The Commission has initiated a formal investigation procedure under Article 88(2) of the Treaty concerning an aid of 21 million Euro (850 million BF) which was granted in 1997 by the Region of Wallonia to the Verlipack group, declared bankrupt in January 1999.

The investigation concerns the injection of new capital totalling 8,6 million Euro (350 million BF) in 1997 and which was approved by the Commission in September 1998, and an additional assistance not notified to the Commission when it took its decision and which the Region of Wallonia had granted in 1977 in the form of two loans totalling 12,4 million Euro (500 million BF) for the Group Heye-Glas with a view to financing its contribution to Verlipack's capital.

The Commission decision in September 1998 was based on the fact that the Region of Wallonia had complied with the principle of a private investor operating under normal market-economy conditions. It was the Commission's understanding that the contribution by the Region to Verlipack's capital was accompanied also by a substantial contribution from a private investor, Heye-Glas. This contribution however came from public resources, thereby questioning the basis of the Commission decision. This information was lacking, when the Commission took its decision, it has now led to initiate the procedure aimed at revoking that decision.

Verlipack was active on the market in hollow container glass, with a share of 20% in Belgium and 2,2% in the European Union in 1997. The market was characterised by intra-community trade and strong competition. Verlipacks' managers stated that filing for bankruptcy was a consequence of a fall in prices due to overcapacity in glass production on the market in central Europe.

The two loans granted by the Region of Wallonia to Heye-Glas to finance its capital contribution for Verlipack is illegal because not notified. The Commission has examined the compatibility of the aid on the basis of the derogation provided for in Article 87(3) of the treaty (i.e. former Article 92(3) and has looked into whether the derogation applies under the guidelines on national regional aid and the guidelines on state aid for rescuing and restructuring firms in difficulty.

From the information available, the Commission cannot regard the aid as rescue or restructuring aid. Also, it cannot be considered to faciliate the development of certain economic activities or certain economic regions.

Therefore, the Commission decided to call on the Belgian authorities to give their observations within one month, together with any information that could help in assessing the aid.

This article is based and incorporates information provided by the European Commission (Press Releases) and is intended for general information. Specialist advice should be sought before acting on it.