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

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1 EUROPEAN COMMISSION Brussels, C(2016) 7639 final Subject: State aid/germany SA Hamburg: The cultivation of a minimum of five different annual crop varieties on the undertaking's agricultural land (crop rotation) SA Hamburg: Extensive cultivation of permanent grassland SA Hamburg: Setting up of flower beds and flower strips Sir, The European Commission ("the Commission") wishes to inform Germany that, having examined the information supplied by your authorities on the State aid scheme referred to above, it has decided not to raise any objections to the relevant scheme 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 24 May 2016, registered by the Commission on the same day, Germany notified, according to Article 108(3) TFEU, the above mentioned aid scheme. The Commission has requested additional information to the German authorities by letter of 25 July 2016 and 26 August 2016, which the German authorities provided by letters of 16 August and 21 September DESCRIPTION 2.1. Title (2) The decision concerns the following three schemes, which grant support for agrienvironment-climate commitments: a) Hamburg: The cultivation of a minimum of five different annual crop varieties on the undertaking s agricultural land (crop rotation) His Excellency Dr. Frank-Walter Steinmeier Bundesminister des Auswärtigen Werderscher Markt Berlin DEUTSCHLAND Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel

2 b) Hamburg: Extensive cultivation of permanent grasslands c) Hamburg: Setting up of flower beds and flower strips 2.2. Objective (3) The three schemes support ways of using agricultural land, which are compatible with the protection and improvement of the environment, the landscape and its features, natural resources, the soil and genetic diversity. (4) The scheme concerning the cultivation of a minimum of five different annual types of main crop on the undertaking s agricultural land (recital (2)a)) aims at the sustainable improvement of natural and economic production conditions in agriculture through a "5 step" crop rotation that addresses the concerns of protection the environment and the preservation of the natural habitat. (5) The scheme on the extensive cultivation of permanent grasslands (recital (2)b)) aims at the introduction or maintenance of extensive cultivation of permanent grasslands in view of the sustainable improvement of the natural and economic conditions of production. (6) The scheme on the setting up of flower beds and flower strips (recital (2)c)) aims at the promotion of wild flower areas in the agricultural landscape which can serve various fauna species, bees or other wild animals as host, food or protective plants. Contribution to a common objective (7) For efficiency reasons Hamburg decided not to participate anymore in the current rural development subvention period and therefore did not draw up a Rural Development Plan (RDP) for the period under Regulation (EU) No 1305/2013. Hence, there is no funding of the notified scheme under such RDP. On the basis of the experience gained with the implementation and the evaluation of similar previous measures implemented under the RDP , the Hamburg authorities consider as the main reason for these schemes not falling under a RDP that the administrative management of a RDP is not proportional to the needs of the City State Hamburg. However, according to the German authorities, the measure is designed in a consistent manner with the conditions laid down in Article 33 of Regulation (EU) No 1305/ The German authorities have provided documentation according to which the evaluation report 2014 established by the "Thünen Institut" 2 regarding the similar agro-environment commitments implemented under the former RDP , have had a fundamental positive influence on the environment and the sustainability of agricultural practices. Indeed, crop rotation improves the sustainability of the natural and economic production conditions and contributes to the protection of the environment and the preservation of the natural habitat. 1 2 Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005. OJ L 347, , p Annual interim report (Jährlicher Zwischenbericht 2014 gemäß Art. 82 der Verordnung (EG) Nr. 1698/2005 über die Umsetzung des Entwicklungsprogramms für den Ländlichen Raum der Freien und Hansestadt Hamburg Stadt-Land-Fluss. Juni 2015). 2

3 The extensive cultivation of permanent grasslands has positive effects over the natural and habitat conditions, while the setting up of flower beds and flower strips aims at the promotion of wild flower areas in the agricultural landscape which can serve various fauna species, bees or other wild animals as host, food or protective plants. Therefore, according to the German authorities, the three measures lead to added value in terms of sustainability of the agricultural practice and they contribute to the CAP objectives of sustainable management of natural resources Legal basis (8) The legal bases of the notified schemes are the following: 2.4. Duration [LS: please insert and EN translation for these 3 acts, either in the main text or in a footnote. You may keep te DE text, too.] Richtlinie der Freien und Hansestadt Hamburg zur Gewährung von Fördermitteln für die Durchführung von Maßnahmen zur markt- und standortangepassten Landbewirtschaftung nach dem Agrarpolitischen Konzept Anbau von jährlich mindestens fünf verschiedenen Hauptfruchtarten auf der Ackerfläche des Betriebes (5- gliedrige Fruchtfolge) 3 ; Richtlinie der Freien und Hansestadt Hamburg zur Gewährung von Fördermitteln für die Durchführung von Maßnahmen zur markt- und standortangepassten Landbewirtschaftung nach dem Agrarpolitischen Konzept Extensive Bewirtschaftung des Dauergrünlandes 4 ; Richtlinie der Freien und Hansestadt Hamburg zur Gewährung von Fördermitteln für die Durchführung von Maßnahmen zur markt- und standortangepassten Landbewirtschaftung nach dem Agrarpolitischen Konzept Anlage von Blühflächen oder Blühstreifen 5. (9) Aid under the three schemes can be granted from the date of approval by the Commission until 31 December Budget (10) The total budgets of the three schemes are the following: (a) The cultivation of a minimum of five different annual crop varieties on the undertaking s agricultural land (recital (2)a)): EUR (b) The extensive cultivation of permanent grasslands (recital (2)b)): EUR Directive of the Free and Hanseatic City of Hamburg on the granting of funding for the implementation of measures for market and site-adapted land management according to the agricultural policy concept The cultivation of a minimum of five different annual crop varieties on the undertaking's agricultural land (crop rotation). Directive of the Free and Hanseatic City of Hamburg on the granting of subsidies for the implementation of measures for market and site-adapted land management according to the agricultural policy concept Extensive cultivation of permanent grasslands. Directive of the Free and Hanseatic City of Hamburg on the granting of subsidies for the implementation of measures for market and site-adapted land management according to the agricultural policy concept Hamburg: Setting up of flower beds and flower strips. 3

4 (c) The setting up of flower beds and flower strips (recital (2)c)): EUR 2.6. Beneficiaries (11) Beneficiaries are small or medium sized enterprises (SME), which are active in the primary agricultural production 6, who exercise the agricultural activity of the undertakings on agricultural land themselves, or associations of such undertakings. The number of beneficiaries per scheme is estimated between 11 and 50. (12) SME are enterprises pursuant to the criteria laid down in Annex I to Commission Regulation (EU) No 702/2014 of 25 June (13) Eligible are agricultural areas located on the territory of City State Hamburg. (14) The following are excluded from the scope of beneficiaries: a) undertakings subject to an outstanding recovery order following a previous Commission Decision declaring an aid illegal and incompatible with the internal market; b) undertakings in difficulty as defined in point 35(15) of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas (hereinafter: the "Guidelines"), or c) undertakings, in respect of whose assets, to which an insolvency proceeding has been applied for, opened or has been ended due to lack of assets. The same applies to applicants and, where the applicant is a legal person, to the proprietor of the legal person, who have made, or are obliged to make, an application to open insolvency proceedings in accordance with 807 of the Code of Civil Procedure or 284 of the Fiscal Code Description of the aid schemes The cultivation of a minimum of five different annual crop varieties on the undertaking s agricultural land (15) The subject of the aid is the cultivation of at least five different main crop varieties in combination with the cultivation of leguminous plants on the farmland of the undertaking. (16) The granting of the aid is subject to the following technical requirements: Active farmers in the meaning of Article 9 of Regulation (EU) N 1307/2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009, OJ L347, , p Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union. OJ L 193, , p. 1. OJ C 204, , p. 1, amended in the 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.4). 4

5 at least five different crop varieties should be cultivated; the cultivation of crops should not exceed per type of crop a minimum of 10 % and a maximum of 30 % of the surface of the area at the time of the submission of the application; should there be more than five main crop varieties cultivated, while the minimum of 10 % of the land is not attained, then all crop types can be combined until the said threshold is attained. the cultivation of cereals should not exceed a maximum of 66 % of the agricultural land; at least 10 % of the area at the time of the submission of the application should be cultivated with legumes or a mixture containing legumes; the share of raw fodder that contains legumes should not exceed 40 %. (17) For the purpose of this scheme, the supported legumes are peas, field beans, lupines, lentils, soya seed, lucerne (alfalfa), clover, grass-clover and grass-alfalfa as arable fodder. (18) The setting aside from agricultural production of land in good agricultural and environmental condition is not to be regarded as main crop. Such areas are to be considered agricultural land for the purposes of the measurement of the obligation of cultivation. Extensive cultivation of permanent grasslands (19) The subject of the aid is the extensive management of the entire permanent grassland of the undertaking with a maximum stocking density of 1,4 LSU/ha main fodder area (HF), grassland and arable fodder. Permanent grassland refers to non-rotational land used to grow constantly (at least for a period of five years) grass or other herbaceous fodder. It may be either sown or natural. (20) The granting of the aid is subject to the following technical requirements: a maximum stocking density of 1,4 LSU/ha main feed area during the commitment period, as well as a minimum stocking density of 0,3 LSU/ha; a maximum quantity of farmyard manure is applied, corresponding to a stocking density of 1,4 LU per hectare of agricultural area; turning or loosening of the soil on the grassland is not permitted (grassland renewal by reseeding), irrigation or betterment measures are not supported; the main fodder area and the permanent grassland should be used at least once per year, nonetheless undertakings have to abstain from an under- or over-usage of individual areas; usage of pesticides is not permitted, unless exceptionally authorised by the granting authority; usage of mineral fertilisers is not permitted on the permanent grassland. (21) No aid shall be granted in the case of undertakings which receive support for organic farming. 5

6 The setting up of flower beds and flower strips (22) The subject of the aid is the creation and maintenance of wild flower areas or flower strips, as well as the annual reseeding on the agricultural land of undertakings as a non-investment measure for a period of five years. (23) The granting of the aid is subject to the following technical requirements: authorised is (a) the planting of flower strips along fixed field boundaries with a width of at least 5 meters and no more than 24 metres; or (b) the planting of flower strips within a specific field with a width of at least 5 meters and no more than 24 metres; or (c) the planting of flower areas of no more than 2 hectares per field; wild flower areas shall be planted with a mixture of seeds adapted to the location in order to obtain a rich flowering and shall be planted annually; the plant species have to differentiate themselves from the neighbouring crops; they should at least flower partially in summer or in autumn; the working methods are limited at tillage and mechanical removal of bad herbs and one mowing after the end of flowering (but not during the period from 1 May to 15 September); the use of plant protection products and fertilisers is not permitted; in cases when the establishment of a flower area does not success, the area will be re-seeded; the mixture of seeds should contain at least 10 different flowering plants. No type of plant should have a preponderance of more than 20%; the ordering/delivery document should serve as a proof for this requirement; the utilisation of the flowers for economic purposes and the rotation of the cultivated area are not permitted. Common conditions for the three schemes (24) Excluded from funding are: a) measures which, according to other national or European requirements, are already binding, in particular as compensatory measures under the nature conservation legislation; b) the planting under the first two schemes (recital (2)a) and b)) of flower areas or flower strips; these are to be subsidised only under the third scheme (recital (2)c). (25) The commitments are undertaken on a voluntary basis by SMEs, which are active in the primary agricultural sector, for a renewable period of five years. The renewal is not automatic. The commitment period of five years starts on 1 January of a given year and ends on 31 December of the fifth year. (26) The German authorities have notified that the aid will cover only those voluntary commitments going beyond the relevant mandatory standards established 6

7 pursuant to Chapter I of Title VI of Regulation (EU) No 1306/2013 9, the relevant criteria and minimum activities as established pursuant to points (c)(ii) and (c)(iii) of Article 4(1) of Regulation (EU) No 1307/2013, and relevant minimum requirements for fertiliser and plant protection products use as well as other relevant mandatory requirements established by national law. The German authorities have identified and described the mandatory standards and requirements in the notification to the Commission and have thus confirmed that the commitments supported hereunder go above these mandatory standards and requirements. (27) The German authorities have confirmed the endeavour to ensure that the undertakings that undertake to carry out operations under the schemes are provided with the knowledge and information required to implement them, such as by commitment-related expert advice and/or by making aid under this measure conditional on obtaining relevant training. (28) The national legal bases stipulate that the application for aid by the applicant has to be submitted to the competent authority before the start of the activities of the commitment period. In line with this condition, the deadline for submission of the aid application for the commitment year 2017 is set at 15 December The aid application contains amongst others the applicant's name and the size of the undertaking, a description of the project or activity, including its location and start and end dates, the amount of aid needed to carry it out and the eligible costs. (29) For the commitment year 2016 applications for aid were submitted to the competent authorities of Hamburg in These applications followed the continuation of the previous commitment period under the Rural Development Program of Hamburg for the period As declared by the German authorities, the granting authority has, however, not granted the aid yet, waiting for the approval of the Commission of the current notified aid scheme. A stand still clause is provided for in point 12, second sentence of the national legal basis as well as in the formal aid application template. (30) The aid is granted trough the budget of the Free and Hanseatic City of Hamburg. The granting authority is the "Behörde für Wirtschaft, Verkehr und Innovation in Hamburg". (31) Agricultural area is defined as any area taken up by arable land, permanent grassland and permanent pasture or permanent crops as defined in Article 4 of Regulation (EU) No 1307/ Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008. OJ L 347, , p According to the German authorities, aid for activities undertaken during the commitment year 2016, for which the application for aid has been submitted during the year 2016, is not part of the notified schemes, but may be covered by application of Regulation (EU) No 1408/2013 regarding de minimis aid in the agriculture sector (Commission Regulation (EU) No 1408/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in the agriculture sector. OJ L 352, , p. 9). Hamburg has ensured that the provisions of the agriculture de minimis Regulation will be respected. 7

8 2.8. Type of aid (32) Direct grant Aid amount (33) The aid amounts have been calculated by Germany on the basis of the additional net costs excluding value added tax (VAT), which result from the commitments made by the beneficiaries. The figures have been calculated by an independent body (KTBL 11 ). The aid amount covers all or part of the additional costs and income foregone resulting from the commitments. The German authorities ensured that the calculations and the corresponding aid (a) contain only elements that are verifiable; (b) are based on figures established by appropriate expertise; (c) indicate clearly the source of the figures used; (d) are differentiated to take account of regional or local site conditions and actual land use, where applicable; and (e) do not contain elements linked to investment costs. (34) The aid shall be granted annually. (35) The German authorities notified that the rules for area related payments provided for in Article 47 of Regulation (EU) No 1305/2013 and in any delegated act adopted pursuant to that provision shall be complied with. The cultivation of a minimum of five different annual crop varieties on the undertaking s agricultural land (36) The annual amount of the aid to be granted is fixed at 90EUR/ha per year for crop rotation on supported agricultural land and 55EUR/ha per year for crop rotation on supported agricultural land for undertakings which receive support for the introduction or continuation of ecological cultivation methods. Aid amounts which are lower than EUR 300 per year will not be granted. Extensive cultivation of permanent grasslands (37) The annual amount of the aid to be granted is fixed at 130EUR/ha per year of supported permanent grassland. Aid amounts which are lower than 300EUR per year will not be granted. The setting up of flower beds and flower strips (38) The annual amount of the aid to be granted is fixed at 750EUR/ha per year for supported flower areas or flower strips and annual reseeding. Aid amounts which are lower than EUR 100 per year will not be granted. (39) The German authorities explained that the aid amount granted under recital (38) above is justified by the following particularities: Financial calculation: The regular amount of 450 EUR/ha per year for other land uses permitted by the Guidelines (according to point 228 thereof) is not sufficient to cover the additional costs incurred and the 11 Kuratoriums für Technik und Bauwesen in der Landwirtschaft e.v. (KTBL). The KTBL is an association of private law, which is for its decisions not depending upon Federal or Regional authorities and performs its task with qualified experts. 8

9 income foregone of this operation. The aid corresponds to the income foregone by the undertaking by waiving the cultivation and crop rotation of a crop and the economic value of its respective harvest (established at 701EUR/ha), adding the costs for the establishment of the flowering areas/strips consisting in soil preparation, sowing, annual reseeding, cost of seeds and equipment (established at 252EUR/ha), which results in a total amount of 953 EUR/ha. Habitat and environmental conditions: Due to high urban density in the Hamburg area, the undertakings dispose of under-average size of land. The creation of flower areas/strips can therefore occur only to a lesser extent and the costs are higher. In addition, the flower area is replanted annually, without producing economic value, which results also in higher costs. Therefore there is a higher need of incentivizing the undertakings to choose a less productive form of land usage Cumulation Taking into account the aspects presented above, the German authorities consider it duly justify the increase of the aid amount with 300 EUR/ha per year. (40) The level of payment for each commitment year is determined on the basis of the yearly application for payment. Aid may be granted concurrently under several schemes or cumulated with ad hoc aid, provided that the total amount of State aid for an activity or project does not exceed the aid ceilings laid down in the Guidelines. The aid shall not be cumulated with de minimis aid in respect of the same eligible costs if such cumulation would result in an aid intensity or aid amount exceeding that fixed in the Guidelines. In order to ensure compliance with the permissible aid ceilings, the national competent authorities shall clear the aid amount, which may lead to a reduction of the aid Other commitments (41) The legal bases of the present three schemes contain a revision clause for operations undertaken, in order to ensure their adjustment in the case of amendments of the relevant mandatory standards, requirements or obligations referred to in Section of the Guidelines beyond which the commitments have to go. (42) The legal bases stipulate that the beneficiaries of the aid have to agree in the application for aid to the revision clauses mentioned above in recital (41). (43) Furthermore the aid scheme stipulates that the commitment expires and the aid amount is reduced to the amount corresponding for the period until the expiry of the commitment, if the adjustments referred to in recital (41) are not accepted or not implemented by the beneficiary. (44) The publication of the aid scheme, the identity of the granting authority and the individual aid grants above EUR will be effectuated on the following web page: 9

10 The information will be kept for 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 (45) According to Article 107(1) 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". (46) 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 (iv) the measure must distort or threaten to distort competition and affect trade between Member States. (47) The notified schemes confer an advantage on their recipients. This advantage is granted through State resources (recital (30)) and it favours holders of agricultural land which voluntarily engage themselves to agricultural practices such as the crop rotation, permanent grassland and creation of flower beds, as indicated in recitals (4), (5) and (6). These practices are increasing the value of the produce and strengthening the undertaking's 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. 12 (48) 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-eu trade. 13 The beneficiaries of aid operate on the agricultural market, where intra-trade takes place. The sector concerned is open to competition at EU level 14 and therefore sensitive to any measure in favour of production in one or more Member States. Therefore, the present schemes are liable to distort competition and to affect trade between Member States. (49) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the proposed schemes constitute State aid within the meaning of that Article. The aid may only be considered compatible with the common market if it can benefit from one 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. The volume of intra-eu trade in agricultural products is significant. As an example, in 2015 the value of intra-eu imports in cereals exceeded 2,988 Mio EUR, and the value of intra-eu exports in cereals exceeded 3,072 Mio EUR. (Source: 10

11 3.2. Lawfulness of the aid Application of Article 108(3) TFEU (50) The aid scheme was notified to the Commission on 24 May It has not been implemented yet. Therefore, Germany has complied with its obligation under Article 108(3) TFEU Compatibility of the aid Application of Article 107(3)(c) TFEU (51) 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. (52) For this derogation to be applicable, the aid must comply with the relevant Union State aid rules. (53) In the agricultural sector, this derogation applies to aid which complies with the Guidelines Application of the Guidelines (54) As regards the notified aid schemes, Part II, Section of Guidelines is applicable. (55) It follows from point 207 of the Guidelines that the Commission will consider aid for agri-environment-climate commitments 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 specific conditions set out in Section of Part II of the Guidelines Common Assessment Principles (56) Contribution to a common objective: As described in recitals (3) to (6), the objective of the present notified schemes is agro-environmental commitments. The notified aid schemes contribute to a common objective in line with points 43 and 44 of the Guidelines, namely the sustainable improvement of the natural and economic production conditions that respect the protection of the environment and the conservation of natural habitats. Even if the schemes are not part of an approved RDP, they contribute to a common objective, as spelled out in recital (7). (57) Need for State intervention: According to point 55 of the Guidelines, the Commission considers that the market is not delivering the expected objectives without State intervention concerning the aid measures fulfilling the specific conditions laid down in Part II. As, shown below in section , those conditions are fulfilled in the present case. Thus, the Commission considers the notified aid schemes to be necessary to achieve the objectives of common interest specified under Section 3.1 of Part I of the Guidelines. (58) Appropriateness of aid: According to point 57 of the Guidelines, the Commission considers that aid granted in the agricultural and forestry sectors and in rural areas, which fulfils the specific conditions laid down in the relevant Sections of 11

12 Part II, is an appropriate policy instrument. As shown below in section , those conditions are fulfilled in the present case. Thus, the Commission considers that the aid is granted by means of an appropriate instrument to address the objective of common interest. (59) The aid is a premium as provided for in point 228 of Part II, Section of the Guidelines. Therefore point 60 of the Guidelines is complied with. (60) Incentive effect and need for aid: It follows from recital (28) that the aided activity under the notified schemes will only start after the beneficiary has submitted an aid application to the national authorities and that the aid application contains all the elements required under point 71 of the Guidelines. The aid schemes therefore fulfil the requirements of incentive effect in line with points 70 and 71 of the Guidelines. (61) Proportionality and cumulation of the aid: Points 82 and 84 of the Guidelines stipulate that if the aid amount does not exceed the eligible costs and that the aid intensity respects the ceilings set out in the Part II thereof, the aid is deemed to be proportionate. The premium is exceeded in one case, with respect to setting up of flower beds and flower strips. However, the Commission assesses that the latter premium remains proportionate because the aid amount covers only partially the additional costs for the establishment of the flowering areas/strips and the loss of income of the undertaking which waives the cultivation f the land and the economic value of its harvest. Moreover, it is acknowledged that the underaverage sizes of land in the Hamburg area dis-incentivize the creation of flower areas/strips (see recital ((39))). Therefore, the aid schemes fulfil the specific conditions regarding the eligible costs and the aid intensity laid down in Part II, Section of the Guidelines, as shown below, and therefore points 82 and 84 of the Guidelines are complied with. Pursuant to point 86 of the Guidelines recoverable VAT is not eligible for aid. According to recital (33) VAT is excluded from aid. Point 86 of the Guidelines is therefore complied with. Point 93 of the Guidelines stipulates that Member States may fix the aid amount for the measures or types of operations referred to in Section of Part II of the Guidelines on the basis of standard assumptions of additional costs and income foregone. Member States should ensure that the calculations and the corresponding aid (a) contain only elements that are verifiable; (b) are based on figures established by appropriate expertise; (c) indicate clearly the source of the figures used; (d) are differentiated to take account of regional or local site conditions and actual land use, where applicable; and (e) do not contain elements linked to investment costs. As explained in recital (33), these provisions are complied with. (62) Points 99, 100 and 104 of the Guidelines contain rules on cumulation. As the German authorities have confirmed that the total aid cannot be cumulated with de minimis aid or with aid received from other local, regional, national or EU schemes if it exceeds the aid ceilings of the Guidelines (recital (40)), the conditions of these points of the Guidelines are fulfilled. Point 102 of the Guidelines provides that State aid should not be cumulated with payments referred to in Articles 81(2) and 82 of Regulation (EU) 1305/2013. As a RDP does not exist for Hamburg (recital (7)), no such cumulation occurs. Point 102 of the Guidelines is therefore complied with. 12

13 (63) Avoidance of undue negative effects on competition and trade: According to point 113 of the Guidelines, the Commission considers that where an aid fulfils the conditions and does not exceed the relevant maximum aid intensities laid down in the applicable Sections of Part II of these Guidelines, the negative effect on competition and trade is limited to the minimum. The first two aid schemes (recitals (2)a) and (2)b)) fulfil the conditions laid down in Section of the Guidelines, as shown below in section and therefore point 113 of the Guidelines is complied with in their respect. The third aid scheme (recital (2)c)) exceeds the relevant maximum aid intensity due to the reasons highlighted in recital (39) above. However, this higher aid amount is not expected to have negative effects on competition and trade due to the fact that the flowers will not be traded (recital (23)). (64) The information required under points 128 and 131 of the Guidelines will be published on /home/ (recital (44)). Therefore, the transparency requirement is complied with Specific assessment according to the category of aid: Aid for agro-environment-climate commitments (65) According to point 208 of the Guidelines, Section applies to aid to undertakings active in the primary agricultural production which undertake, on a voluntary basis, to carry out operations consisting of one or more agrienvironment-climate commitments on agricultural land, which is to be defined by Member States, including but not limited to the definition of agricultural area provided for in point (35)50 of the Guidelines. Pursuant to recitals (18) and (31), this provision is complied with. (66) Pursuant to recitals (3) to (6) the schemes provide for changes in the agricultural practices which make a positive contribution to the environment and climate. Therefore point 209 of the Guidelines is complied with. (67) According to point 210 of the Guidelines, the aid will cover only those voluntary commitments going beyond the relevant mandatory standards established pursuant to Chapter I of Title VI of Regulation (EU) No 1306/2013, the relevant criteria and minimum activities as established pursuant to points (c)(ii) and (c)(iii) of Article 4(1) of Regulation (EU) No 1307/2013, and relevant minimum requirements for fertiliser and plant protection products use as well as other relevant mandatory requirements established by national law. The mandatory standards and requirements must be identified and described in the notification to the Commission. As explained in recital (26), this provision is complied with. (68) According to point 211 of the Guidelines, Member States should endeavour to ensure that the undertakings that undertake to carry out operations under this measure are provided with the knowledge and information required to implement them, such as by commitment-related expert advice and/or by making aid under this measure conditional on obtaining relevant training. As explained in recital (27) this provision is complied with. (69) According to point 212 of the Guidelines, the commitments must be undertaken for a renewable period of one to seven years. As explained in recital (25) this provision is complied with. 13

14 (70) According to point 213 of the Guidelines, the rules for area related payments provided for in Article 47 of Regulation (EU) No 1305/2013 and in any delegated act adopted pursuant to that provision should be complied with. As explained in recital (35) this provision is complied with. (71) Points 214 to 220 of the Guidelines are not applicable for the current schemes. (72) According to point 221 of the Guidelines, the aid must be granted annually and may compensate undertakings active in primary agricultural production for all or part of the additional costs and income foregone resulting from the commitment made by them. As explained in recitals (33) and (34), this provision is complied with. (73) Point 222 of the Guidelines is not applicable for the schemes. (74) Transaction costs are not covered by the notified aid schemes, therefore points 223 to 225 of the Guidelines are not applicable. (75) The aid does not apply to aid granted to organic farming measures, therefore point 226 of the Guidelines is complied with (see recital (21) above). (76) Point 227 of the Guidelines is not applicable for the current schemes. (77) Pursuant to recitals (36) and (37), the maximum amounts of the aid for the first two schemes (recitals (2)a) and b)) are 90EUR/ha for crop rotation of annual crops on supported agricultural land, 55EUR/ha for crop rotation of annual crops on supported agricultural land for undertakings which receive support for the introduction or continuation of ecological cultivation methods; 130EUR/ha for supported permanent grassland (annual crop). Therefore, point 228 of the Guidelines is complied with as concerns the first two schemes (recitals (2)a) and b)). (78) Pursuant to recital (38), the maximum amount of the aid for supported flower areas/strips and annual reseeding (annual crop) is 750EUR/ha. This amount was increased in comparison with the regular maximum amount of 450 EUR/ha. The increase is duly substantiated, taking into account the circumstances explained in recital (39) above. Therefore, point 229 of the Guidelines is complied with as concerns the third scheme (recital (2)c)) Other commitments (79) Point 724 of the Guidelines requires a revision clause to be provided for operations undertaken pursuant to Section of Part II of the Guidelines, in order to ensure their adjustment in the case of amendments of the relevant mandatory requirements. As mentioned in recital (41) the aid schemes provide for a revision clause for such adjustments. The condition of point 724 of the Guidelines is therefore met. (80) Point 725 of the Guidelines requires a revision clause to be provided for operations undertaken pursuant to Section of Part II of the Guidelines which extend beyond the rural development programming period , in order to allow for their adjustment to the legal framework of the following programming period. It follows from recital (42) that the aid schemes contain a 14

15 revision clause with regard to adjustments required by point 725 and that the conditions of this point of the Guidelines have been fulfilled. (81) Point 726 of the Guidelines requires the expiry of the commitment and aid amount to be reduced in cases where the beneficiary does not accept the adjustments mentioned in recitals (79) and (80). It follows from recital (43) that the aid schemes contain a revision clause with regard to adjustments required by points 724 and 725 and that the conditions of point 726 of the Guidelines have been fulfilled. Furthermore the aid schemes ensure that the beneficiary agrees to these revision clauses (recital (42)). (82) The Commission notes that undertakings in difficulty are excluded from any support and that Germany will suspend the payment of the notified aid if the beneficiary still has at its disposal an earlier unlawful aid that was declared incompatible by a Commission decision (recital (14)), in line with points 26 and 27 of the Guidelines. 4. CONCLUSION The Commission has accordingly decided not to raise 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 15 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, Germany will be deemed to agree to the publication of the full text of this letter. If Germany 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(4) 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 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 (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 140, , p. 1). 15