- vessels of not less than 100 gt used for the transportation of passengers and/or goods,

- vessels of not less than 100 gt for the performance of a specialised service (for example, dredgers and ice breakers),

- tugs of not less than 365 kW,

- fishing vessels of not less than 100 gt for export outside the Community,

- unfinished shells of the above mentioned vessels that are afloat and mobile.

(i) owns or controls an undertaking engaged in shipbuilding, ship repair or ship conversion, or

(ii) is owned or controlled, directly or indirectly, whether through stock ownership or otherwise, by an undertaking engaged in shipbuilding, ship repair or ship conversion.

1. Aid granted, whether directly or indirectly, for shipbuilding, ship repair and ship conversion, financed by Member States or their regional or local authorities or through State resources in any form whatsoever, may be considered compatible with the common market only if it complies with the provisions of this Regulation. This provision applies not only to aid granted to undertakings engaged in such activities but also to related entities.

2. For the purposes of this Regulation, aid granted indirectly includes all forms of aid to shipowners or to third parties which are available as aid for the building or conversion of ships such as credit facilities, guarantees and tax concessions. Concerning tax concessions, these provisions shall be without prejudice to the Community guidelines on State aid to maritime transport(1), and in particular point 3.1 thereof, and any amendments thereto.

3. No aid granted pursuant to this Regulation may be conditional upon discriminatory practices against products originating in other Member States. In particular, aid granted by a Member State to its shipowners or to third parties in that State for ship building or ship conversion may not distort, or threaten to distort, competition between shipyards in the Member State and shipyards in other Member States in the placing of orders.

1. Until 31 December 2000, production aid in support of contracts for shipbuilding and ship conversion, but not ship repair, may be considered compatible with the common market provided that the total amount of all forms of aid granted in support of any individual contract (including the grant equivalent of any aid granted to the shipowner or third parties) does not exceed, in grant equivalent, a common maximum aid ceiling expressed as a percentage of the contract value before aid. For shipbuilding contracts with a contract value before aid of more than ECU 10 million, the ceiling shall be 9%; in all other cases the ceiling shall be 4,5%. Footnotes:(1)OJ C 205, 5. 7. 1997, p. 5.

2. The aid ceiling applicable to a contract shall be that in force at the date of signature of the final contract.

3. The grant of aid in individual cases in application of an approved aid scheme shall not require prior notification to, or authorisation from, the Commission.

4. Aid in the form of state-supported credit facilities granted to national and non-national shipowners or third parties for the building or conversion of vessels may be deemed compatible with the common market and shall not be counted within the ceiling if it complies with the terms of OECD Council Resolution of 3 August 1981 (OECD Understanding on Export Credits for Ships) or with any agreement amending or replacing that Understanding.

5. Aid related to shipbuilding and ship conversion granted as development assistance to a developing country shall not be subject to the ceiling. It may be deemed compatible with the common market if it complies with the terms laid down for that purpose by OECD Working Party 6 in its Agreement concerning the interpretation of Articles 6 to 8 of the OECD Understanding on Export Credits for Ships or with any later addendum or corrigendum to the said Understanding. The Commission must be given prior notification of any such individual aid proposal. It shall verify the particular development content of the proposed aid and satisfy itself that it fails within the scope of the Understanding referred to in the first subparagraph and that the offer of development assistance is open to bids from different yards.

1. Aid to defray the normal costs resulting from the total or partial closure of shipbuilding, ship repair or ship conversion yards may be considered compatible with the common market provided that the resulting capacity reduction is of a genuine and irreversible nature.

2. The costs eligible for the aid referred to in paragraph 1 are:

3. In addition, in the case of undertakings which totally cease shipbuilding, ship repair or ship conversion, the following measures may also be deemed compatible with the common market:

4.The amount and intensity of aid must be justified by the extent of the closures involved, account being taken of the structural problems of the region concerned and, in the case of conversion to other industrial activities, of the Community legislation and rules applicable to those new activities.

5.ln order to establish the irreversible nature of aided closures, the Member State concerned shall ensure that the closed shipbuilding, ship repair and ship conversion facilities remain closed for a period of not less than ten years.

1.Aid for the rescue and restructuring of undertakings in difficulties, including capital injections, debt write-offs, subsidised loans, loss compensation and guarantees, may exceptionally be considered compatible with the common market provided that it complies with the Community guidelines on State aid for rescuing and restructuring firms in difficulty(1). Furthermore, in cases of restructuring, the following additional specific conditions must also be respected:

2.ln assessing the regularity of production and the capacity reduction involved, the Commission shall base its decision not only on the theoretical capacity of the yard(s) of the undertaking but also on the level of actual production over the preceding five years. No account will be taken of capacity reductions in other undertakings in the same Member State unless capacity reductions in the beneficiary undertaking are impossible without undermining the viability of the restructuring plan.

3.The Commission shall seek the views of Member States on all such cases where the aid is in excess of ECU 10 million before adopting a position on them.

4.In the case of restructuring operations lasting several years and involving large amounts of aid, the Commission may require that aid be disbursed in instalments subject to prior notification and approval by the Commission.

1.Aid to shipbuilding, ship repair and ship conversion undertakings covered by this Regulation shall be subject to, in addition to the provisions of Article 93 of the Treaty, the special notification rules provided for in paragraph 2.

2.The following shall be notified to the Commission in advance by the Member States and authorised by the Commission before they are put into effect:

(a)any aid scheme - new or existing - or any amendment of an existing scheme covered by this Regulation;

(b) any decision to apply a generally applicable aid scheme, including generally applicable regional aid schemes, to the undertakings covered by this Regulation in order to verify compatibility with Article 92 of the Treaty, in particular in cases referred to in Articles 6, 7, 8 and 9 unless the aid is below the de minimis threshold of ECU 100000 over any three-year period;

(c) any individual application of aid schemes in the following cases:

(i)those referred to in the second subparagraph of Article 3(3) and in Article 3(5), Article 4, and Article 5; or

(ii)when specifically provided for by the Commission in its approval of the aid scheme concerned.

1.To enable the Commission to monitor application of the aid rules contained in Chapters II to IV, Member States shall supply it with:

(a) monthly reports on each shipbuilding and ship conversion contract by the end of the third month following the month of signing of each contract, in accordance with the annexed Schedule 1;

(b) completion reports on each shipbuilding and ship conversion contract, including those signed before the entry into force of this Regulation, by the end of the month following the month of completion, in accordance with the annexed Schedule 1;

(c) where requested by the Commission, yearly reports, to be provided by 1 March of the year following the year subject to the report, giving details of the total amount of aid granted to each individual national shipyard during the previous calendar year, in accordance with the annexed Schedule 2;

(d) in the case of shipyards able to build merchant ships over 5000 gt, yearly reports to be provided not later than two months after the annual general meeting has approved the shipyard's yearly report, giving publicly available information on capacity developments and on the structure of ownership, in accordance with the annexed Schedule 3;such reports shall be submitted biannually after the first annual report has been submitted unless the Commission decides to request yearly reports to continue;

(e) in the case of shipyards which have received restructuring aid in accordance with Article 5, quarterly reports on the attainment of the restructuring objectives, including the following elements: disbursement and use of the aid, investments, productivity performance, employment reductions, viability;

(f) in the case of shipyards benefiting from contracts supported by aid in the form of development assistance, such information as the Commission may require to enable it to ensure that the conditions of Article 3(5) are respected.

2.In the case of shipyards engaged in both commercial and military shipbuilding, ship repair or ship conversion, the reports referred to in (d) of paragraph 1 shall be accompanied by an attestation by the statutory auditor certifying the apportionment of the overheads to these two fields. In addition, separate information shall be submitted on the turnover in the commercial and military fields.

3.On the basis of the information communicated to it in accordance with Article 10 and paragraph 1 of this Article, the Commission shall draw up an annual overall report to serve as a basis for discussion with national experts and the Council. The report shall also be sent to the European Parliament for information. Separate half-yearly reports will be drawn up on cases involving restructuring aids.

4.If a Member State does not fully comply with its reporting obligations as laid down in paragraph 1, the Commission may, after consultation and after having given due notice, require that that Member State suspend outstanding payments of aid already approved until such time as all due reports have been received by the Commission. If the reporting by a Member State under paragraph 1 is punctual but incomplete and at the time of reporting that Member State specifies those yards which have not fulfilled their reporting obligations, the Commission shall limit its possible requirement for suspension of outstanding aid payments to such yards only.