Commission finds that Polish public support for chemical company PCC is in line with State aid rules

This article is brought to you in association with the European Commission.

The European Commission has concluded that two support measures totalling €23 million awarded by Poland to chemical company PCC MCAA Sp. z o. o (‘PCC’) for an investment into a new plant are in line with EU State aid rules.

The Commission’s investigation

In 2012 and 2013, Poland granted public support to PCC for investing in a new plant to produce ultra-pure monochloroacetic acid in Brzeg Dolny, Poland. The support took the form of: (i) a direct grant of €16 million, and (ii) a tax exemption of up to €7 million. Poland did not notify the support to the Commission as it considered that it was exempted from notification under the 2008 General Block Exemption Regulation (‘2008 GBER’).

In February 2014, the Commission received a complaint from a direct competitor of PCC, alleging that the direct grant was not in line with EU State aid rules and should have been notified. In 2016, the Poland revoked the tax exemption after concluding that the measure was not in line with the 2008 GBER.

Following a complaint, in October 2019, the Commission opened an in-depth investigation into both the direct grant and the tax exemption.

In September 2022, upon appeal by PCC, the Supreme Administrative Court of Poland ruled that Poland should not have revoked PCC’s tax exemption.

The Commission’s assessment

The Commission assessed the two Polish measures under the EU Regional Aid Guidelines 2007-2013 (‘2007-2013 RAG’). Based on its in-depth assessment, the Commission concluded that:

• The direct grant and the tax exemption had an ‘incentive effect’, as they gave PCC a real incentive to carry out the investment in Brzeg Dolny, a disadvantaged region. PCC would not have carried out the investment in the region, or would have carried it out at a smaller scale, without the public support.
• The overall aid amount granted by Poland to PCC did not exceed the regional aid ceiling applicable to the Brzeg Dolny region.
• While the complainant had claimed that the monochloroacetic acid market was in overcapacity at the time of the investment and that therefore no aid should be granted to support the investment, the Commission concluded that demand had not been in absolute decline, and prospects for future growth looked promising at the time of the granting of the aid.
• The positive effects of the measures outweighed any potential distortion of competition and trade in the EU.

Background

EU State aid rules, in particular the GBER and the RAG, enable Member States to support the economic development and employment in disadvantaged areas of Europe and to foster regional cohesion in the Single Market, while ensuring a level playing field between Member States.

The GBER declares specific categories of State aid (such as regional aid) compatible with the Treaty on the Functioning of the EU, provided that they fulfil certain conditions. It therefore exempts these categories from the requirement of prior notification to and approval by the Commission, enabling Member States to grant the aid directly and informing the Commission only ex-post.

The RAG set out the rules under which Member States can grant State aid to companies to support investments in new production facilities in the less advantaged regions of Europe. In order to comply with the RAG, an aid measure must respect a number of conditions, in particular:

• The aid must have a real “incentive effect”, in other words, it must effectively encourage the beneficiary to invest in a specific region.
• The aid must not exceed the regional aid ceiling applicable to the region in question and must be kept to the minimum necessary to attract the investment to the disadvantaged region.
• The aid cannot be granted to an undertaking in difficulty.
• The aid must bring positive effects that outweigh any potential distortion of competition and trade in the EU.

The Commission’s  2007-2013 RAG applied to measures granted until 30 June 2014, when the 2014-2021 RAG entered into force.

The non-confidential version of the decision will be made available under the case number SA.38330 in the  State Aid Register on the competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.