piglets to breathe and access colostrum, and intervention to prevent

deaths from crushing and savaging.

(56) The minimum legislative standards are stipulated in Article 3 of

Directive 98/58/EC and in its Annex, point 2, whereby "Member States shall

make provision to ensure that the owners or keepers take all reasonable steps to

ensure the welfare of animals under their care and to ensure that those animals are

not caused any unnecessary pain, suffering or injury. All animals kept in

husbandry systems in which their welfare depends on frequent human attention

shall be inspected at least once a day. Animals in other systems shall be inspected

at intervals sufficient to avoid any suffering." However, none of the legislative

requirements lay down the obligation of ensuring a permanent presence.

(57) The Czech authorities propose aid to compensate for additional costs of the

presence of a qualified keeper. Additional costs of the "third shift" are estimated

at CZK 443 (EUR 16.39) per sow and per year.

3. ASSESSMENT

3.1. Existence of aid - Application of Article 107(1) TFEU

(58) According to Article 107(1) of the TFEU, "[s]ave as otherwise provided in the

Treaties, any aid granted by a Member State or through State resources in any

form whatsoever which distorts or threatens to distort competition by favouring

certain undertakings or the production of certain goods shall, in so far as it affects

trade between Member States, be incompatible with the internal market".

(59) The qualification of a measure as aid within the meaning of this provision

therefore requires the following cumulative conditions to be met: (i) the measure

must be imputable to the State and financed through State resources; (ii) it must

confer an advantage on its beneficiaries; (iii) that advantage must be selective;

and (iv) the measure must distort or threaten to distort competition and affect

trade between Member States.

(60) The scheme in question confers an advantage on its beneficiaries. This advantage

is granted through State resources (see recitals (6) and (7)) and it favours the pig

breeders carrying out their activities in the Czech Republic. Since the scheme is

put in place by national legal acts and the aid is granted directly by the national

authorities with resources from the State budget, the measure is imputable to the

State. 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

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otherwise have received in the normal course of its business, points to a possible

distortion of competition.6

(61) Pursuant to the case law of the 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.7

The beneficiaries of aid operate on the market of

agricultural products, specifically pig meat, where intra- trade takes place. With

150 million pigs and a yearly production of about 22 million tons, the EU is the

world's biggest producer of pig meat. The main producer countries are Germany,

Spain and France (about 50% of the EU production). In 2015, with 1,500,000

pigs, the Czech Republic had 1% of the total number of pigs of the EU. Similarly,

the Czech Republic's pigmeat production represents 1% of the total EU

production8. The sector concerned is open to competition at EU level and

therefore sensitive to any measure in favour of the production in one or more

Member States. Therefore, the present scheme is liable to distort competition and

to affect trade between Member States.

(62) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It

can therefore be concluded that the proposed scheme constitutes State aid within

the meaning of that Article. The aid may only be considered compatible with the

internal market if it can benefit from one of the derogations provided for in

Article 107(3) of the TFEU.

3.2. Lawfulness of the aid – Application of Article 108(3) TFEU

(63) The aid scheme was notified to the Commission on 23 December 2016 and it has

not been implemented yet. Therefore, the Czech Republic has complied with its

obligation under Article 108(3) TFEU.

3.3. Compatibility of the aid

3.3.1. Application of Article 107(3)(c) TFEU

(64) Under Article 107(3)(c), an aid may be considered compatible with the internal

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.

(65) For this derogation to be applicable, the aid must comply with the relevant Union

State aid rules, which is Part II., Chapter 1.1.5.2. and Part I. Chapter 3 of the

Guidelines.

3.3.2. Application of the Guidelines

(66) As regards the notified aid scheme, Part II. Chapter 1.1.5.2. Aid for animal

welfare commitments of the Guidelines is applicable.

6 Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission

of the European Communities, ECLI:EU:C:1980:209. 7 See in particular the judgment of the Court of 13 July 1988 in Case 102/87 French Republic v

Commission of the European Communities, ECLI:EU:C:1988:391. 8 Source: http://ec.europa.eu/eurostat/web/agriculture/data/main-tables. Data for 2015.

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3.3.2.1. Conditions set out in Section 1.1.5.2 - Aid for animal welfare

commitments

(67) Pursuant to point 231 of the Guidelines the Commission will consider aid for

animal welfare commitments compatible with the internal market under

Article 107(3)(c) TFEU if it complies with the common assessment principles of

the Guidelines and the conditions set out in Section 1.1.5.2 of the Guidelines.

(68) According to point 232 of the Guidelines, animal welfare payments must be

granted to undertakings active in the primary agricultural production which

undertake, on a voluntary basis, to carry out operations consisting of one or more

animal welfare commitments and which are active farmers. As detailed in

recital (11) above, payments are to be granted to active farmers who undertake

animal welfare commitments on a voluntary basis in the animal rearing sector.

Therefore, the condition set out in point 232 of the Guidelines is fulfilled.

(69) Pursuant to point 233 of the Guidelines, aid can cover only the commitments

going beyond the relevant mandatory standards established pursuant to Chapter I

of Title VI of Regulation (EU) No 1306/2013 and other relevant mandatory

requirements. Annex II to that Regulation specifies, as a statutory management

requirement 13, Article 4 of Council Directive 98/58/EC. The baseline mandatory

requirements applicable to this aid scheme are detailed in recitals (30), (34), (41),

(46), (49), (52) and (56) under each proposed sub-measure. As shown in recitals

(31), (35),(42), (45), (48), (53) and (55), sub-measures of this scheme go beyond

the mandatory standards. The notified scheme therefore complies with point 233

of the Guidelines.

(70) Point 234 of the Guidelines stipulates that animal welfare commitments eligible

for aid must provide upgraded standards of production methods in one of the

following areas:

(a) water, feed and animal care in accordance with the natural needs of

animal husbandry;

(b) housing conditions, such as increased space allowances, flooring

surfaces, enrichment materials, natural light;

(c) outdoor access;

(d) practices which avoid mutilation and/or castration of animals or in

specific cases, when mutilation and/or castration of animals is deemed

necessary, provide for the use of anaesthetics, analgesia and anti-

inflammatory medication or immunocastration.

(71) The proposed sub-measures fall within the scope of points 234 (a), (b) and (d) of

the Guidelines. Therefore, all the commitments set out under this aid scheme fall

entirely within the scope of point 234 of the Guidelines.

(72) The Czech authorities confirmed that in compliance with point 235 of the

Guidelines, the animal welfare commitments will be undertaken for a renewable

period of 1 year (recital (12)). The mechanism of renewal of the contract has been

fixed in compliance with point 236 of the Guidelines - the application for aid

must be submitted annually (see recitals (12) and (24)). Thus, the conditions of

points 235 and 236 of the Guidelines are complied with.

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(73) In compliance with point 237 of the Guidelines, the aid will be granted annually

and will compensate farmers for all or part of the additional costs resulting from

the voluntary commitment (recital (11)). The aid will not cover transaction costs

(recital (14)).

(74) Point 240 of the Guidelines stipulates that the aid must be limited to EUR 500 per

livestock unit. Livestock units are calculated according to Annex II of

Commission implementing regulation (EU) No 808/20149 indicating that pigs

equal to 0.3 livestock unit and breeding sows to 0.5 livestock unit. Therefore, in

light of the Guidelines and of the above-mentioned regulation, amounts must be

limited to EUR 250 per breeding sow and to EUR 150 for other pigs. For the

purposes of this aid scheme the calculation are made per individual sow. The

Czech authorities provided detailed figures demonstrating the maximum aid

amounts which can be granted per animal for each sub-measure. Even if the

above-mentioned sub-measures are cumulated, the maximum amount granted per

breeding sow would be of EUR 155.63 and of EUR 146.16 per non-breeding sow

(see recitals (32), (38), (43), (47), (53) and (57)). The amounts per livestock unit

set in point 240 of the Guidelines are therefore complied with.

(75) On the basis of the above, the Commission concludes that the conditions set out

in Section 1.1.5.2 of Part II of the Guidelines are fulfilled.

3.3.2.2. Common Assessment Principles

(76) Pursuant to point 38 of the Guidelines, the common assessment principles apply

to aid granted in accordance with Article 107(3)(c) TFEU.

(77) This aid scheme respects the common assessment principles, in that:

it contributes to a common objective in line with point (43) of the Guidelines. As

described above, the objective of the present scheme is to encourage voluntary

commitments improving animal welfare. Support is targeted on clearly defined

objectives reflecting needs of the pig breeding sector, which is one of the sectors

ensuring food production (see recital (3)).

Recital (23) shows that the scheme goals are also consistent with the rural

development objectives referred to in point 10 of the Guidelines which reminds

that animal welfare is one of the Union priorities contributing to the achievement

of the rural policy objectives. The scheme is therefore in line with point 44 of the

Guidelines.

The same measure is not co-financed under the RDP of the Czech Republic 2014-

2020, therefore, there is no risk of overlap or double funding. As the Czech

authorities explained, the notified aid scheme fits into and is consistent with the

objectives of the Czech RDP (see recital (23)). The Commission thus considers

that the conditions of point 47 of the Guidelines are met.

9 Commission implementing regulation (EU) No 808/2014 of 17 July 2014 Laying down rules for the

application of Regulation (EU) No 1305/2013 of the European Parliament and of the Council on

support for rural development by the European Agricultural Found for Rural Development (EAFRD),

OJ L 227, 31.7.2014, p.18

14

As regards environmental objectives, as confirmed by the Czech authorities, the

aid scheme is primarily designed to improve the welfare of pigs and not to

increase the quantity of animals (see recitals (3) and (20)). The Commission also

takes note of the Czech Republic's commitment to respect all obligations under

Directive 91/676/EEC as well as the commitment to take into account the

constantly updated Nitrate Action Plan of the Czech Republic (see recital (21)).

The scheme is also fully compatible with Directive 2010/75/EU on industrial

emissions. To this end, the Czech authorities confirmed that this Directive has

been fully implemented by Act No 76/2002, as amended. The measure is

therefore not expected to have any adverse environmental impact within the

meaning of point 52 of the Guidelines.

There is a need for State intervention: pursuant to point 55 of the Guidelines, the

Commission considers that the market does not deliver the expected objectives

without State intervention regarding aid measures fulfilling the specific

conditions set out in Part II of the Guidelines. This aid scheme meets the

conditions of Section 1.1.5.2. of Part II of the Guidelines (see recitals (67) to

(75)). Therefore, the aid is considered necessary to achieve the objectives of

common interest.

The aid is appropriate: pursuant to point 57 of the Guidelines, the Commission

considers that aid granted in the agricultural and forestry sectors and in rural areas

that meet the specific conditions laid down in the relevant Sections of Part II is an

appropriate policy instrument. The proposed scheme satisfies the applicable

criteria laid down in Part II of the Guidelines (see recitals (67) to (75)), therefore

it is considered to be an appropriate policy instrument. In compliance with

point 59 of the Guidelines direct subvention aid appears to be the most suitable

form of aid for reaching the set goals of animal welfare and to compensate for the

additional costs linked to the implementation of the welfare measures for pigs

(see recitals (7) and (11)). In addition, the grant is awarded in the form provided

for animal welfare measures in Section 1.1.5.2 of Part II of the Guidelines

(premium per livestock unit), in accordance with the provisions of point 60 of the

Guidelines.

Incentive effect and need for aid is present: as detailed in recitals (24) to (26), the

Czech authorities have demonstrated that the scheme will have an incentive effect

for undertakings, as it will encourage the improvement of the living conditions of

pigs. As described in recitals (12), (24) and (25) , the beneficiaries have to submit

the application for the aid annually and the application must contain the data

specified in point 71 of the Guidelines. No aid will be granted for costs incurred

prior to the submission of the application. In compliance with point 72 of the

Guidelines, in order to strengthen the incentive effect of the aid, large enterprises

are required to submit a description of the situation without the aid

(counterfactual scenario). In assessing the application, the granting authority will

carry out a credibility check of the counterfactual scenario and confirm that the

aid has an incentive effect (recital (26)).

The aid is proportional: the maximum amount of aid laid down in point 240 of

the Guidelines is complied with. It will be calculated by the granting authority

when granting the aid. The eligible costs will be supported by clear,

contemporary documentary evidence. For the purposes of calculating the aid

amount and the eligible costs, all figures used will be taken before any deduction

15

of tax or other charge (see recital (16)). Value added tax will not be eligible for

aid, except where it is not recoverable under the national VAT rules (see

recital (14)). The aid under this aid scheme can therefore be considered limited to

the minimum needed to achieve common objectives. Hence, the criterion of

proportionality is fulfilled.

As mentioned by the Czech authorities in recital (15), the aid amount was fixed

for all measures according to the requirements of point 93 of the Guidelines.

Furthermore, the Czech authorities undertook to ensure that the aid under this

scheme will not be cumulated with aid received from other local, regional,

national or EU sources, ad hoc aid or de minimis aid to cover the same eligible

costs (recital (22)).

The principle of transparency is respected: the Czech Republic made a

commitment to publish the information required under point 128 of the

Guidelines by the deadline set out in point 131 of the Guidelines. Therefore, in

the course of the implementation of this aid scheme the transparency will be

ensured (recital (27)).

(78) The Commission takes note that, in line with point 724 of the Guidelines, the

Czech authorities made a commitment to adjust the animal welfare commitments

subject to the present State aid in case of amendment of the relevant mandatory

standards beyond which the current commitments go (recital (19)).

(79) The Commission takes note of the commitment by the Czech authorities that aid

will not be granted to undertakings in difficulty as defined in point 35 (15) of the

Guidelines (recital (9)).

(80) The Commission takes note that in compliance with point 27 of the Guidelines

the Czech authorities commit to suspend the payment of the notified aid if the

beneficiary still has at its disposal an earlier unlawful aid that was declared

incompatible by a Commission Decision (either concerning an individual aid or

an aid scheme), until that beneficiary has reimbursed or paid into a blocked

account the total amount of unlawful and incompatible aid including the

corresponding recovery interest (recital (10)).

(81) In view of the above considerations the Commission concludes that all the

applicable requirements set out in the Guidelines are complied with.

4. CONCLUSION

The Commission has accordingly decided not to raise objections to the notified aid

scheme on the grounds that it is compatible with the internal market pursuant to Article

107(3)(c) TFEU

If any parts of this letter are covered by the obligation of professional secrecy according

to the Commission communication on professional secrecy in State aid decisions10

and

should not be published, please inform the Commission within fifteen working days of

10 Commission communication C(2003) 4582 of 1 December 2003 on professional secrecy in State aid

decisions, OJ C 297, 9.12.2003, p. 6.

16

notification of this letter. If the Commission does not receive a reasoned request by that

deadline the Czech Republic will be deemed to agree to the publication of the full text of

this letter. If the Czech Republic wishes certain information to be covered by the

obligation of professional secrecy please indicate the parts and provide a justification in

respect of each part for which non-disclosure is requested.

Your request should be sent electronically via the secured e-mail system Public Key

Infrastructure (PKI) in accordance with Article 3(3) of Commission Regulation (EC) No

794/200411, to the following address: agri-state-aids-notifications@ec.europa.eu.

For the Commission

Phil HOGAN

Member of the Commission

11 Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU)

2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the

Functioning of the European Union (OJ L 140, 30.4.2004, p. 1).