The European Commission has rejected the Polish Government's plans for restructuring the shipyards in Szczecin and Gdynia.

The Commission's view is that the plans are incompatible with EC state aid rules but it has agreed to postpone its final decision until 12 September 2008. This is when the Polish Government has promised to submit amended plans once its ongoing negotiations with potential investors have been concluded.

This is not the first time the Commission has postponed a decision in these proceedings, which began in 2004.

If the plans submitted in September are also incompatible with EC state aid rules, the Commission can give a final negative decision and order the recovery of all state aid granted to both yards since May 2004, together with accrued interest.

State aid given to Gdynia shipyard includes capital injections and loans amounting to EUR 497 million as well as production guarantees of EUR 915 million (nominal value); while Szczecin shipyard has received EUR 165 million in support and production guarantees of EUR 570 million (nominal value).

Both shipyards have been in trouble since the 1990s. Poland's authorities have already undertaken a number of attempts to privatise the yards, but all of them have been unsuccessful. Neither of the shipyards has made a profit since at least 2004 and they would not have survived without the subsidies.

This issue has already been discussed in Law-Now dated 31 July 2007.

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The original publication date for this article was 21/07/2008.