Port Security Conference

April 30, 2003

EC to investigate Italian shipbuilding guarantee scheme
The European Commission today initiated a formal investigation of Italy's Shipbuilding Guarantee Fund. The Fund is not yet operative, but after an initial assessment of the scheme the Commission cannot determine that it does not break European Union rules on state aid.

On May 16, 2001 the Italian authorities notified the Commission of adoption of a decree implementing the Shipbuilding Guarantee Fund ("the Fund").

The Fund is intended to cover the risk of loans taken out for the construction and conversion of ships in Italian shipyards.

The Fund will provide so-called "second-priority" end-financing guarantees to Italian and foreign shipowners. The guarantees can be given for a sum no greater than 40 percent of the amount of the loan and, within this limit, would cover up to 90 percent of the final loss incurred by the banks for capital, contractual interest and interest on arrears, and costs. The one-off premium to be paid by the beneficiaries of the Fund is fixed and has been of set at 2.3 percent of the guaranteed amount, for 12-year loans. This amounts to a yearly premium of 0.5 percent.

In spite of an extensive exchange of information between Italy and the Commission, not all the Commission's doubts about the Italian guarantee scheme could be clarified. Therefore, the Commission considers it necessary to launch a formal investigation into the proposed scheme. This will also give interested third parties the opportunity to submit their comments on the ship-financing guarantee scheme.

According to the Shipbuilding Regulation, State-granted guarantee schemes for ship-financing are only allowed if the scheme is free of State aid. General rules for assessment of whether a guarantee or a guarantee scheme contains aid are laid down in the Commission Notice on Guarantees(1). At this stage, the Commission has doubts that the Italian guarantee scheme fulfils all the conditions as set forth in this Notice on Guarantees. In particular, the Commission has doubts that the State-provided guarantee scheme, which charges a uniform premium independently of the insured risk can be considered as self-financing. Private operators offer risk insurance on the basis of an individual risk assessment.

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