Compatibility of the aid. Article 61(3)(b) EEA enables the Authority to declare aid compatible with the functioning of the EEA Agreement if it has the effect ‘to remedy a serious disturbance in the economy of an EC Member State or an EFTA State’. The Authority recalls that, in line with the case law of the Court of Justice and the decision making practice of the European Commission (hereinafter referred to as the Commission), Article 61(3)(b) needs to be applied restrictively and must tackle a disturbance in the entire national economy (1). The Authority recognises that the Mortgage Loan Scheme was adopted amid the current international financial crisis. In Iceland, small saving banks faced liquidity problems as a result of financial difficulties of the larger banks, which traditionally provided funding to the saving banks’ sector. Unlike the larger financial undertakings, the saving banks did not have direct access to funding by the Central Bank. In line with the Authority’s Guidelines on the application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis, the Authority considers that this measure falls to be assessed under Article 61(3)(b) EEA. In order to be declared compatible with the EEA Agreement, the aid must be granted on the basis of non- discriminatory criteria, be appropriate in terms of being well targeted to remedy a serious disturbance in the economy and be necessary and proportionate thereto, limiting negative spill-over effects for competitors. The Impaired Assets Guidelines (2) (the ‘IAG’) translates these general principles into conditions specific for impaired asset relief. The Authority considers that the appropriate framework for assessing the compatibility of the measure is the IAG. The IAG define impaired assets relief as all measures whereby a bank is dispensed from the need for severe downward value adjustments of certain asset classes. This is also the cases for the present measure. Therefore the Mortgage Loan Scheme must fulfil the conditions for the compatibility of assets relief as set out in the IAG.
Compatibility of the aid. (182) As set out above, the Authority is of the preliminary view that a substantial part of the aid to AS Oslo Sporveier (in the form of annual compensation and the 2004 capital injection) was granted under an existing aid scheme. The Authority has furthermore come to the preliminary conclusion
Compatibility of the aid. (69) Measures caught by Article 61(1) of the EEA Agreement are generally incompatible with the functioning of the EEA Agreement, unless they qualify for an exemption under Article 61(2) or (3) of the EEA Agreement. The Authority notes that Iceland so far has not provided any arguments regarding the potential compatibility of the measure under these provisions.
Compatibility of the aid. 1. Legal basis for the compatibility assessment
Compatibility of the aid. 3.1. Act No 28/2007 amending the Harbour Act
(1) See the Authority's State Aid Guidelines on national regional aid 2007-2013, point 2(8), fn. 8.
(2) State aid N 554/06 — Germany, Rolandswerft which concerned the adaptation of a ship lift to lift heavier ships and State aid C-6/06 — Germany, Volkswerft Stralsund (OJ L 151, 13.6.2007, p. 33) also for the extension of a ship lift.
(3) See the definition of investment aid in Section 4.1.1 of the Regional Aid Guidelines which limit investment aid to initial investment projects,
Compatibility of the aid. 7.1. Compatibility assessment under Regulation 1370/2007
7.1.1. Public service contracts and their content
Compatibility of the aid. Assessment of the aid measures under Article 61(3) of the EEA Agreement is set out below.
3.1. The necessity, proportionality and appropriateness of the aid
3.1.1. The necessity of the measures
(1) This approach is similar to the one taken by the European Commission in the case of emergency aid for Ethias — Belgium — case NN 57/08.
(2) See paragraph 19 of the Authority’s temporary rules on the application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis: xxxx://xxx.xxxxxxxx.xxx/?0=0&xxxxXxxxXX= 16604&1=1
3.1.2. The method of restoring the bank — the appropriateness of the means employed to achieve the objective
3.1.3. The proportionality of the measures — limiting aid and distortions of competition to the minimum necessary
(1) This decision does not relate to any aspects of the internal market rules of the EEA Agreement that may apply in so far as the division of foreign and domestic assets and liabilities is concerned.
(2) A number of other financial institutions have also required State assistance. On 22 April 2010, the FME decided to take control of BYR Savings Bank, to establish on its foundation a new limited liability company BYR hf. and to transfer to BYR hf. assets and liabilities of the failed savings bank. At the same time FME decided to take control of Keflavik Savings Bank and establish on its foundation SpKef Savings Bank to take over assets and liabilities of the failed Keflavik Savings Bank. Measures for recapitalisation of these two savings banks are under way and the Authority awaits notification from the Icelandic authorities. On 21 June 2010, the Authority approved for a period of six months a rescue scheme in support of five smaller savings banks in Iceland through settlement of claims owned by the Central Bank of Iceland on the savings banks concerned.
Compatibility of the aid. Based on the foregoing considerations, the tax exemptions at issue appear to constitute aid within the meaning of Article 61(1) of the EEA Agreement. It is therefore necessary to determine if such an aid is compatible with the functioning of the EEA Agreement under the exceptions laid down in Article 61(2) and (3). The Norwegian authorities have argued that the measure at issue does not contain aid, and have not put forward any arguments concerning compatibility. However, after assessing the likely involvement of state aid, it has to be considered whether such aid could be compatible with the EEA Agreement by virtue of Article 61(2) and (3) of the Agreement. The application of the exceptions under Article 61(2) does not appear appropriate. The establishment of Entra does not entail aid having a social character granted to individual consumers or aid to make good the damage caused by natural disasters or exceptional occurrences. Under Article 61(3)(a) aid may be considered compatible with the EEA Agreement when it is designed to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment. Since the measure in question is not limited to such areas, this provision seems not to apply. Also the exemption laid down in Article 61(3)(b) seems not to be applicable. Lastly, as regards the exemption laid down in Article 61(3)(c), it also seems that the aid cannot be considered to faci- litate the development of certain economic activities or of certain economic areas in the meaning of this Article. Consequently, the aid seems not to qualify for any of the exemptions provided for in Article 61(3) of the EEA Agreement.
Compatibility of the aid. Consequently, the Authority will review the compatibility of the ad hoc grant of NOK 36 000 000 (3.1) and of the preferential tax regime some companies belonging to the Norsk Film group have benefited from (3.2).
3.1. Payment of the grant of NOK 36 000 000
Compatibility of the aid. Exemptions from the general prohibition on State aid as provided for in Article 61(1) may be granted if the conditions of 61(2) or (3) are fulfilled. The exemptions under Article 61(2) and 61(3)(a) and (b) seem to be applicable to the case at hand. Under Article 61(3)(c) EEA, State aid to facilitate the develop- ment of certain economic activities or of certain economic areas may be considered to be compatible with the EEA Agreement where such aid does not adversely affect trading conditions to an extent contrary to the common interest. As for the aid in question, it would seem to constitute operating aid. As such aid is particularly distortive, it may only in very limited circumstances be considered compatible with the func- tioning of the EEA Agreement. The Authority has not been presented with any elements indicating the existence of such circumstances in the case at hand. Against this background, the Authority takes the preliminary view that the aid is not compatible with the functioning of the EEA Agreement.