EUROPEAN COMMISSION. The Commission has based its decision on the following considerations:

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1 EUROPEAN COMMISSION Brussels, C(2016) 3741 final Subject: State aid/italy SA (2016/N) Rules on compensation for the damage caused by wildlife to crops on the territory of the Gran Sasso and Laga Mountains national park SA (2016/N) Rules on compensation for the damage caused by wildlife to livestock on the territory of the Gran Sasso and Laga Mountains national park Sir, The European Commission ("the Commission") wishes to inform Italy that, after having examined the information supplied by your authorities on the State aid schemes referred to above, it has decided not to raise any objections to the notified schemes, on the grounds that they are compatible with the internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union ("TFEU"). The Commission has based its decision on the following considerations: 1. PROCEDURE (1) By letter of 22 January 2016, registered by the Commission as received on 25 January 2016, Italy notified in accordance with Article 108(3) TFEU, the above mentioned State aid schemes. (2) The Commission requested additional information by letter of 11 March 2016 which the Italian authorities provided by letter of 13 April 2016, registered by the Commission as received on the following day. Additional information was provided by the Italian authorities on 13 May 2016, registered by the Commission as received on the same day. S.E. Onorevole Paolo Gentiloni Ministro degli Affari esteri e della Cooperazione Internazionale P.le della Farnesina 1 I Roma Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel

2 2. BACKGROUND (3) The Gran Sasso and Laga Mountains national park ("the national park") is a legal person of public law which covers the territory of 3 Regions (Abruzzo, Lazio and Marche) and is subject to the supervision of the Ministry of Environment, Land and Sea. (4) The national legislation establishing the national park 1 stipulates that one of its objectives is the conservation of animal and plant species and that the capture, killing, damage and disturbance of wildlife are prohibited throughout the territory of the national park. The carrying out of agricultural and livestock activities on the territory of the national park is considered functional to the preservation and protection of agro-ecosystems, that are habitat characterized by specific biological diversity. Activities and works that may adversely affect the ecological balance and compromise the preservation of the landscape and protected natural environments, with particular regard to the protected flora and fauna and their habitats are prohibited in the national park. (5) The national park constitutes an environment where areas of high naturalness alternate with populated areas. According to the information provided by the Italian authorities, in 2015, 617 damage events have occurred to crops and 394 to livestock with an approximate damage amounting altogether to EUR DESCRIPTION 3.1. Title (6) Rules on compensation for the damage caused by wildlife to crops on the territory of the Gran Sasso and Laga Mountains national park (SA (2016/N)). Rules on compensation for the damage caused by wildlife to livestock on the territory of the Gran Sasso and Laga Mountains national park (SA (2016/N)) Objective (7) The aim of the notified aid schemes is to compensate for the damage to crops and livestock on the territory of the national park which is caused by animals protected under national legislation Legal basis (8) Aid scheme SA (2016/N) has the following legal bases: (a) Draft rules on compensation for the damage caused by wildlife to crops on the territory of the Gran Sasso and Laga Mountains national park (Progetto di disciplinare per l indennizzo dei danni arrecati dalla fauna 1 Decree of the President of the Republic of 5 June 1995, published in the Official Journal of 4 August 1995, n

3 selvatica alle colture agrarie nel territorio del parco nazionale del Gran Sasso e Monti della Laga). (b) Draft technical rules on the placing of protecting fences against damage caused by wildlife - boars, deers, roe deers and porcupine - to crops on the territory of the Gran Sasso and Laga Mountains national park (Progetto di disciplinare tecnico per la realizzazione di recinzioni a protezione dei danni da specie di fauna selvatica, Cinghiale, Cervo, Capriolo e Istrice, alle colture agrarie nel territorio del Parco Nazionale del Gran Sasso e Monti della Laga). (9) Aid scheme SA (2016/N) has the following legal bases: (a) (b) Draft rules on compensation for the damage caused by wildlife to livestock on the territory of the Gran Sasso and Laga Mountains national park (Progetto di disciplinare per l indennizzo dei danni arrecati dalla fauna selvatica al patrimonio zootecnico nel territorio del parco nazionale del Gran Sasso e Monti della Laga). Draft rules on the placing and use of fences and other preventive measures against damage caused by wildlife to livestock on the territory of the Gran Sasso and Laga Mountains national park (Progetto di disciplinare per la realizzazione e l'utilizzo di recinzioni ed altri strumenti di prevenzione dei danni arrecati al patrimonio zootecnico dalla fauna selvatica nel territorio del Parco Nazionale del Gran Sasso e Monti della Laga) Duration (10) From the date of the Commission decision until 31 December (11) The schemes will apply to damage occurred from 1 January 2015 to 30 November Budget (12) The overall budget amounts to EUR for aid scheme SA (2016/N) and EUR for aid scheme SA (2016/N) and is financed from national budgetary resources Beneficiaries (13) Undertakings (of all sizes) active in the primary production of agricultural products which are affected by the damage caused by the protected animals specified in the legal bases. (14) For each notified scheme, the number of beneficiaries is estimated to be between 501 and (15) Aid will not be granted to undertakings in difficulty within the meaning of point (35.15) of the European Union Guidelines for State aid in the agricultural and 3

4 forestry sectors and in rural areas 2014 to ("the Guidelines"), unless the financial difficulty of an undertaking has been caused by the damage brought about by the protected animals specified in the legal bases. (16) Aid will not be granted to undertakings still having at their disposal an earlier unlawful aid that was declared incompatible by a Commission decision (either concerning an individual aid or an aid scheme) Aid instrument (17) Direct grant Description of the aid schemes (18) Under SA (2016/N) aid will be granted to compensate for damage to crops of primary agricultural undertakings which occurred on the territory of the national park and have been caused by the following protected species: boar (Sus scrofa L), roe deer (Capreolus capreolus L), red deer (Cervus elaphus L) and crested porcupine (Hystrix cristata). Damage caused by other animals are not covered. (19) Under SA (2016/N) aid will be granted to compensate for damage caused on the territory of the national park by the following protected species: marsican brown bear (Ursus arctos marsicanus); apennine wolf (Canis lupus italicus); golden eagle (Aquila chrysaetos); european linx (Linx linx); european wildcat (Felis silvestris silvestris); beech marten (Martes foina); pine marten (Martes martes); red fox (Vulpes vulpes) and wild boar (Sus scrofa) to the following species: a) farmed livestock: cattle (Bos taurus); sheep (Ovis aries); goat (Capra hircus); horse (Equus caballus); donkey (Equus asinus domesticus); hybrid crosses between horses and donkeys (mules and hinnies); rabbit (Oryctolagus cuniculus); pig (Sus scrofa); poultry species belonging to the genera: Anas, Anser, Cygnopsis, Numida, Meleagris; honey bee (Apis mellifera); b) farmed wild animals: red deer (Cervus elaphus); roe deer (Capreolus capreolus); fallow deeer (Dama dama); wild boar (Sus scrofa); hare (Lepus europaeus); c) working dogs (for guarding or herding). (20) The Italian authorities have provided an analysis of the potential impact of the present aid schemes on the environment. They have explained that the measures covered by the notified aid schemes have only a positive environmental impact because they will facilitate the co-existence of agricultural and livestock activities and protected wildlife. In their view, the impossibility to compensate the damage would jeopardize the institutional purpose of the national park. 2 OJ C 204, , p. 1, as amended by Commission Notice amending the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (OJ C 390, , p.5). 4

5 (21) Undertakings are only eligible for aid payments if they have previously taken the appropriate and proportionate preventive measures. The relevant legal bases (recitals (8)(b) and (9)(b)) lay down detailed rules for the use of park keepers or guarding dogs or the placing of fences with different technical requirements depending on the animal species in question. According to that legislation, the building of fences is admitted to the only extent to harmonize the requirements of environmental protection with the carrying out of sustainable agricultural activities threatened by species mentioned in recitals (18) and (19) above and is allowed, only if fences are built by means of removable structures, in order not to hinder the movement of wildlife. (22) The damage is calculated at the level of the individual beneficiary. As a general rule, farmers shall report a damage event with the Local Environmental Coordination Unit (CTA) of the State Forestry Corps. The competent authority (the CTA or an agronomist or veterinary of the national park or an independent expert entrusted by the national park management authority) arranges for an inspection to establish the direct causal link between the damage and the behaviour of the protected animal and then draws up a report, certifying the damage on the basis of all the evidence and quantifying the compensation. Where a veterinary participates in the inspection, the report has to include a medicalforensic opinion. The report is delivered or notified to the beneficiary and transmitted to the national park management authority which pays out the compensation to the beneficiary. (23) Detailed information about the types of crops compensable, the reference cultivation practices, the relative productivity values and the average values of market prices (for SA (2016/N)), the value of the particular breeds and other factors such as the herd or flock management system, the lists of breeds normally farmed and the amount of compensation (for SA (2016/N)) are contained in technical handbooks, which are drawn up, kept and regularly updated by the national park management authority. (24) The following costs are eligible under the following conditions: (a) SA (2016/N): direct costs such as damage to and removal of seeds, bulbs, tubers and parts of plants and grubbing up of entire cultivated herbaceous plants and trees; digging of holes and de-levelling of farmed land. Such damage is compensated up to 100% whereby the compensation corresponds to the average value of the product lost as a result of damage, related to the productivity for the whole year, based on the market price. (b) SA (2016/N): compensation for the animals killed. For working dogs, only damage caused by wolves and bears may be compensated. For beehives, compensation is granted only for damage caused by bears and boars. Such direct costs are compensated up to 100% for professional agricultural undertakings (I.A.P.) and up to 50% for agricultural undertakings (I.A.) 3. The compensation is calculated on the basis of the market value of the stock in question. 3 According to the national legislation, I.A.P. is an undertaking devoting at least 50% of its total working time to agricultural activities and whose revenues deriving from such activities are at least 50% of its total earned income. An I.A. is an agricultural undertaking that doesn't meet the requirements for being an I.A.P. 5

6 (c) With regard to SA (2016/N), veterinary costs for the treatment of wounded animals which are compensated up to 80%. These costs are proportionate to the direct costs referred to in point (b) above and may not be higher than the market value of the wounded animal. (25) For SA (2016/N), it is possible for farmers to request as an alternative to financial compensation to have killed sheep and goats replaced by an adult animal of productive age and with the same capacity as the killed animal or, if the beneficiary agrees, with a different capacity but with the same market value. (26) The aid amount is reduced by any costs (e.g. costs for harvesting) not incurred because of the event causing the damage, which would otherwise have been incurred by the beneficiary. (27) The aid must be paid out within four years from the damaging event. (28) With regard to aid scheme SA (2016/N), no compensation is paid, inter alia: (a) for amounts below EUR 50; (b) if the crop is clearly abnormal (mancanza di ordinarietà); (c) for damage to truffle production. (29) With regard to aid scheme SA (2016/N), no compensation is paid, inter alia, in the following cases: (a) inability to produce the dead animal carcass; (b) presence of animal remains that are insufficient to be able to ascertain the actual causes of death. (30) The aid and any other payments received to compensate for the damage, including payments under other national or Union measures or insurance policies for the damage receiving aid, are limited to 100% of the direct eligible costs and to 80% of the indirect eligible costs. (31) Aid under these notified schemes can be cumulated with aid received from other local, regional, national or Union schemes or with de minimis aid to cover the same eligible costs where the aid intensities of 100% for directs costs and 80% for indirect costs are not exceeded Other commitments (32) Italy made a commitment to publish the information required under point (128) of the Guidelines by the deadline set out in point (131) thereof. 6

7 4. ASSESSMENT 4.1. Existence of aid - Application of Article 107(1) TFEU (33) For Article 107(1) TFEU to apply, the schemes must provide an economic benefit to an undertaking which it would not have received in its normal course of business, the aid must be granted to certain undertakings, the benefit must be granted by a Member State or through State resources and the schemes must be capable of affecting competition and trade between Member States. (34) The aid at issue is financed through State resources (recital (12)) and confers an advantage on its recipients as it favours only certain undertakings by strengthening their competitive position on the market. According to the case law of the Court of Justice, the mere fact that the competitive position of an undertaking is strengthened compared to other competing undertakings, by giving it an economic benefit which it would not otherwise have received in the normal course of its business, points to a possible distortion of competition 4. (35) Pursuant to the case law of the Court of Justice, aid to an undertaking is capable of affecting trade between Member States where that undertaking operates in a market open to intra-union trade 5. The beneficiaries of aid operate in the agricultural sector which is open to competition at EU level 6 and therefore sensitive to any measure in favour of the production in one or more Member States. Therefore, the present schemes are liable to affect trade between Member States. (36) In light of the above, the conditions of Article 107(1) TFEU are fulfilled and it can therefore be concluded that the proposed schemes constitute State aid within the meaning of that article Lawfulness of the aid Application of Article 108(3) TFEU (37) The aid schemes were notified to the Commission on 22 January They have not been implemented prior to the date of the present decision. Therefore, Italy has complied with its obligation under Article 108(3) TFEU Compatibility of the aid (38) State aid may only be considered compatible with the internal market if it can benefit from any of the derogations provided for in the TFEU Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission of the European Communities, ECLI:EU:C:1980:209. See in particular the judgment of the Court of 13 July 1988 in Case 102/87 French Republic v Commission of the European Communities, ECLI:EU:C:1988:391. In 2014, Italian trade with all agricultural products with EU countries for exports amounted to EUR million, and for imports amounted to EUR million. Source: European Commission, Agricultural Policy Perspectives, Member States factsheet April 2016, Italy. Available at: 7

8 Application of Article 107(3)(c) TFEU (39) Under Article 107(3)(c) TFEU, an aid may be considered compatible with the internal market, if it is found to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. (40) For this derogation to be applicable, the aid must fulfil the requirements of the relevant Union State aid legislation Application of the Guidelines (41) As regards the notified aid schemes, Part I Common provision and Part II, Chapter Aid to compensate for the damage caused by protected animals of the Guidelines are applicable Common assessment principles (42) As indicated in recital (7), the objective of the notified aid schemes is to compensate for the damage caused by the protected animals specified in recitals (18) and (19) above to the primary agricultural production. The notified aid schemes thus contribute to a common objective in line with points (43) and (44) of the Guidelines. The notified schemes fall under Section 1.2 of Part II of the Guidelines. In accordance with point (48) of the Guidelines the Commission therefore considers that such aid is contributing to the objectives of rural development. (43) Taking into account the objective of the notified aid schemes, no negative impact on the environment within the meaning of point (52) of the Guidelines has been identified (recital (20)). (44) Since the notified schemes fulfil the specific conditions laid down in Section of Part II of the Guidelines (recital (63)), the Commission considers, in line with points (55) and (57) of the Guidelines, respectively, that the aid is necessary and that it is an appropriate policy instrument to address the objective of common interest. (45) Point (69) of the Guidelines limits aid granted under Section 1.2 of Part II of the Guidelines to undertakings which have undertaken reasonable efforts to minimise the risk concerned. As described in recital (21), the aid is limited to undertakings that have taken proportionate and preventive measures and therefore the requirement of point (69) of the Guidelines is considered fulfilled. (46) Under point (75)(h) of the Guidelines, aid to compensate for the damage caused by protected animals granted in accordance with Section of Part II of the Guidelines is not required or is deemed to have an incentive effect. (47) As described below (recitals (60) to (62)), the eligible costs and aid intensities respect the requirements set out in Section of Part II of the Guidelines and thus, are in line with point (84) of the Guidelines. In addition, in line with points (100) and (104) of the Guidelines, aid under the notified schemes can be 8

9 cumulated with aid received from other local, regional, national or Union schemes or with de minimis aid to cover the same eligible costs only where such cumulation does not result in exceeding the highest aid intensity applicable under the Guidelines (recital (31)). On this basis, the criterion of proportionality is fulfilled. (48) Since the present notified scheme fulfils the conditions laid down in Section of Part II of the Guidelines (recital (63)) and does not exceed the relevant maximum aid intensities (recitals (60) and (61) below), the Commission considers, in line with point (113) of the Guidelines, that the negative effect on competition and trade is limited to the minimum. (49) The Italian authorities have committed to comply with the transparency requirements set out in point (128) of the Guidelines by the deadline set out in point (131) thereof (recital (32)) Specific assessment according to the category of aid (50) It appears from recital (4) that the animals whose damage the notified schemes aim to compensate for are protected animals under national legislation, in line with the definition laid down in point (35.28) of the Guidelines. (51) Pursuant to point (391) of the Guidelines the Commission will authorise aid to compensate for the damage caused by protected animals to undertakings active in the primary agricultural production only. It follows from recital (13) that this requirement is met. (52) Points (326) and (392) of the Guidelines require the beneficiary to take reasonable and proportionate preventive measures. As described in recital (21) above, this requirement is met. (53) According to point (393) of the Guidelines, a direct causal link between the damage suffered and the behaviour of the protected animal must be established by the Member State. The notified schemes compensate only for damage caused by protected animals and, to be eligible, the damage needs to be assessed by the competent authority (recital (22)). Therefore, the condition set out in point (393) of the Guidelines is fulfilled. (54) Point (394) of the Guidelines requires the aid to be paid directly to the undertaking concerned. As described in recital (22), the compensation is directly paid to the beneficiaries by the granting authority. Point (394) of the Guidelines is therefore complied with. (55) In accordance with point (395) of the Guidelines the aid scheme must be established within a period of three years from the date of the occurrence of the damaging event and the aid must be paid out within four years from that date. Under the schemes at hand, the Italian authorities intend to compensate for damage occurred as of 1 January 2015 (recital (10)). In addition, Italy has assured that aid will be paid out within four years from the date of the occurrence of the damaging event (recital (27)). Therefore, the requirements of point (395) of the Guidelines are fulfilled. 9

10 (56) Point (396) of the Guidelines limits the eligible costs to the costs of the damage incurred as a direct consequence of the damaging event and requires the damage to be assessed by a public authority or by an independent expert recognised by the granting authority. Based on the information provided in recital (22) above, these conditions are fulfilled. (57) Point (397) of the Guidelines sets out the costs eligible for aid. These costs include the market value of the plants destroyed or the animals killed and the veterinary costs resulting from the treatment of wounded animals. As specified under recital (24), the eligible costs under the notified schemes are in line with point (397) of the Guidelines. (58) Point (398) of the Guidelines requires the aid amount to be reduced by any costs not incurred because of the damaging event. It follows from recital (26) that this requirement is met. (59) According to point (399) of the Guidelines the damage must be calculated at the level of individual beneficiary. As specified in recital (22) above, this requirement is complied with. (60) Points (401) and (403) of the Guidelines limit the aid to 100% of direct eligible costs. The compensation for the direct costs under the present schemes, namely the damage for plants destroyed or animals killed by the protected animals, is limited to 100% (recital (24)(a) and (b)). The condition of points (401) and (403) of the Guidelines as regards the aid intensity is therefore fulfilled. (61) Point (402) of the Guidelines requires the compensation for indirect costs to be proportionate to the direct costs. This point also limits the aid to 80% of the eligible indirect costs. As described in recital (24)(c) above, these conditions are met. (62) According to point (403) of the Guidelines the compensation paid under the notified schemes combined with any other payments, like e.g. payments received under insurance policies, must be limited to 100% of the direct eligible costs and 80% of the indirect eligible costs. It appears from recital (30) that any other payments received for the same eligible costs will be deducted from the aid. It follows from recitals (60) and (61) that the aid intensity will not exceed 100% for the direct eligible costs and 80% for the indirect eligible costs. Therefore, the requirements of point (403) of the Guidelines are complied with. (63) On the basis of the above, the Commission concludes that the conditions set out in Section of Part II of the Guidelines are fulfilled Other conditions (64) The Commission takes note that undertakings in difficulty will be supported only in cases where the financial difficulty of an undertaking has been caused by the damage brought about by the protected animals (recital (15)), in line with point (26) of the Guidelines. (65) The Commission takes note that undertakings still having at their disposal an earlier unlawful aid that was declared incompatible by a Commission decision (recital (16)) are excluded from any support, in line with point (27) of the Guidelines. 10

11 (66) In accordance with point (719) of the Guidelines, the Commission only authorises schemes of limited duration. Aid schemes other than those benefiting from cofinancing under Regulation (EU) No 1305/2013 should not apply for a period of more than seven years. It follows from recital (10) above that this requirement is met. 5. CONCLUSION The Commission has accordingly decided not to raise any objections to the notified aid schemes, on the grounds that they are compatible with the internal market pursuant to Article 107(3)(c) TFEU. If any parts of this letter are covered by the obligation of professional secrecy according to the Commission communication on professional secrecy in State aid decisions 7 and should not be published, please inform the Commission within fifteen working days of notification of this letter. If the Commission does not receive a reasoned request by that deadline Italy will be deemed will be deemed to agree to the publication of the full text of this letter. If Italy wishes certain information to be covered by the obligation of professional secrecy please indicate the parts and provide a justification in respect of each part for which non-disclosure is requested. Your request should be sent electronically via the secured system Public Key Infrastructure (PKI) in accordance with Article 3(3) of Commission Regulation (EC) No 794/2004 8, to the following address: agri-state-aids-notifications@ec.europa.eu. For the Commission Phil HOGAN Member of the Commission 7 8 Commission communication C(2003) 4582 of 1 December 2003 on professional secrecy in State aid decisions (OJ C 297, , p. 6). Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU) 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 140, , p. 1). 11