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

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1 EUROPEAN COMMISSION Brussels, C(2018) 4062 final Subject: State aid Poland SA (2017/N) Potato-growing ZAMARTE Sp. z o.o. Sir, The European Commission ("the Commission") wishes to inform Poland that, having examined the information supplied by your authorities on the State aid measure referred to above, it has decided not to raise any objections to the relevant measure as it is 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 14 November 2017, registered by the Commission on the same day, Poland notified, according to Article 108(3) TFEU, the above mentioned aid measure. (2) The Commission sent requests for additional information to the Polish authorities on 14 December 2017 and 6 March 2018, which the Polish authorities answered by letters of 11 January 2018 (registered by the Commission on the same day) and 30 April 2018 (registered by the Commission on the same day), respectively. The Polish authorities also submitted additional information on 20 March DESCRIPTION 2.1. Title (3) Potato-growing ZAMARTE Sp. z o.o. H.E. Jacek Czaputowicz Ministerstwo Spraw Zagranicznych Al. J. Ch. Szucha Warszawa Poland Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË

2 2.2. Objective (4) With the present notification the Polish authorities wish to grant an individual aid to compensate for direct value losses as the consequence of measures imposed by the national authorities for eradication of an organism which is harmful for potatoes. (5) The Polish authorities explained that the present aid measure will have no negative environmental impact. They assured that the aid does not constitute a breach of applicable Union environmental protection legislation, does not lead to an increase of the agricultural production, nor runs counter the regulatory requirements for the good agricultural and environmental condition Legal basis (6) Article 11 of Act of 18 December 2003 on Plant Protection. (7) Draft Decision of the Chief Inspector for Plant and Seed Protection to grant compensation Form (8) Direct grant Duration (9) Aid will be granted after the present Commission decision has been adopted Budget (10) Overall budget is PLN ,12 (approx. EUR ), financed from national resources. The granting authority is the Chief Inspector for Plant and Seed Protection Beneficiary (11) The beneficiary of the aid is a potato producer "Potato-growing ZAMARTE Sp. z o.o." ("Hodowla ziemniaka ZAMARTE Sp. z o.o.", hereafter: "potato producer"). (12) The Polish authorities explained that the beneficiary is a large undertaking active in the primary agricultural production. (13) The Polish authorities confirmed that the beneficiary is not an undertaking in difficulty within the meaning of point 35(15) of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to (the "Guidelines"). (14) The Polish authorities also confirmed that the beneficiary does not have at its disposal an earlier unlawful aid that was declared incompatible by a Commission Decision. 1 OJ C 204, , p. 1, as amended by the Notices published in OJ C 390, , p. 4 and OJ C 139, , p. 3, and corrected by the Corrigendum published in OJ C 265, , p. 5. 2

3 2.8. Description of the aid measure (15) The Polish authorities confirmed that the aid is limited to costs and damages caused by a plant pest for which the competent authority has formally recognised its presence. (16) The aid measure relates to the following harmful organism: - potato spindle tuber viroid. (17) That organism has not previously been observed in potatoes in Poland. It is a plant pest for which Union 2 and national rules 3 exist. Under Polish legislation concerning plant protection, potato spindle tuber viroid is subject to mandatory control measures. (18) The Polish authorities confirmed that the presence of the plant pest in question was not deliberate nor the result of a negligence of the beneficiary. The beneficiary has respected all obligations related to the phytosanitary safety and taken all preventive measures in order to limit the damage. It was not possible to take out insurance against the plant pest in question, as insurance companies in Poland do not offer cover against such risk. (19) The aid compensates for direct value losses of 383 tonnes of potatoes which the potato producer suffered as a consequence of control and eradication measures decided by the competent authority due to the recognised presence of potato spindle tuber viroid. The measures, such as destruction or denaturation of potatoes, or processing of potatoes under quarantine conditions in conformity with the conditions set by the competent authority, are described in detail in the decision of 22 March 2016 of the Provincial Inspector for Plant and Seed Protection, by which they were imposed on the potato producer. (20) The Polish authorities explained that the potato producer carried out the imposed control and eradication measures within the time-limits laid down in the said decision. In accordance with the relevant Polish legislation, the potato producer implemented the imposed control and eradication measures at his own expense. (21) The Polish authorities confirmed that the maximum aid intensity and compensation amount were calculated by the granting authority. The eligible costs were supported by documentary evidence which were clear, specific and contemporary. For the purposes of calculating the aid intensity and the eligible costs, all figures used were taken before any deduction of tax or other charge. (22) The aid does not cover costs not directly incurred due to the plant pest which would otherwise have been incurred by the beneficiary. 2 3 Council Directive 2000/29/EC of 8 May 2000 on protective measures against the introduction into the Community of organisms harmful to plants or plant products and against their spread within the Community, OJ L 169, , p. 1. Regulation of the Minister for Agriculture and Rural Development of 21 February 2008 on preventing the introduction and spread of quarantine organisms [Rozporządzenie Ministra Rolnictwa i Rozwoju Wsi z dnia 21 lutego 2008 r. w sprawie zapobiegania wprowadzaniu i rozprzestrzenianiu się organizmów kwarantannowych (Dz. U. Nr 46, poz. 272)] 3

4 (23) The compensation is calculated on the basis of the market price of potatoes immediately before any suspicion of the plant pest arose or was confirmed. More specifically, the aid amount (recital (10)) was calculated on the basis of the difference between the amount which the beneficiary could obtain from the sale of potato tubers intended as seed, and the amount obtained as a result of the use of potato tubers as decided by the Provincial Inspector for Plant and Seed Protection. (24) The Polish authorities gave assurances that the aid received by the beneficiary will be limited to 100 % of the eligible costs. (25) Aid will be paid directly to the beneficiary. (26) The Polish authorities confirmed that they implemented Article 14(1) of Directive 2009/128/EC (the "Pesticides Directive") 4 and Article 55 of Regulation (EC) No 1107/ in relation to damage caused by plant pests Cumulation (27) The Polish authorities confirmed that the aid cannot be cumulated with aid received from other local, regional, national or EU schemes to cover the same eligible costs Transparency (28) Poland has informed the Commission that in order to comply with the transparency requirement the publication of the aid measure and the individual aid award will be done through the following web page: Poland committed that the information will be kept for at least 10 years and will be available for the general public without restrictions. 3. ASSESSMENT 3.1. Existence of aid - Application of Article 107(1) TFEU (29) According to Article 107(1) of the TFEU, "[s]ave as otherwise provided in the Treaties, 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 production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market". (30) The qualification of a measure as aid within the meaning of this provision therefore requires the following cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and 4 5 Directive 2009/128/EC of the European Parliament and of the Council of 21 October 2009 establishing a framework for Community action to achieve the sustainable use of pesticides (OJ L 309, , p. 71). Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market and repealing Council Directives 79/117/EEC and 91/414/EEC (OJ L 309, , p. 1). 4

5 (iv) the measure must distort or threaten to distort competition and affect trade between Member States. (31) The measure in question is imputable to the State and financed through State resources (recital (10)). The notified measure is selective because it is granted to one undertaking. The notified measure therefore gives only one undertaking (recital (11)) a selective economic advantage, by strengthening its 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 6. (32) Pursuant to the case law of the Court of Justice, aid to an undertaking appears to affect trade between Member States where that undertaking operates in a market open to intra-eu trade. 7 The beneficiary of aid operates in the potato sector where intra-eu trade takes place. 8 The sector concerned is open to competition at EU level and therefore sensitive to any measure in favour of the production in one or more Member States. Therefore, the present measure is liable to distort competition and to affect trade between Member States. (33) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the proposed measure constitutes State aid within the meaning of that Article. The aid may only be considered compatible with the internal market if it can benefit from one of the derogations provided for in the TFEU Lawfulness of the aid Application of Article 108(3) TFEU (34) The aid measure was notified to the Commission on 14 November It has not been implemented yet. Therefore, Poland has complied with its obligation under Article 108(3) TFEU Compatibility of the aid Application of Article 107(3)(c) TFEU (35) Under Article 107(3)(c), 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. (36) For this derogation to be applicable, the aid must comply with the relevant Union State aid rules 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. According to Eurostat, the intra-eu trade in 2016 of fresh and chilled potatoes amounted for imports to around EUR 1, 610 billion and in the case of seed potatoes for imports to around EUR 284 million. 5

6 Application of the Guidelines (37) As regards the notified aid measure, Part II, Section "Aid for the costs of the prevention, control and eradication of animal diseases and plant pests and aid to make good the damage caused by animal diseases and plant pests" of the Guidelines is applicable. (38) It follows from point 364 of the Guidelines that the Commission will consider aid for the costs of the prevention, control and eradication of plant pests and aid to make good the damage caused by plant pests compatible with the internal market under Article 107(3)(c) TFEU if it complies with the common assessment principles of the Guidelines and with the conditions set out in Section of Part II of the Guidelines Conditions set out in Section of Part II of the Guidelines (39) In line with point 365 of the Guidelines, the aid will be given to an undertaking active in the primary agricultural production (recital (12)). (40) As required by point 366 of the Guidelines, aid will only be paid in relation to a plant pest for which Union or national rules exist, whether laid down by law, regulation or administrative action (recital (17)), and as part of a an emergency measures imposed by the competent public authority (recital (19)). (41) In line with point 367 of the Guidelines, the eradication measures are detailed in the relevant emergency measure (recital (19)). (42) Aid will be granted to make good the damage caused by a plant pest (recital (4)). Point 368 of the Guidelines is not relevant for the present case, given that the present aid compensates the damage and does not cover the costs of prevention, control or eradication measures. (43) In accordance with points 369 of the Guidelines, the aid will be paid directly to the beneficiary (recital (25)). (44) Point 370 of the Guidelines prohibits granting individual aid where it is established that the disease was caused deliberately or by the negligence of the beneficiary. The Commission is satisfied that, in view of the information available, this requirement is respected (recital (18)). (45) According to point 372 of the Guidelines, aid must be paid out within four years from the date of the occurrence of the cost or damage caused by the plant pest. Given that the damage occurred in March 2016 (recital (19)) and the aid will be granted and consequently paid after the present Commission decision has been adopted (recital (9)), the mentioned requirement can be considered as fulfilled. (46) The eligible costs communicated by the Polish authorities (recital (19)) relate to compensation of value losses of potatoes as a result of the control and eradication measures, as referred to under point 377(a) of the Guidelines. (47) The compensation is calculated in relation to the relevant market values for the kind of potatoes concerned as required under point 377 of the Guidelines and the 6

7 market value is established on the basis of the value of the potatoes immediately before any suspicion of the plant pest arose or was confirmed (recital (23)). The aid measure thus also complies with point 379 of the Guidelines. (48) The aid does not cover costs not directly incurred due to the plant pest which would otherwise have been incurred by the beneficiary (recital (22)), as required by point 378 of the Guidelines. (49) The aid is limited to costs and damage caused by a plant pest for which the competent authority has formally recognized an outbreak, as required by point 380 of the Guidelines (recital (19)). (50) The aid intensity for eligible costs will not exceed the maximum intensity of 100% (recital (24)) and the beneficiary will not receive any other payments for the same eligible costs (recitals (18) and (27)). The maximum aid intensity provided for in point 382 of the Guidelines is therefore complied with. (51) On the basis of the above, the Commission concludes that the conditions in Section of Part II of the Guidelines are fulfilled Common Assessment Principles Contribution to a common objective (52) As said in recital (4), the objective of the present notified aid is to make good the damage caused by measures aiming at control and eradication of plant pests. By its nature (compensation of losses), the aid is closely related to the CAP, as it aims at restoring production potential damaged by a plant pest, and is not incompatible with the rules on the common organisation of the markets in agricultural products, since it does not interfere with the mechanisms thereof. The notified aid falls under Section 1.2 of the Guidelines and thus, in accordance with point 48 of the Guidelines, the Commission considers that such aid is contributing to the objectives of rural development. Hence, the notified aid contributes to a common objective in line with points 43 and 44 of the Guidelines. (53) Taking into account the objective of the notified aid (see recital (4)) and the information provided by the Polish authorities (recital (5)), no negative impact on the environment within the meaning of point 52 of the Guidelines has been identified. Need for State intervention / Appropriateness of aid (54) Since the notified aid fulfils the specific conditions laid down in Section of Part II of the Guidelines (recital (51)), the Commission considers, in line with point 55 of the Guidelines, that the aid is necessary. For the same reason, in line with point 57 of the Guidelines, the Commission considers the aid as an appropriate policy instrument. (55) The aid instrument (direct grant, recital (8)) is the form foreseen in the specific provisions of the Guidelines. Therefore, it is in line with point 60 of the Guidelines and the Commission considers the form of the aid as an appropriate aid instrument. 7

8 Incentive effect and proportionality (56) Pursuant to point (75)(f) of the Guidelines, there is no requirement for an incentive effect for aid to compensate for the costs of prevention, control and eradication of plant pests and for losses caused by those plant pests in accordance with Section of Part II of the Guidelines. (57) 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. Similarly, point 326 of the Guidelines requires a minimum contribution from producers to losses or the cost of such aid measures or some other adequate measures which should be taken to mitigate the risk of distortion of competition and ensure that the State aid is proportionate to the losses suffered. As described in recitals (18) and (20), the Polish authorities confirmed that the beneficiary has taken reasonable preventive measures and the infestation with the plant pest was not caused deliberately or by the negligence of the beneficiary. Therefore, the Commission considers that the requirements of points 69 and 326 of the Guidelines are fulfilled. (58) As described in recitals (21) - (23), the aid amount will not exceed the eligible costs, whereas the eligible costs are calculated accurately and the maximum aid intensities foreseen in Section of Part II of the Guidelines are respected. Furthermore, as provided for in recital (27) above, there will be no cumulation of the present aid with any other aid to cover the same eligible costs. In addition, on the basis of the confirmations provided by the Polish authorities (recital (21)) the Commission concludes that the requirements of point 85 of the Guidelines are fulfilled as well. Hence, the principle of proportionality of the aid is respected. Avoidance of undue negative effects on competition and trade (59) Since the present aid fulfils the conditions laid down in Section of Part II of the Guidelines (recital (51)) and does not exceed the relevant maximum aid intensity (recital (50)), the Commission considers, in line with point 113 of the Guidelines, that the negative effect on competition and trade is limited to the minimum. Transparency (60) The transparency requirement is complied with as shown in recital (28) Other conditions (61) The Commission takes note that the beneficiary is not an undertaking in difficulty (recital (13)). This is in line with point 26 of the Guidelines. (62) The Commission takes note that the beneficiary does not have at its disposal an earlier unlawful aid that was declared incompatible by a Commission Decision (recital (14)). This is in line with point 27 of the Guidelines. (63) The Commission therefore concludes that the notified aid complies with the relevant provisions of the Guidelines. 8

9 4. CONCLUSION The Commission has accordingly decided not to raise objections to the notified aid on the grounds that it is 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 9 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 Poland will be deemed to agree to the publication of the full text of this letter. If Poland 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 nondisclosure 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/ , to the following address: agri-state-aids-notifications@ec.europa.eu. For the Commission Phil HOGAN Member of the Commission 9 10 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). 9