HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"EN
12.5.2012 Official
Journal
of
the
European
Union L
125/33
DECISIONS
COMMISSION DECISION
of 13 July 2011
on State aid No C 6/08 (ex NN 69/07) implemented by Finland for lands Industrihus Ab
(notified under document C(2011) 4905)
(Only the Finnish and Swedish texts are authentic)
(Text with EEA relevance)
(2012/252/EU)
THE EUROPEAN COMMISSION,
(3) The
Commission’s
opening
decision
was
published
in
the
Official Journal of the European Union ( 3 ). The Commission
invited interested parties to submit their comments on
Having regard to the Treaty on the Functioning of the European
the aid.
Union, and in particular the first subparagraph of Article 108(2)
thereof,
Having regard to the Agreement on the European Economic
(4) The
Commission
received
no
comments
from
interested
Area, and in particular Article 62(1)(a) thereof,
parties.
Having called on interested parties to submit their comments
pursuant to the provisions cited above ( 1 ),
(5) Further
to
the
opening
decision,
Finland
submitted
information which was registered with the Commission
on 6 May 2008, 21 January 2010, 26 February 2010,
Whereas:
21 May 2010, 18 June 2010, 18 April 2011, 27 June
2011 and 28 June 2011. A meeting between the
Commission services, the Finnish authorities and repre
1. PROCEDURE
sentatives of I took place on 4 June 2010.
(1) Through
a
complaint
lodged
on
5
September
2006,
the
Commission was informed of a variety of measures
granted by the Local Government of land (‘the LG’) in
favour of the real estate company lands Industrihus Ab
2. DESCRIPTION OF THE AID
(‘I’). By letters dated 25 October 2006 and 14 February
2007, the Commission requested information from
2.1. THE BENEFICIARY
Finland which was submitted by letters dated 11 January
2007 and 3 April 2007. The Finnish authorities
(6)
I is registered in the City of Mariehamn, the capital of
submitted further information on 31 May 2007 and
land, an archipelago in the Baltic Sea between mainland
12 July 2007. The complainant submitted additional
Finland and Sweden with a total population of some
information in November 2006 and May 2007.
28 000. land is a province of Finland but enjoys a

high degree of autonomy. I is owned mainly by the
LG (84,43 %) and the City of Mariehamn (15,01 %).
Other local authorities in land make up the
(2) By
letter
dated
30
January
2008,
the
Commission
remaining shareholders (
informed Finland that it had decided to initiate the

4 ).
procedure laid down in Article 108(2) of the Treaty on
the Functioning of the European Union (‘TFEU’) ( 2 ) in
respect of the aid (‘the opening decision’).
(7)
I’s business is the construction, ownership and letting
( 1 ) OJ C 76, 27.3.2008, p. 15.
of buildings for industrial and commercial use. According
( 2 ) With effect from 1 December 2009, Articles 87 and 88 of the EC
to Finland, the objective of the company’s activities is to
Treaty have become Articles 107 and 108, respectively, of the TFEU.
provide buildings to companies in land in order to
The two sets of provisions are identical in substance. For the
contribute to a diversified and competitive economy.
purpose of this Decision, references to Articles 107 and 108 of
the TFEU should be understood as references to Articles 87 and
88 of the EC Treaty when appropriate. The TFEU also introduced
( 3 ) See footnote 1.
certain changes in terminology, such as the replacement of ‘Com
( 4 ) With the exception of a negligible share held by the local business
munity’ by ‘Union’ and ‘common market’ by ‘internal market’. The
organisation ‘lands fretagarefrening rf’ (3 shares out of a total of
terminology of the TFEU will be used throughout this Decision.
30 392).

---

L 125/34
EN
Official Journal of the European Union
12.5.2012
(8) Up
until
1999
I’s
business
activities
were
modest
in (13) At
the
beginning
of
2002
a
working
group
for
the
size ( 5 ). The balance sheet of I grew very slowly, if at
building of iTiden was appointed and an architect
all ( 6 ). In this context the board of I decided to start
commissioned. Potential tenants were sounded out for
searching for new business opportunities in order to
their interest in renting property in iTiden. The
expand. At the same time, the local business
preparatory land works were carried out in the spring
community (made up almost exclusively of small enter
of 2003 and the construction of phase 1 (the project was
prises) expressed a wish for a ‘technology park’, i.e. a
designed in two consecutive construction phases) started
cluster of office properties where local firms could
in the summer of 2003. The first tenants moved into the
locate under the same roof in order to facilitate cooper
completed ‘phase 1’ part of iTiden on 1 December 2004.
ation, generate new ideas and enhance entrepreneurship
in general. This would eventually become the ‘iTiden’
office park (kvarteret iTiden). The genesis of the project
(14) The construction of phase 2 of iTiden was launched in
is explained in more detail in Section 2.2.
the autumn of 2006 and completed in 2007.
2.3.
2.2.
THE STATE AID MEASURES
THE iTiden PROJECT ( 7 )
(15) The Commission’s formal investigation has covered
(9) Discussions
between
representatives
of
the
local
business
several capital injections (‘capital increases’) and guar
community and the LG concerning the possibility of
antees for bank loans (‘loan guarantees’) granted by the
building a ‘technology park’ started back in 1999. Joint
LG in favour of I between 1997 and 2007. The
study trips were made to similar facilities in Sweden.
measures are set out in the table below (capital injections
are numbered C-I to C-XI and guarantees G-I to G-III).
(10) In
2000
the
project
was
assigned
to
a
working
group,
which presented a proposal to the LG and the City of
Measure
Date of the
Capital increases Loan guarantees
Mariehamn in the spring of 2000. The project and the
measure
(in EUR)
(in EUR)
LG’s plans to build and finance it were mentioned in the
LG budget for 2000 (
C-I (*) 18.6.1997 84
094,39

8 ) and confirmed in the 2001
budget, in which the LG also requested funds for
possible capital increases for infrastructure projects,
C-II (*) 22.6.2000 340
582,27
including for I (a similar request was made in the
2000 budget) ( 9 ).
C-III (*) 10.10.2000 114
368,37
C-IV 20.7.2001 353
199,00
(11) On
12
July
2001,
with
the
help
of
a
capital
increase,
I
C-V 15.8.2002 599
933,73
bought land in the ‘Vstra Klinten’ district of Mariehamn,
where iTiden was to be built. In connection with this
C-VI 13.3.2003 799
911,64
purchase, I also secured the changes necessary for the
iTiden project in the town planning.
G-I 9.10.2003 2
600
000,00
C-VII 6.5.2004 515
165,97
(12) In the budget for 2002 the LG declared that I would
start building the iTiden project in 2002 and that this
C-VIII 30.9.2004 669
896,95
would in all likelihood require a capital increase (for
which the LG requested the necessary budgetary appro
G-II 2.11.2004 1
160
000,00
priations) ( 10 ).
C-IX 16.6.2005 199
977,91
( 5 ) In 1999: total balance sheet EUR 733 341; turnover EUR 101 486;
overall result EUR 27 719.
C-X 16.6.2005 234
961,43
( 6 ) Balance sheet reduced from EUR 834 645 (1997) to EUR 733 341
(1999).
( 7 ) Most of the information in this Section is taken from the iTiden
G-III 13.12.2005 2
600
000,00
website (www.itiden.ax), complemented by information (consistent
with the public information) submitted by the Finnish authorities.
C-XI 15.2.2007 1
379
998,95
( 8 ) ‘The LG will strive to increase the offer of industrial property and
office space suitable for IT and service sectors through the public
property companies. These may consequently require more capital.’
TOTAL 5
292
090,61 6
360
000,00
Budget fr landskapet land 2000, page 304.
( 9 ) ‘The LG will work […] to become more efficient in facilitating the
(*) These measures were granted before the euro was introduced; hence
growth of new firms and business projects. The LG will continue its
they were denominated in Finnish Mark (FIM). C-I was FIM 500 003,
efforts to realise the project of an “IT village” […]’. Budget fr
C-II FIM 2 025 010 and C-III FIM 680 003. At the time of
landskapet land 2001, pages 319 and 321.
conversion, the exchange rate was fixed at EUR 1 = FIM 5,94573.
( 10 ) Budget fr landskapet land 2002, page 291.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/35
(16) Compared
with
the
table
of
the
measures
in
point
7
of
have given the same support, the Commission doubted
the opening decision, a loan guarantee of
that a private investor would have provided capital as the
EUR 2 587 500 dated 26 October 2006 has been
LG did, given I’s long record of losses or, at best, very
removed, as it was never put into effect (following a
modest profits. With respect specifically to the loan guar
decision by Finnish courts). Furthermore, capital
antees, the Commission doubted that I would have
increase C-XI, dated 12 June 2006 in the opening
been able to obtain comparable financial support on
decision, is dated 15 February 2007 here as it became
the markets, and that they consequently provided I
clear in the investigation that this measure had been put
with an advantage. The Commission also considered
into effect at that later date. The LG’s decision to grant
that any such advantages would be liable to distort
this capital increase has recently (6 April 2011) been
competition and intra-Community trade.
annulled by Finland’s Supreme Administrative Court
(see recital 114 below). However, as the capital was
paid to I in 2007 and has not been paid back, the
Commission considers that the national court decision
does not remove this measure from the scope of its
(21) If the measures were considered State aid, the
investigation.
Commission doubted that they could be viewed as
compatible with the internal market.
(17) According
to
the
Finnish
authorities,
all
capital
increases
were provided to finance the iTiden project, with the
exception of the following:
(22) Finally,
the
Commission
questioned
Finland’s
claim
that
the measures, if they were indeed considered to
constitute State aid, had been granted in compliance
C-I: Capital injection of 18 June 1997 (EUR 84 094,39)
with aid schemes that applied already prior to Finland’s
accession to the EU and would thus be lawful.
C-II: Capital injection of 22 June 2000
(EUR 340 582,27)
4. COMMENTS FROM FINLAND
C-III: Capital injection of 10 October 2000
4.1. THE MEASURES ARE NOT STATE AID
(EUR 114 368,37)
(23) Finland
has
taken
the
view
that
the
LG
has
acted
in
accordance with the market investor principle, i.e. that
C-VIII: Capital injection of 30 September 2004
the measures were guided by the LG’s prospects of return
(EUR 669 896,95)
on its investment. Finland has argued that the investment
decisions were motivated by the company’s programme
of new investments, chiefly by the iTiden project. The
C-IX: Capital injection of 16 June 2005
measures were thus not intended to cover previous
(EUR 199 977,91).
losses, or to support a loss-making business. The LG
has obtained concrete value for its investments in new
shares in I, as the company’s value increased in line
(18) All
the
loan
guarantees,
according
to
Finland,
were
issued
with the share subscription. I did not, therefore,
with the purpose of financing the iTiden project. More
obtain any advantage that it would not have been able
details on the loan guarantees are given in recitals 66 to
to obtain from a private investor.
86 below.
3. GROUNDS FOR INITIATING THE PROCEDURE
(24) Irrespective
of
any
possible
advantage,
Finland
has
also
UNDER ARTICLE 108(2) TFEU
taken the view that the measures cannot be classified as
(19) In
the
opening
decision,
the
Commission
questioned
State aid, because there is no concrete evidence of a
whether the capital increases and loan guarantees were
significant effect on competition in the land real
compatible with the internal market on the following
estate market.
grounds.
(20) As regards the existence of State aid within the meaning
4.2. IF STATE AID, IT IS LAWFUL UNDER EXISTING AID
of Article 107(1) TFEU, the Commission noted that the
SCHEMES
measures involved State resources, as they were granted
by the local authorities, and that they were selective, as
(25) However,
if
the
measures
were
found
to
include
a
State
they were targeted at I. As regards the criterion of
aid element, the aid, according to Finland, should be
whether the measures granted an ‘advantage which it
considered as lawful. Finland has argued that both the
would not have obtained under normal market
capital injections and the guarantees were covered by
conditions’ because a private investor, guided by the
existing aid schemes that were put into place prior to
prospect of profitability in the long run, would not
Finland’s EU membership.

---

L 125/36
EN
Official Journal of the European Union
12.5.2012
4.3. IF IT IS NEW STATE AID, IT IS NEVERTHELESS
grant a selective advantage liable to favour certain under
COMPATIBLE WITH THE INTERNAL MARKET
takings or the production of certain goods; and (c) it
must distort or threaten to distort competition and
(26) Should
the
measures
constitute
unlawful
State
aid,
they
have the potential to affect trade between Member
should nonetheless be considered compatible with the
States. These conditions being cumulative, they must all
internal market under Article 107(3)(c) TFEU, as their
be present before a measure is characterised as State aid.
purpose has been the development of the region and
the creation of new jobs, mainly by contributing to the
diversification of the region’s economy, which relies too
heavily on the shipping industry.
5.1.1. STATE RESOURCES AND SELECTIVITY
(32) For the reasons indicated in the opening decision (and
which have not been contested by Finland), these two
4.4. POSSIBLE RECOVERY
criteria are met. The measures are granted by individual
decisions taken by the LG to make use of funds that it
(27) Should the Commission find that the aid constitutes
has been allocated in its annual budget by the regional
unlawful and incompatible aid that needs to be
assembly of land. The measures are thus clearly
recovered, Finland put forward the following arguments.
financed by the State and individually targeted at I.
(28) Under Article 14(1) of Council Regulation (EC)
5.1.2. ADVANTAGE
No 659/1999 of 22 March 1999 laying down detailed
rules for the application of Article 93 of the EC
(33) Finland
has
argued
that
the
measures
are
not
State
aid
Treaty ( 11 ) the Commission will not require recovery of
because they did not provide I with an advantage that it
aid where this would be contrary to a general principle
would not have been able to obtain on the markets, be it
of Community law. This would be the case here, since
from a private shareholder or from a private creditor.
Finland had legitimate reasons to expect that the above
mentioned schemes, which pre-dated accession, were and
still are valid, and thus that any aid granted under these
rules would be lawful.
(34) It
is
a
settled
principle
of
State
aid
law
(usually
referred
to
as the Market Economy Investor Principle, or MEIP) that
an investment by public authorities in the capital of
undertakings constitutes State aid unless in similar
(29) Should
the
Commission
nevertheless
consider
than
the
circumstances a private investor, having regard in
aid is to be recovered, Finland argues that the aid element
particular to the prospects of achieving a return, might
in the capital increases is not necessarily the full nominal
have provided the same capital ( 12 ). Similarly, under point
amount of the transactions that comprise State aid. In
3.1 of the Commission Notice on the application of
respect of the guarantees, any aid to be recovered cannot
Articles 87 and 88 of the EC Treaty to State aid in the
be larger than the interest advantage obtained by the firm
form of guarantees
( 13 ) (‘the Guarantee Notice’), a
as a result of the guarantee (by comparison to non-guar
guarantee provided by public authorities will constitute
anteed loans). Similarly, concerning the capital injections,
State aid unless funding is made available on conditions
any aid cannot be more than I’s cost of obtaining
which would be acceptable for a private operator under
equivalent capital on the market.
the normal conditions of a market economy.
5. ASSESSMENT
(35) In the opening decision, the Commission expressed
doubts that the MEIP was met in relation to the capital
5.1. QUALIFICATION AS STATE AID
injections and guarantees, based in particular on two
observations concerning I:
(30) According
to
Article
107(1)
TFEU,
‘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
(a) I’s long record of losses or negligible profits in the
production of certain goods shall, insofar as it affects
years in which the measures were granted. Indeed, I
trade between Member States, be incompatible with the
made losses in every year between 2001 and 2005.
internal market’.
The profits between 1998 and 2000 were small
( 12 ) See, among others, the judgment in cases 234/84, Belgium v
Commission [1986] ECR 2263, paragraph 14; C-305/89 [1991]
(31) The
qualification
of
a
measure
as
State
aid
requires
that
ECR I-1603, paragraphs 18 and 19; joined cases C-278/92,
the following conditions are met: (a) it must be financed
C-279/92 and C-280/92 Hytasa [1994] ECR I-4103, paragraphs
by a Member State or through State resources; (b) it must
20 and 21; C-303/88 Eni-Lanerossi [1991] ECR I-1433, paragraphs
20 et seq.; case T-11/95 BP Chemicals [1995] ECR II-599, paragraph
161.
( 11 ) OJ L 83, 27.3.1999, p. 1.
( 13 ) OJ C 155, 20.6.2008, p. 10.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/37
and decreasing (respectively EUR 38 000, 28 000 and
(41) As regards the general financial performance of I, the
9 000). Similarly, when I eventually again showed a
Commission accepts, based on the evidence submitted in
profit in 2006 this was a mere EUR 557,43. The
the investigation, that the operational result of I
profit forecasted for 2007 in 2006 (i.e. what was
consistently covered its losses and ensured liquidity.
anticipated when the decision to grant the last
The evidence available does not allow the conclusion
measures were taken) was only EUR 5 868,46 ( 14 ).
that the capital increases (or the loans obtained
through the guarantees) were used to cover losses
stemming from I’s operations.
(b) In addition, it appeared to the Commission that I’s
cash flow was insufficient to cover its costs, and had
been so since 2000, which led to the presumption
that the measures had been necessary simply to cover
(42) However, the fact remains that the LG made available to
this cash drain (
I important additional capital that prima facie generated

15 ).
no or very little profits between 1997 and 2006. The
crux therefore is — as Finland itself argues — whether
the LG had reason to expect a return on its capital that
(36) Finland
has
dismissed
this
view.
Its
arguments
will
be
would have been sufficient for a private investor to have
discussed below separately for the capital increases and
made the same investment. This has to be assessed on
the loan guarantees.
the basis of what was known to the LG at the time of the
capital increases.
5.1.2.1. The capital injections
(43) Finland has argued that the lion’s share of the capital
(37) First
of
all,
Finland
dismisses
the
view
that
I
had
a
increases was intended to finance the iTiden project,
liquidity problem. In fact, although the company’s oper
phases 1 and 2, whereas the remaining capital increases
ations had been limited in size prior to the iTiden
were assigned to various other investments. For reasons
project, its operational result and liquidity had been satis
of clarity, the capital increases that were used to finance
factory and remained so throughout the period covered
the iTiden project are dealt with first in the analysis
by the investigation. The measures have thus not been
presented below.
necessary to cover the operations’ costs. Rather, the
measures were intended to finance the expansion of
the company and should consequently be considered
investments. In the light of the conditions of these
investments, they were justified under the Market
The iTiden capital increases
Economy Investor Principle and consequently do not
constitute State aid.
(44) Finland argues that all capital increases with the
exception of C-I, C-II, C-III, C-VIII and C-IX were made
with the purpose of funding iTiden, which was by far
I’s biggest single project. The earliest capital increase
(38) In
this
context,
Finland
argues
that
most
capital
increases
assigned to the iTiden project was thus made in 2001
were used to finance the iTiden project, whereas the rest
(C-IV).
were intended for I's other projects (see recital 17
above).
(45) As regards the conditions on which these capital
increases were made by the LG, and crucially the
(39) The
Commission
makes
the
following
assessment.
return that was expected at the time of the decision,
Finland has provided the following information:
(40) As
a
preliminary
point
the
Commission
underscores
that
the capital that a shareholder provides to a firm is by
definition not earmarked for a certain use but becomes
(46) The
LG’s
decisions
to
proceed
with
the
capital
increases
part of the tangible equity of the company. It is therefore
related to iTiden were made on the basis of information
normal, when an investment is provided as general
provided at informal meetings involving the LG and
equity, to assess its compliance with the MEIP against
representatives of I. Finland states that no minutes
the general performance prospects of the firm as a
were kept of these meetings. Finland has nevertheless
whole. This does not exclude, where evidence thereof is
submitted to the Commission presentations made at
available, making an assessment of the expected return
such informal meetings or at meetings of I’s board.
on specific planned investments, provided of course that
These contain succinct accounts of the background and
such information was available at the time when the
main features of the iTiden project and profitability
investment decision was made.
calculations for iTiden phase 1 and phase 2. This
evidence consequently allows the Commission to
( 14 ) See point 25 of the opening decision.
ascertain what return was anticipated by the LG at the
( 15 ) See point 26 of the opening decision.
time it made the capital increases related to iTiden.

---

L 125/38
EN
Official Journal of the European Union
12.5.2012
(47) On
31
January
2002,
I
held
an
informal
meeting
with
development) will demand a return that adequately
the LG in order to secure its approval to launch the
reflects the risk inherent in the investment. Thus, he
construction of iTiden in 2002 (subsequent to the
will expect a ‘risk premium’ that exceeds the known
purchase of the land which had taken place in 2001).
return that he can receive from an alternative, risk-free
At this meeting, I presented a profitability calculation,
asset (‘the risk-free rate’). A common benchmark for the
where the assumption was that the project would yield a
risk-free rate are AAA-rated government bonds for
yearly return of 3 % on I’s own equity.
shorter maturities. For the purpose of this assessment,
the yield on two-year Finnish government bonds is
used, as Finland did not issue bonds with shorter matur
ities. Accordingly, this gives a risk-free rate of between
2,7 and 4,2 % in 2002, between 2,2 and 2,7 % in 2003
(48) Another
informal
meeting
between
I
and
the
LG
was
and between 2,8 and 3,8 % in 2006.
held on 4 March 2003 in order to prepare I’s general
assembly on 5 March 2003. The general assembly was to
decide on launching the construction of phase 1 of
iTiden, which had not been carried out in 2002. An
updated profitability calculation was provided. In this
calculation it was estimated that phase 1 would yield a
(52) Compared to the return on equity expected by the LG
surplus of only EUR 700 assuming no return on I’s
when it decided to make the iTiden-related capital
own equity.
increases, the Commission observes that the LG could
have achieved the same or even higher returns without
any of the risk associated with the property projects.
Indeed, even under the most optimistic reading, the
‘risk premium’ (i.e. the return exceeding the risk-free
(49) On
2
January
2006
the
board
of
I
met
to
discuss
the
premium) would have been at most 0,3 % for capital
launch of the construction of phase 2 and the call for a
increases C-IV and C-V (i.e. the capital increases of
capital increase that would be launched to finance this.
2001 and 2002). For the capital increases made as a
According to a profitability calculation presented at the
result of the 2003 decision to launch the construction
meeting, the project would break even with a return on
of phase 1 of iTiden (and thus on the basis of the
equity of 3 %. However, this calculation had to be revised
expected returns presented at the informal meeting of
to account for the increased cost of adapting the
4 March 2003, see recital 48 above), i.e. C-VI, C-VII
buildings to the tenant’s needs. Thus, a revised calcu
and C-X, the expected return was zero, meaning that
lation was established on 10 January 2006 to serve as
an infinitely better return could have been achieved by
a basis for the capital increase decided at the general
taking no risk at all. Similarly, for the capital increase for
assembly on 12 June 2006 (although the capital
phase 2, C-XI, the expected return of 1 % was largely
increase was only paid on 15 February 2007 for
inferior to the risk-free rate available at the time.
technical reasons — this is capital increase C-XI). In
this calculation, the assumed annual return on own
equity for phase 2 of iTiden was set at 1 %.
(53) It
is
obvious
that
no
private
investor
would
have
been
satisfied with the negative, or marginal, risk premium
(50) Finland
has
provided
this
evidence
and
states
that
this
accurately accounts for the contemporaneous yield
that the LG was ready to accept for the capital
expectations based on which the LG decided to make
increases mentioned in recitals 47 to 49 above. If need
the capital increases for the iTiden project, i.e. C-IV, C-
be, this can be corroborated by empirical data on
V, C-VI, C-VII and C-X for phase 1 and C-XI for phase 2.
expected returns in the land property market.
These profitability assessments are based on anticipated
revenue (i.e. rents) from iTiden. Finland has argued that
the return on the LG’s investment should also take into
account the prospect of capital gains consisting in an
increase in value of the property over time. However,
Finland has provided no concrete evidence of this.
(54) According
to
a
report
( 16 ) from KPMG dated 10 July
Such considerations are not integrated in the profitability
2007, commissioned by the Finnish authorities and
calculations, which indicate that they were not taken into
submitted to the Commission on 17 July 2007, the
account when the investment decisions were made. On
return demanded by private investors on office
the basis of the above evidence, the Commission finds
property investments in land is 7 % (and 8 % for
that a private investor would not have made similar
industrial property). Although this report was drawn up
investments against this expected return.
later than the investment decisions of the LG at issue in
this decision, it is nevertheless relevant, as the report is
based on observations of past investments and there is
no obvious reason to believe that the required return
would have been significantly lower in the preceding
(51) Any
investor
putting
money
into
a
project
that
involves
some element of risk (such as commercial real estate
( 16 ) KPMG ‘Projekt Tower’, 10.7.2007.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/39
years. At any rate, it provides convincing indications that
amounts to EUR 84 094,39, i.e. well below the ECU
the returns expected by I would not have been
100 000 de minimis ceiling. I did not benefit from
sufficient for a private investor.
any other measure during a period of three years ( 19 ).
Based on this, the 1997 capital injection would in any
event — irrespective of the circumstances in which it was
performed — not constitute State aid.
(55) Finland
has
argued
that,
despite
the
low
or
zero
expected
return, the investments would be consistent with the
MEIP because (i) prior to starting construction, I had
approached potential tenants and was confident that it
C-II and C-III capital increases of 22 June 2000 and
would achieve an occupancy rate of at least 80 % and (ii)
10 October 2000
in view of the actual financial performance of I (and
(60) Finland
has
indicated
that
these
measures
were
intended
thus principally of the iTiden project) in the years from
for the construction of an industrial property in
2004 onwards, and the potential capital gains thus
Norrble, the renovation of a property in Mariehamn
accrued, the investments turned out to be profitable.
(C-II) and the purchase of an industrial property in the
eastern part of land (C-III). There is thus no clear link
to the iTiden project, which at that time had not yet
clearly taken shape (this would happen in 2001 when
(56) In this respect, and without it being necessary to go into
the land was purchased).
the merits of I’s financial performance in later years, it
suffices to reiterate that the question is not whether the
firm’s results today are adequate but whether, based on
what was known and could be assumed at the time when
(61) Although it is true that I’s overall profits were modest
the LG decided to make the State resources available to
or negative in the period 1998-2007, the fact is that it
I (having regard to the expected 80 % occupancy rate),
turned a modest profit in 2000 and the two preceding
a private investor acting on market terms would have
years and that losses started in 2001. It has been shown
provided the same capital to the firm. For the reasons
in the investigation that the company was covering its
explained above, the Commission finds that a private
costs and that the liquidity position was adequate. The
investor would not have done so.
investments motivating these two capital increases seem
proportionate to the size and ‘traditional’ business model
of I prior to the expansion linked to the iTiden project.
There is therefore no compelling reason to consider that
a private investor would not have undertaken the same
(57) Consequently, the Commission finds that capital
capital increases, and there is thus no clear evidence of
increases C-IV, C-V, C-VI, C-VII, C-X and C-XI have
an advantage to I.
provided I with an advantage that it would not have
been able to get on market terms ( 17 ).
(62) Up
until
2000
I’s
business
operations
were
showing
modest but positive results (in the range of EUR 9 000
The remaining capital increases
to EUR 38 000 in 1997-2000). I’s business operations
were in accordance with the company’s plan in place
(58) The
Commission
will
now
look
at
the
remaining
capital
then. Accordingly I owned and let warehouses and
increases covered by the opening decision which,
offices around the land Islands. The stock of real
according to Finland, where not motivated by the
estate owned by I had remained very stable until
iTiden project.
2000, which also explains the company’s stable
financial performance. I’s turnover was in the range
of EUR 95 000 to EUR 101 000 in 1997-2000. Accord
ingly, although with a relatively small turnover, I was
able to make its businesses profitable.
C-I capital increase of 18 June 1997
(59) Under
the de minimis rules applicable at the time of this
capital injection, subsidies of less than ECU 100 000
granted to an undertaking over a period of three years
C-VIII and C-IX capital increases of 30 September 2004 and
did not constitute State aid (
16 June 2005

18 ). This capital increase
(63) According
to
Finland,
these
capital
increases
were
used
to
( 17 ) It is true that capital increase C-IV was made in 2001, i.e. prior to
purchase an industrial property (C-VIII) and to construct
the profitability analysis presented in 2002. No separate account
a hangar at Jomala airport outside Mariehamn (C-IX).
has been given as to the financial assumptions that underpinned
C-IV. However, as this capital increase was used to purchase the
land on which iTiden was to be built (and this was the intention
( 19 ) Although the formal procedure was only opened in 2008, the
from the start), the Commission takes the view that the LG, to the
Commission questioned Finland on these measures by letter
extent that it considered the return prospects at all, had no reason
already on 25 October 2006, which is why the 1997 capital
to expect a better return than the 3 % that was expected in 2002.
injection is not covered by the 10-year statute of limitations on
( 18 ) OJ C 68, 6.3.1996, p. 9.
recovery.

---

L 125/40
EN
Official Journal of the European Union
12.5.2012
(64) Although
not
immediately
justified
by
the
iTiden
project,
firm was not a firm in difficulty within the meaning of
these measures were implemented in circumstances that
the Commission’s Guidelines on Rescue and Restruc
were completely different from those affecting previously
turing Aid ( 20 ). It cannot be concluded on the basis of
discussed measures C-II and C-III. Capital increases C-VIII
the available evidence that I was a firm that would not
and C-IX were undertaken in 2004 and 2005, respect
have survived at all without state support. In the years
ively. At that time, I had been operating at a loss since
preceding the capital injections, i.e. before the launch of
2001. Crucially, too, these investments were made at a
the iTiden project, I’s financial performance was stable
time when the LG had already invested more than
and its business operations showed moderate positive
EUR 2,25 million in I since 2001 on the understanding
results. The reason why the public authorities started
that this investment would not provide a return that
massively injecting capital in 2001 was not to rescue
would be acceptable to a market investor.
the firm but to finance its growth. In the absence of
the aid in the form of capital increases, I would not
have been a bankrupt firm but a smaller firm that still
would have had access to the financial markets. The
Commission cannot, therefore, conclude that I would
not have had access to credit markets without guarantees.
The question is then whether the guarantees afforded the
(65) The
inadequate return on the iTiden project would
firm an advantage in the form of lower loan costs than it
inevitably impact negatively on I’s result as a whole.
would have paid on market terms, in the absence of a
Indeed, the equity of an undertaking is not earmarked
guarantee.
but fungible and has to be remunerated from the overall
performance of the firm. It must therefore have been
clear to the LG, at the time when they undertook
measures C-VIII and C-IX, that any additional increases
in the capital of I was unlikely to produce an adequate
return in the foreseeable future. A market investor would
(68) The
question
that
needs
to
be
examined
next
is
whether
have been ready to make those capital injections if those
an adequate premium is charged for the guarantees,
investments had allowed a market return on the overall
comparable to what would have been charged by a
performance of the firm (i.e. a return that would have
private guarantee provider. In the present case, the
compensated for the low returns of the other capital
Commission has found no private guarantees that allow
increases), but there is nothing suggesting that this was
for a ready comparison. In such circumstances, the
expected to be the case. Finland has not provided any
Commission will compare the total financial cost of
specific information regarding those measures that would
the guaranteed loan, including the interest rate of the
change this view. The Commission consequently
loan and the guarantee premium, with the market
considers that no private investor would have provided
premium of a similar non-guaranteed loan (
additional capital to I in these circumstances. Capital

21 ).
increases C-VIII and C-IX have thus provided I with
an advantage that it would not have been able to
obtain on the market.
(69) On
9
October
2003,
[…]
(*),
a
commercial
bank,
granted
I a loan amounting to EUR […] against collateral […].
The interest rate was set at […]% per annum until
15 January 2007 ( 22 ).
5.1.2.2. The loan guarantees
(66) When
assessing
the
possible
State
aid
involved
in
guar
antees, the Commission applies the principles laid down
in its Guarantee Notice. Point 3.2 of the Notice sets out
the conditions that would normally be sufficient to rule
(70) Although this loan was contemporaneous with guarantee
out the presence of State aid in a guarantee granted by
G-I, the Commission does not consider it a suitable
public authorities. However, these conditions are not met
comparison for the cost of that measure. Indeed,
concerning guarantees G-I, G-II and G-III (it is sufficient
between June 2000 and March 2003, I received five
to record that these guarantees covered 100 % of the
capital injections for a total amount of
underlying loans, see point 3.2(c) of the Guarantee
EUR 2 208 595,01. State support of such magnitude
Notice).
will inevitably have influenced the risk assessment
conducted by […] before granting the loan and thus
improved the loan terms, including cost, compared to
the terms that the firm would have been able to obtain
on the markets in the absence of the State aid element in
(67) The
Commission
first
notes
that
I’s
financial
position
in
( 20 ) OJ C 244, 1.10.2004, p. 2.
the period in which the guarantees were granted was
( 21 ) The Guarantee Notice, point 3.2(d).
(*) Confidential information.
strong enough not to exclude the firm’s ability to
( 22 ) After 15 January 2007, the interest rate was supposed to change to
obtain loans on the market without guarantees. The
[…] + […] basis points.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/41
the capital increases. Therefore, the Commission cannot
(74) On 27 June 2011 Finland submitted additional
assume that the interest rate for the 2003 non-guar
information on the rating and collateralisation of the
anteed loan (or any later loans) accurately reflects the
loans. The rating was produced by […], the bank that
credit terms of I in the absence of State aid and
gave I the non-guaranteed loans and two of the guar
cannot use it as a credible and reliable benchmark for
anteed loans. The […] rating uses a letter system for the
the cost of the loans covered by the guarantees granted
years 2000 to 2003, complemented with one-word
by the LG.
qualifications. The rating is readily comparable with the
rating scale of the Reference Rate Communication. For
2005 onwards, the rating is provided by […], a
consultancy firm similar to […]. In 2003 and 2004
(71) The
Commission
considers
that,
in
the
absence
of
any
[…] rated I at B – (satisfactory) and A (satisfactory),
other reliable evidence as to comparable loans on market
which corresponds to a ‘satisfactory’ rating within the
terms, the Reference Rate Communication (
meaning of the Reference Rate Communication. This

23 ) provides
an appropriate benchmark external to the beneficiary
means that for 2003 and 2004 […] rated I one
for assessing whether measures G-I, G-II and G-III were
category higher than […] did. For 2005 […] rated I
granted on market terms. The Reference Rate Communi
at A (satisfactory), which translates into a ‘satisfactory’
cation provides a proxy for the market rate and for
rating according to the Reference Rate Communication
calculating the aid element in aid measures. The
and thus places I in the same category as […] does.
methodology for defining the reference rate is based on
the following two factors: the base rate (in this case the
one-year Euribor) to which a loan margin is added. The
loan margin to be added to the base rate depends on two
factors: the rating of the undertaking receiving the loan
(75) The Commission is of the opinion that the rating of […]
and the level of collateral offered for the loan. The
should be applied when assessing whether guarantees G-
communication distinguishes five rating categories
I, G-II and G-III were granted on market terms. Bearing
(strong [AAA-A], good [BBB], satisfactory [BB], weak
in mind that before the first guarantee G-I was granted in
[B] and bad [CCC and below]) and three collateralisation
October 2003, when I had already received five capital
levels (high, normal and low) for each rating category.
injections for a total of EUR 2 208 595,01, any rating of
the company in 2003 is likely to have been affected by
the considerable amount of State support. Therefore the
Commission considers it appropriate to apply the more
conservative rating produced by […]. This has an impact
(72) On
18
June
2010,
Finland
submitted
to
the
Commission
for 2003 and 2004, as for these two years […] rated I
a report from the consultancy firm […] that provides an
one category lower than […]. It should also be noted
annual rating for I for December each year. The rating
that […] granted I loans guaranteed by the LG while at
is prepared retrospectively and based on the figures
the same time producing I’s rating, which might have
available at the end of the financial year (i.e. the rating
affected the assessment. […] was not involved in the
given in December 2002 looks retrospectively at the
financial proceedings and their assessment is thus less
health of the company in 2002). […] produced the
likely to have been directly influenced by undue consider
rating report describing the overall financial status and
ations linked to the State aid.
development of the company and covering the following
sectors of evaluation: growth, profitability, cash flow,
liquidity, solvency and obligations. The applied rating
scale has five rating categories: excellent (A + and A),
good (A – and B +), satisfactory (B and B –), adequate
(C + and C) and poor (C – and D), allowing a direct
(76) Consequently, the Commission assumes the following
ratings for I for the purpose of applying the
comparison with the rating scale of the Reference Rate
Reference Rate Communication: weak (B) in 2003 and
Communication.
2004 and satisfactory (BB) in 2005.
(73) In December 2002, 2003 and 2004, […] rated I
respectively at C +, C + and C, which places the
(77) As
regards
the
collateral,
I
provided
collateral
at
the
company in the category ‘adequate’. This category
nominal value of the guarantees in the form of
corresponds to the ‘weak’ rating category within the
mortgages on real estate on which the iTiden project
meaning of the Reference Rate Communication. For a
was built. Finland has not provided Loss Given Default
company rated ‘weak’, the loan margins to be added to
(LGD) related information under footnote 2 of the
the base rate under the Reference Rate Communication
Reference Rate Communication. This information helps
range, depending on the collateral offered, from 220 bps
to define the level of collateralisation and the loan
for a high collateralisation to 650 bps for a low collat
margins to be added on top of the base rate. Therefore
eralisation. In December 2005, […] rated I at B – (satis
the Commission requested information on the priority of
factory), which corresponds to a ‘satisfactory’ rating
the mortgages pledged and the value of the property at
within the meaning of the Reference Rate Communi
the time of granting the guarantees. Finland does not
cation.
have valuations that show the value of the property at
the time of the guarantee measures. The Finnish auth
( 23 ) OJ C 14, 19.1.2008, p. 6.
orities have, however, argued that the value of the

---

L 125/42
EN
Official Journal of the European Union
12.5.2012
property has accrued over time, as the project progressed.
interest rate on the loan was set at […]% until 15 January
According to Finland, in 2010 the property was valued
2007 ( 24 ). The premium for the guarantee was […]% of
at EUR […].
the loan amount p.a ( 25 ). Thus, the total financial cost of
the guaranteed loan at the time of granting the loan
amounted to […]% p.a., which should be compared
with a reference rate calculated for the guarantee on
the basis of the base rate and a margin that depends
on I’s rating and the collateralisation level of the
(78) As regards the seniority of the collateral, the Commission
loan. The base rate (one-year Euribor) on 9 October
notes that for guarantees G-I and G-II, the LG collateral
2003 was 2,235 %. At the time I was rated ‘weak’
had the highest seniority of all mortgages granted on the
within the meaning of the Reference Rate Communi
property. The Commission notes that commercial banks
cation. As established above, the Commission assumes
have granted non-guaranteed loans to I and accepted as
that the collateralisation level of the loan was normal,
collateral mortgages on the same property that rank
which means that the loan margin to be added on top of
lower in seniority (and are thus less good collateral)
the basis rate is 400 bps. Therefore, the reference rate for
than the collateral received by the LG. In view of this,
this loan amounts to 6,235 %, which is higher than the
and in the absence of better evidence, the Commission
total financial cost of G-I amounting to […]% p.a.
assumes that the level of collateralisation of the guar
antees was ‘normal’ for the purpose of applying the
Guarantee Notice.
(82) In addition, as from 6 September 2004, the LG reduced
the guarantee premium for G-I to […]%. Accordingly, the
total financial cost of the guaranteed loan came to […]%,
(79) On the basis of the above, the reference rate will be
i.e. […] basis points below the reference rate, thus
assessed separately for each guarantee that I received
generating a corresponding advantage for I.
from the LG.
Guarantee G-II
(80) The
Commission
notes
that,
for
all
guarantees
granted
to
I, the premiums were made up of two parts: (i) a
(83) On
2
November
2004
I
took
a
loan
of
EUR
[…]
from
recurrent premium, paid annually and expressed as a
[…] (credit number […]). This loan was secured by a
percentage of the outstanding principal of the loan and
guarantee from the LG, for which I provided security
(ii) a ‘one-off’ fee, also expressed as a percentage of the
in the form of a lien on real estate. The interest rate was
loan amount, but paid only once, at the emission of the
set at […] + […] basis points and the guarantee fee at
guarantee. In the assessment below, the total financial
[…]% of the loan amount p.a., meaning that the total
cost of the guaranteed loans includes only the recurrent
financial cost of this guaranteed loan was […]% p.a ( 26 ).
premium paid annually. In accordance with point 4.2 of
the Guarantee Notice, the aid element of a guarantee
should be calculated as the difference between the
market price (in this case the reference rate) and the
price actually paid. The price actually paid by I
includes the recurrent premium paid annually and a
(84) The
reference
rate
for
G-II
has
to
be
calculated
on
the
one-off premium paid only once. For practical reasons
basis of the one-year Euribor on 2 November 2004,
the one-off premium will be addressed below in Section
which was 2,314 %. At the time I was rated ‘weak’
8.2 dealing with recovery, since it is easier to deduct the
within the meaning of the Reference Rate Communi
amount of the one-off fee from the amount of aid to be
cation. Assuming a normal level of collateralisation, the
recovered. In any case, even if the one-off premiums
reference rate for this loan amounts to 6,314 % p.a.,
were added to the total financial costs of the guaranteed
which is higher than the total financial cost of G-II
loans, the conclusion as to the presence of aid would not
amounting to […]% p.a. Comparing the costs of this
change. The one-off premium affects only the amount of
aid granted to I.
( 24 ) According to the information provided by Finland, this rate was to
be applied until 15 January 2007, when it was to be changed to
[…] + […] basis points. However, the terms of this guaranteed loan
were renegotiated, and as of 13 December 2005 the interest rate
was set at […]% until 15 January 2007, when it was to be changed
to […] + […] basis points. On 14 January 2009 the interest rate
was changed to […] + […] bps, and on 12 February 2011 it was
Guarantee G-I
again changed to […] + […] bps.
( 25 ) This does not include the one-off premium of […]% of the loan, i.e.
(81) Guarantee
G-I
was
granted
by
the
LG
on
9
October
EUR 19 500. This will be addressed below, in Section 8.2 dealing
2003 to cover a loan of EUR […] from […] to I
with recovery of aid.
( 26 ) This does not include the one-off premium of […]% of the loan, i.e.
(credit number […]). As collateral for any claims under
EUR 2 900. This will be addressed below, in Section 8.2 dealing
the guarantee, I provided a mortgage on real estate. The
with recovery of aid.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/43
new guaranteed loan with the reference rate shows that
on financial terms that were more advantageous than
the total financial cost of the loan covered by guarantee
those made available to its competitors (who, in the
G-II was at least […] basis points below the reference
absence of the advantage granted to I, might have
rate, thus providing a financial advantage to I.
chosen to make similar investments). It is not necessary
According to the information available to the
to demonstrate that the measures have allowed I to
Commission, the interest rate on the guaranteed loan
take market shares from any specific competitor.
has not changed since it was issued.
(89) Similarly, the advantage granted to I was liable to affect
Guarantee G-III
trade between Member States. It is true that land is a
small market, located on an archipelago that can only be
(85) On
13
December
2005,
the
LG
issued
a
new
guarantee
reached by sea or air, and that specific restrictions on the
in favour of I. This guarantee was to cover the ‘ref
right of establishment apply there by virtue of Finland’s
erence loan’, i.e. the originally non-guaranteed loan of
EU Accession Treaty. However, the fact remains that
9 October 2003, the terms of which were thus
there is no absolute obstacle to foreign undertakings
amended. The interest rate of the loan was at this
operating in land, and certainly no obstacle to such
point changed to […]% p.a. The guarantee fee was set
undertakings making investments in the local property
at […]% of the loan amount, meaning a total financial
market. The Commission also notes that Finland has
cost of […]% p.a. ( 27 ) (the terms applied from this date
not disputed the statement in the opening decision that
are identical to those, described above, that apply to the
real estate in land has in the past been acquired by
loan covered by guarantee G-I, including the changes to
undertakings based in other Member States. Any
the interest rate over time).
advantage granted to I through these measures would
thus have at least the potential to affect trade between
the Member States by unduly strengthening I’s position
in relation to potential foreign competitors or investors.
(86) The reference rate for G-III has to be calculated on the
basis of the one-year Euribor on 13 December 2005,
which was 2,769 %. At the time I was rated ‘satis
factory’ within the meaning of the Reference Rate
Communication. Taking into account a normal level of
5.3. CONCLUSION ON THE QUALIFICATION OF STATE AID
collateralisation, the reference rate for this loan amounts
to 4,969 % p.a. This is higher than the total financial cost
(90) For
the
above
reasons,
the
Commission
finds
that
all
capital increases (with the exception of C-I, C-II and C-
of G-III amounting to […]% p.a. Therefore, the LG has
III) and loan guarantees G-I, G-II and G-III constitute
given I a corresponding financial advantage of at least
State aid within the meaning of Article 107 TFEU.
[…]% p.a.
5.2. DISTORTION OF COMPETITION AND EFFECTS ON
6. ALLEGED LAWFULNESS OF THE AID
TRADE
(91) Finland
has
argued
that
both
the
capital
injections
and
(87) The
Finnish
authorities
have
claimed
that
the
measures
in
the guarantees, if State aid, were lawful under aid
question do not affect trade between Member States and
schemes that were put into place prior to Finland’s EU
do not therefore constitute State aid within the meaning
membership and duly submitted to the EFTA Surveillance
of Article 107(1) TFEU. In support of this argument
Authority (‘ESA’) prior to EU accession under references
Finland has in essence argued that I is only one of
93-074 (capital increases) and 93-079 (guarantees).
several firms active on the real estate market, and not
the largest one. There is thus no evidence that the
measures, if they are considered to constitute State aid,
would have strengthened I’s position to the detriment
(92) This
argument
should
be
examined
in
the
context
of
the
of competitors.
provisions of Regulation (EC) No 659/1999. Pursuant to
Article 1(d), ‘aid scheme’ means ‘any act on the basis of
which, without further implementing measures being
required, individual aid awards may be made to under
(88) The Commission cannot accept this argument. The fact
takings defined within the act in a general and abstract
that I has been provided with a financial advantage that
manner and any act on the basis of which aid which is
was not made available to its competitors (and, as
not linked to a specific project may be awarded to one or
Finland has confirmed, there are several other operators
several undertakings for an indefinite period of time
on the land real estate market) means that I has been
and/or for an indefinite amount’. Furthermore,
able to make large investments and expand its operations
according to Article 1(b) of Regulation (EC)
No 659/1999, ‘existing aid’ means: ‘(i) without prejudice
to Sections 144 and 172 of the Act of Accession of
( 27 ) This does not include the one-off premium of […]% of the loan, i.e.
EUR 6 500. This will be addressed below, in Section 8.2 dealing
Austria, Finland and Sweden, all aid which existed prior
with recovery of aid.
to the entry into force of the Treaty in the respective

---

L 125/44
EN
Official Journal of the European Union
12.5.2012
Member States, that is to say, aid schemes and individual
(99) The
national
legal
basis
for
the
guarantee
scheme
is
the
aid which were put into effect before, and are still
provincial Act on provincial guarantees for industry and
applicable after, the entry into force of the Treaty’.
certain other enterprise sectors (FS 1966:14) ( 30 ), which
was passed in 1966, and amended by FS 1979:84,
1982:37, 1988:53, 1992:9, 1994:29, 1996:56 and
(93) Finland acceded to the European Community on
2002:23. As regards the budget or ‘envelope’, at the
1 January 1995. Moreover, according to paragraph 5
time of Finland’s accession to the EC, the 1966 prov
of Section 172 of the Treaty of Accession of Austria,
incial Act stipulated that ‘the amount of outstanding
Finland and Sweden ‘[…] state aids granted by new
guarantees or loans ( 31 ) may not at any given time
Member States during 1994 but which, in contravention
exceed FIM 20 000 000’. On the other hand, the
of the EEA Agreement or arrangements made thereunder,
measure in question does not provide for any temporal
either have not been notified to the ESA or have been
limitation to their application.
notified but granted before the ESA took a decision, shall
not as a consequence be considered as existing state aids
under Article 93(1) of the EC Treaty […]’.
(100) In the light of the above and of the provisions of the
national act, the measures would prima facie appear to
meet the definition of an aid scheme, as it seems that the
(94) Furthermore,
according
to
Article
1(c)
of
Regulation
(EC)
act allows aid which is not linked to a specific project to
No 659/1999, ‘new aid’ means all aid, that is to say, aid
be awarded to one or several undertakings for an
schemes and individual aid, which is not existing aid,
indefinite period of time. The alleged scheme in
including alterations to existing aid ( 28 ).
question was put in place on 1 September 1982, i.e.
well before 1 January 1994, and was communicated to
the ESA. Thus the first condition for existing aid seems
(95) Finally,
Article 4(1) of Commission Regulation (EC)
to be satisfied, because the original scheme was put in
No 794/2004 of 21 April 2004 implementing Council
place before the entry into force of the Treaty in Finland
Regulation (EC) No 659/1999 laying down detailed rules
and even before 1 January 1994, which means that
for the application of Article 93 of the EC Treaty (
paragraph 5 of Article 172 of the Treaty of Accession

29 )
defines alteration of existing aid as ‘any change, other
of Austria, Finland and Sweden is not applicable in this
than modifications of a purely formal or administrative
case.
nature which cannot affect the evaluation of the compati
bility of the aid measure with the common market.
However an increase in the original budget of an
(101) However, the Commission must also assess whether the
existing aid scheme by up to 20 % shall not be
measures have undergone any substantive alterations
considered an alteration to existing aid.’
since 1 January 1994.
(96) From the above it follows that a measure that pre-dates
(102) At least three amendments to the guarantee scheme were
accession and constitutes a State aid scheme can be said
enacted by the regional authorities after 1 January 1994
to be existing aid if two conditions are satisfied. The first
(by Provincial Acts 1994:29, 1996:56 and 2002:23) and
is that the scheme was put into effect before the entry
prior to the granting of the first guarantee on 14 August
into force of the EC Treaty and the second is that its
2003. These amendments provided for a substantial
substance has not been substantially altered since.
increase in the budget of the scheme (i.e. an increase
in the global amount of guarantees that could be
granted at any given time). Since the present case
(97) The
Commission
will
assess
the
Finnish
argument
about
concerns the granting of a loan guarantee, it should be
the lawfulness of the aid separately for the two alleged
assessed whether the alterations concerning the budget of
schemes.
the scheme, introduced prior to the measures under
discussion, should be considered as substantial and
severable from the existing scheme.
6.1. THE ALLEGED GUARANTEE SCHEME (93-079)
(98) The
Commission
will
first
assess
whether
these
measures
(103) As described, according to Article 4 of Regulation (EC)
constitute an aid scheme within the meaning of
No 794/2004 budget increases of more than 20 %
Article 1(b) of Regulation (EC) No 659/1999.
constitute an alteration of an existing aid scheme. Two
of the abovementioned amendments ( 32 ) have increased
( 28 ) In Gibraltar v Commission (Joined cases T-195/01 and T-207/01
the original budget of the scheme by 50 % and 150 %,
Government of Gibraltar v Commission, judgment of 30.4.2002,
respectively. These budget increases constitute substantive
[2002] ECR II-2309, paragraphs 109-111), the CFI noted that,
alterations to the scheme which were never notified to
under Article 1(c) of Regulation (EC) No 659/99, ‘alterations of
the Commission.
existing aid’ are to be regarded as new aid. Consequently, it is
only the alteration that is liable to be classified as new aid.
However, where the alteration affects the actual substance of the
( 30 ) Landskapslag om landskapsgarantier fr industrier och andra
original scheme, because it is not severable from that scheme, then
nringsgrenar, FS 1966:14.
the latter is transformed into a new aid scheme (Joined cases
( 31 ) The law also covers some loans (the Commission’s note).
T-254/00, T 270/00 and T 277/00 Hotel Cipriani v Commission,
( 32 ) The amendment of 3 March 1994 increased the budget from FIM
judgment of 28.11.2008, paragraphs 358-359).
20 million to FIM 30 million, while the amendment of 16 February
( 29 ) OJ L 140, 30.4.2004, p. 1.
1996 increased the budget from FIM 30 million to FIM 50 million.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/45
(104) The effect of these substantive alterations cannot be
requirements for constituting an aid scheme (which is
considered as severable from the alleged scheme, with
defined among other things as ‘… an act on the basis
the result that the scheme in its entirety becomes new
of which, without further implementing measures being
aid. Indeed, the original aid scheme was limited only as
required, individual aid awards may be made …’). Any
regards the total amount of guarantees that could be
allocation of capital to an individual beneficiary would
outstanding at any given time. With this particular
thus first require an appropriation in the annual budget
configuration, a very substantial increase in the budget
of the LG (voted by the land regional assembly at its
(even without any other alteration of the scheme)
discretion) and then the implementation of decisions
touches upon the very essence of the existing rules.
taken by the LG. It appears thus that capital injections
granted under those powers are to be seen as a
succession of individual decisions rather than an aid
scheme.
(105) In addition, the Commission notes that it does not

appear from the guarantee documents submitted by
Finland that the legal basis of these guarantees was the
alleged guarantee scheme.
(111) In any event, the Commission also notes that the alleged
scheme concerned only the years 1992 to 1994, as no
other information was given under the heading ‘Budget/
(106) Consequently, the guarantees covered by this decision
expenditure’ although the legal basis was the ‘annual
must be considered new aid. Given that the aid has
budget for land’.
been put into effect without prior approval by the
Commission as required by Article 108 TFEU, it is
unlawful.
(112) Finally, the Commission notes that Finland had indicated
that the maximum aid intensity that can ‘be obtained in
favour of any one project’ is 30 %. This can, in any event,
6.2. THE ALLEGED SHARE SUBSCRIPTION SCHEME (93-079)
only be understood as meaning that capital injections
under this alleged scheme were intended to be used
(107) The national rules concerning this alleged scheme were
together with significant private contributions (at least
declared to ESA as aid arrangements for share subscrip
70 %) towards ‘projects’ intended to promote the
tions. It appears from the documents submitted at the
objectives of the alleged scheme, given as being
time that the ‘Annual budget for land’ was given as the
‘Tourism, industry, R&D’. The capital increases at issue
national legal basis. Under the heading ‘maximum
in this decision do not meet this formal condition and
possible aid intensity that (…) can be obtained in
can consequently not be covered by the national legal
favour of any one project’, Finland has indicated ‘30 %’.
provisions that were submitted to the ESA, irrespective of
Furthermore, under the heading ‘Budget/expenditure’
whether these measures constituted a proper aid scheme
Finland has indicated budgets for the years 1992 to
and if so whether it applied beyond 1994.
1994 but left a blank under the heading ‘Total budget
estimate for the whole planning period of the scheme’.
(113) Consequently, the State aid given in the form of capital
increases to I constitutes new aid. As the aid has been
(108) In the course of the investigation, Finland has explained
put into effect without prior approval by the
that the formal legal basis of the alleged scheme is the
Commission as required by Article 108 TFEU, it is
Act on the Autonomy of land (1144/1991), which was
unlawful.
passed in 1991. Under Section 18(22) the land local
authorities have ‘general powers’ to adopt different sorts
of measures focusing on the promotion of land’s
economy. These powers are implemented (e.g. by
6.3. ADDITIONAL COMMENT ON RECENT DECISIONS BY
means of loans, capital injections, guarantees) through
FINLAND’S SUPREME ADMINISTRATIVE COURT
provisions in the annual general budget of the LG.
(114) It should also be noted that two measures granted by the
LG to I have recently been annulled by a national
Finnish court. The measures are (i) capital increase C-XI
(109) The Commission notes the following:
paid to I in 2007 (see comment at recital 16 above)
and (ii) a 2006 loan guarantee that was never imple
mented. By decision of 6 April 2011 the Supreme
(110) Irrespective of the fact that Finland may qualify the
Administrative Court ruled on whether the LG’s
powers of the local authorities to provide such capital
decisions were taken in compliance with national admin
injections (under the general powers they are granted by
istrative rules. However, in doing so, the Court also
the Autonomy Act) as a ‘scheme’, the Commission must
assessed whether there were sufficient indications that
verify whether the provisions of the national law laying
the measures constituted State aid, meaning that the
down those powers meet the definition of a ‘scheme’
local authorities should have notified them to the
under Article 1(d) of Regulation (EC) No 659/1999. It
Commission before putting them into effect. The Court
appears in this respect that the legal basis (Section
finds that all criteria of State aid are met prima facie. The
18(22) of Act 1144/1991) consists of rules that relate
Court also analysed Finland’s claim that the measures —
to the allocation of powers between different authorities
if they did constitute aid — would be covered by the
within the Finnish legal order and that do not meet the
national rules that applied prior to accession and

---

L 125/46
EN
Official Journal of the European Union
12.5.2012
consequently qualify as ‘existing aid’. In doing so, the
not provided any specific argument or evidence enabling
Court made an in-depth assessment of the national
the Commission to approve those measures as
rules and found that, irrespective of whether these rules
compatible under any provision of the TFEU.
amounted to genuine State aid schemes or not, the
decisions of the local authorities did not comply with
the formal requirement under the national rules, mainly
owing to the reasons presented above by the
Commission. Therefore the conclusions of the national
8. RECOVERY OF THE AID
Supreme Administrative Court are in accord with those
of the Commission that the capital injection C-XI under
8.1. FINLAND’S ARGUMENTS
investigation includes new State aid. The Supreme Court
(119) Article 14(1) of Regulation (EC) No 659/1999 provides
came to the same conclusion regarding the 2006 loan
that ‘where negative decisions are taken in cases of
guarantee. As the guarantee was never put into effect, it
unlawful aid, the Commission shall decide that the
has not been assessed in this decision.
Member State concerned shall take all necessary
measures to recover the aid from the beneficiary […].
The Commission shall not require recovery of the aid
if this would be contrary to a general principle of
Community law.’ The natural consequence is therefore
7. COMPATIBILITY
that the measures that constitute unlawful State aid to
I should be recovered.
(115) Finland has argued in general terms that the measures, if
found to constitute new State aid, would nevertheless be
compatible with the internal market because the purpose
of I’s activities, as financed by the aid, was to facilitate
the development of the region and create new jobs.
(120) Finland has, however, argued that the Commission
should refrain from ordering recovery in this case,
because Finland had legitimate expectations that the aid
was lawful under the alleged pre-accession schemes and
that recovery would be contrary to a principle of
Community law. The Commission notes that Finland
(116) State aid, although in principle prohibited, will never
has formally argued legitimate expectations only as
theless be considered compatible with the internal
regards the LG. Legitimate expectations on behalf of
market in the circumstances mentioned in Article 107(2)
the beneficiary were not expressly argued.
TFEU and may be considered compatible if it is used to
achieve the objectives mentioned in Article 107(3). The
only ground for compatibility that can be envisaged in
this case is 107(3)(a) TFEU, which allows for aid to
promote the economic development of areas where the
(121) In any event, the Commission cannot accept this
standard of living is abnormally low or where there is
argument.
serious unemployment, or Article 107(3)(c) TFEU, which
provides that State aid may be authorised to facilitate the
development of certain economic areas.
(122) As regards the capital increases, the Commission has
shown above that, irrespective of what I or anyone
else may have had reason to believe about the legal
status of the alleged share subscription scheme in
(117) Under the regional aid rules applicable to Finland at that
relation to State aid rules, they did not even comply
time (the Regional Aid Maps 2000-2006 and 2007-
with the formal conditions of the alleged scheme as it
2013), the City of Mariehamn where iTiden is located
had been notified to ESA. It is thus not possible to argue
was in any event not eligible for such aid. This means
that I could benefit from a legitimate expectation as to
that even if the aid could be said to be assigned to that
the lawfulness of the capital increases, since these could
project, it could not be deemed compatible. In addition,
not have been covered by the national rules in relation to
the Commission notes that Finland has not shown that
which Finland claims to have had legitimate expectations.
any of the conditions for compatibility under the
regional aid rules (regarding e.g. the form of aid,
eligible costs or maximum aid intensities) are met.
(123) Concerning the loan guarantees, the Commission has
shown that the guarantee scheme had been substantively
altered even before the granting of the guarantees at issue
in this decision. These alterations, made by the land
(118) Nor can the aid be considered compatible with the
authorities, have not been notified to the Commission.
internal market under any of the other Guidelines and
The consequence is that any guarantees granted under
Communications adopted by the Commission with
the national rules that made up the original scheme
regard to the application of Article 107(3)(c) TFEU or
have to be considered new aid. It is well-established
directly under that Article. The Finnish authorities have
that no beneficiary of aid can legitimately expect that

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/47
aid that should have been notified to the Commission
(129) Finally, the Commission has never given either Finland or
under Article 108 TFEU but has not been so, is
the aid beneficiary any precise assurance that the
lawful ( 33 ).
measures at issue would not be State aid or would be
compatible aid, which might create expectation to that
effect ( 37 ).
(124) In summary, both the guarantees and the capital
increases constitute new State aid that should have
been notified to the Commission before implementation.
(130) Finland has further argued that in the event of a recovery
of aid granted through the capital increases, the aid
element should not necessarily be the whole amount of
the capital provided, but rather (by analogy with the
(125) It is established case law ( 34 ) that a Member State whose
calculation of the aid element in guarantees), the cost
authorities have granted aid contrary to the procedural
to I of finding alternative investment on the markets.
rules laid down in Article 108 TFEU may not rely on the
In this respect, Finland has suggested that the cost of
legitimate expectations of the aid recipients in order to
such alternative funding could be established by
justify a failure to comply with the obligation to take the
reference to the 7 % expected return on investment for
steps necessary to implement a Commission decision
office property as established in the KPMG report.
instructing it to recover the aid. If national authorities
were able to rely on their own unlawful conduct, they
would completely invalidate Articles 107 and 108 of the
TFEU and deprive decisions taken by the Commission
(131) The Commission cannot accept this view.
under these provisions of their effectiveness.
(132) It is certainly correct, as a general proposition, that State
aid in a given case is constituted by the difference
(126) The same principle must necessarily apply when the
between the advantage (in the form of funding) that
national authorities argue that they themselves had a
the firm has effectively received from State resources
legitimate expectation about the legality of the
and what it would have been able to obtain on the
measures, but did not notify them to the Commission
capital markets. Consequently, ‘by repaying the aid, the
although the measures constituted new aid ( 35 ).
recipient forfeits the advantage which it had enjoyed over
its competitors on the market, and the situation prior to
payment of the aid is restored’ ( 38 ).
(127) Likewise, insofar as the legitimate expectations of I are
relevant, the Commission notes that according to estab
lished jurisprudence, in view of the mandatory nature of
(133) Anyone making an investment, be it by providing credit
the supervision of State aid by the Commission under
or by taking an equity stake in a firm, will seek to have a
Article 108 of the TFEU, undertakings to which aid has
return on his investment that is commensurate with the
been granted may not, in principle, entertain a legitimate
risk.
expectation that the aid is lawful unless it has been
granted in compliance with the procedure laid down in
that Article. A diligent businessman should normally be
able to determine whether that procedure has been
(134) When the aid is given in the form of a credit at a cost
followed (
below markets costs (which is the case for a guaranteed

36 ).
loan when the total financial cost is lower than the
interest rate of a market loan) to a firm that is not
excluded from the loan market and that would thus, as
(128) The Commission points out that no firm was in a better
an alternative to the aid, have been able to take out a
position than I to have insight into the actions of the
loan at market rate, it is clear that the reparative purpose
LG concerning the alleged aid schemes, since the LG is its
of the recovery can be achieved by making the firm pay
main shareholder and is represented on the I board by
the difference (with interest), thus putting it back on a
individuals who are also members of the LG executive.
par with its competitors.
This argument is corroborated by the fact that, as shown
above in connection with the capital increases, represen
tatives of I and the LG regularly exchange information.
(135) The situation is different for equity investments. The
Therefore, even though the Finnish authorities have not
return here is not dependent on the firm’s willingness
expressly argued legitimate expectation on behalf of the
to pay (as in the case of a loan) but is entirely a factor
aid beneficiary, the Commission believes that I cannot
of the inherent profitability of the firm’s business model.
claim any legitimate expectation in the present case.
Unless the private investor believes that the business will
adequately remunerate the risk it entails, he will not
( 33 ) See case C-24/95 Land Rheinland-Pfalz v Alcan Deutschland GmbH,
make the investment but put his money elsewhere. In
judgment of 20.3.1997, [1997] ECR I-1591, paragraph 49.
other words the Commission cannot accept that the
( 34 ) Ibidem, point 17; see also joined cases C-465/09P Diputación Foral
de Vizcaya v Commission and C-470/09P Territorio Histórico de Vizcaya
et al. v Commission, judgment of 9.6.2011, paragraph 151, not yet
( 37 ) Joined cases T-427/04 and T-15/05 France and France Télécom v
published.
Commission, judgment of 30.11.2009, [2009] ECR II-4315,
( 35 ) See footnote 34.
paragraph 261.
( 36 ) Case C-5/89 Germany v Commission, judgment of 20.9.1990, [1990]
( 38 ) Case C-348/93 Commission v Italy, judgment of 4.4.1995, [1995]
ECR I-3437, paragraph 14.
ECR I-673, paragraph 27.

---

L 125/48
EN
Official Journal of the European Union
12.5.2012
company would have been able to get the same money
(139) Loan guarantees: the aid element for all guarantees is
in the capital market to increase its capital by offering a
calculated as the difference between, on the one hand,
higher remuneration because its expected performance
the reference rate applied as a benchmark for loan costs a
did not allow it to offer this higher remuneration to
company with financial strength comparable to I would
any equity investor. The counterfactual, i.e. the
have borne without the guarantee and, on the other, the
situation in the absence of aid which the recovery is
interest rate obtained by means of the State guarantee
intended to restore or bring about, is thus that no
after any premiums paid have been taken into account,
capital would have been invested at all. The aid to be
pursuant to point 4.2 of the Guarantee Notice (as
recovered is therefore the full amount of the capital
explained in detail in recitals 66 to 80).
increases.
(a) As regards guarantee G-I, the aid element is made up
(136) The Commission can consequently not accept Finland’s
of the difference between the reference rate for a loan
view as regards the aid element in the capital increases.
to a firm in the rating category ‘weak (B)’ and with a
normal collateralisation and the total financial cost of
the loan covered by the guarantee (understood as the
premiums paid for the guarantee plus the interest on
8.2. AID TO BE RECOVERED
the loan). This aid was put at the disposal of I on
9 October 2003 (as explained in recitals 81 and 82).
(137) In consequence, the unlawful and incompatible aid that
From this amount shall be deducted the one-off
has been identified by the Commission and that Finland
guarantee premium of EUR 19 500 (
shall recover from I is as follows:

39 ).

(138) Capital increases:
(b) As regards guarantee G-II, the aid element is made up
of the difference between the reference rate for a loan
to a firm in the rating category ‘weak (B)’ and with a
normal collateralisation and the total financial cost of
(a) Capital increase C-IV: EUR 353 199,00. This aid was
the loan covered by the guarantee (understood as the
put at the disposal of I on 20 July 2001.
premiums paid for the guarantee plus the interest on
the loan). This aid was put at the disposal of I on
2 November 2004. From this amount shall be
deducted the one-off guarantee premium of
(b) Capital increase C-V: EUR 599 933,78. This aid was
EUR 2 900 ( 40 ).
put at the disposal of I on 15 August 2002.
(c) As regards guarantee G-III, the aid element is made
(c) Capital increase C-VI: EUR 799 911,64. This aid was
up of the difference between the reference rate for a
put at the disposal of I on 13 March 2003.
loan to a firm in the rating category ‘satisfactory (BB)’
and with a normal collateralisation and the total
financial cost of the loan covered by the guarantee
(understood as the premiums paid for the guarantee
(d) Capital increase C-VII: EUR 515 165,97. This aid was
plus the interest on the loan). This aid was put at the
put at the disposal of I on 6 May 2004.
disposal of I on 13 December 2005. From this
amount shall be deducted the one-off guarantee
premium of EUR 6 500 ( 41 ).
(e) Capital increase C-VIII: EUR 669 896,95. This aid
was put at the disposal of I on 30 September 2004.
(140) The exact total amount of aid to be recovered will be
determined by the Finnish authorities, in collaboration
with the Commission, within the framework of the
(f) Capital increase C-IX: EUR 199 977,91. This aid was
recovery procedure according to the methodology
put at the disposal of I on 16 June 2005.
described in recitals 138 to 139 above. To the aid
amount to be determined shall be added interest from
the date on which the aid was put at the disposal of the
recipient until the date of its recovery. The Commission
(g) Capital increase C-X: EUR 234 961,43. This aid was
calls on the Finnish authorities, in accordance with their
put at the disposal of I on 16 June 2005.
duty of sincere cooperation, to collaborate with it in
determining the exact amount of aid to be recovered,
( 39 ) See recital 81 and footnote 25.
(h) Capital increase C-XI: EUR 1 379 998,95. This aid
( 40 ) See recital 83 and footnote 26.
was put at the disposal of I on 15 February 2007.
( 41 ) See recital 85 and footnote 27.

---

EN
12.5.2012 Official
Journal
of
the
European
Union L
125/49
HAS ADOPTED THIS DECISION:
2. Finland
shall
ensure
that
this
Decision
is
implemented
within four months following the date of notification of this
Decision.
Article 1
The capital increase in the amount of EUR 84 094,39 granted
Article 5
by Finland in favour of lands Industrihus AB on 18 June 1997
does not constitute State aid in the meaning of Article 107(1)
1. Within two months following notification of this
of the Treaty on the Functioning of the European Union.
Decision, Finland shall submit the following information to
the Commission:
Article 2
(a) the total amount (principal and recovery interest) to be
recovered from the beneficiary;
The State aid measures listed in Section 8.2 of this Decision
unlawfully granted by Finland, in breach of Article 108(3) of
the Treaty on the Functioning of the European Union, in favour
(b) a detailed description of the measures already taken and
of lands Industrihus AB are incompatible with the internal
planned to comply with this Decision;
market.
(c) documents demonstrating that the beneficiary has been
ordered to repay the aid.
Article 3
1. Finland
shall
recover
the
State
aid
referred
to
in
Article
2
2. Finland
shall
keep
the
Commission
informed
of
the
from the beneficiary.
progress of the national measures taken to implement this
Decision until recovery of the aid referred to in Article 2 has
been completed. It shall immediately submit, on simple request
2. The sums to be recovered shall bear interest from the date
by the Commission, information on the measures already taken
on which they were put at the disposal of the beneficiary until
and planned to comply with this Decision. It shall also provide
their actual recovery.
detailed information concerning the amounts of aid and
recovery interest already recovered from the beneficiary.
3. The
interest
shall
be
calculated
on
a
compound
basis
in
accordance with Chapter V of Regulation (EC) No 794/2004.
Article 6
This Decision is addressed to the Republic of Finland.
4. Finland
shall
cancel
all
outstanding
payments
of
the
aid
referred to in Article 2 with effect from the date of adoption of
this Decision.
Done at Brussels, 13 July 2011.
Article 4
For the Commission
1. Recovery
of
the
aid
referred
to
in
Article
2
shall
be
Joaquín ALMUNIA
immediate and effective.
Vice-President

---

L 125/50
EN
Official Journal of the European Union
12.5.2012
ANNEX
Information about the amounts of aid received, to be recovered and already recovered
Total amount of aid to be
Total amount already reimbursed (*)
Total amount of aid
recovered (*)
Identity of the beneficiary
received under the
scheme (*)
Principal Recovery
interest
(Principal)
(*) Million of national currency

---

Document Outline

• �

---