State aid No N 145/2010 Germany Subsidies for training and qualification of prisoners in Saxony

EUROPEAN COMMISSION Brussels, 20.7.2010 C (2010)4920 PUBLIC VERSION WORKING LANGUAGE This document is made available for information purposes only. Subject: State aid No N 145/2010 Germany Subsidies for training and qualification of prisoners in Saxony Sir, 1. PROCEDURE (1) On 15 April 2010, Germany notified a measure in the form of subsidies to educational organisations ( Bildungsträger ) for providing training and qualification for prisoners in Saxony. The Commission requested further information by e-mail dated 26 April 2010 to which the German authorities replied on 29 April 2010. On 19 May 2010, the Commission sent an information request to Germany. The German authorities submitted the requested information on 10 June 2010. (2) Germany considers that the measure in question does not entail State aid within the meaning of the European State aid rules, but has notified the measure for the reason of legal certainty. 2. DESCRIPTION OF THE MEASURE 2.1. Purpose of the measure, legal basis (3) The purpose of the measure is to qualify prisoners in Saxony. The measure aims to preserve and to increase the employability of such prisoners as well as to improve 1

preparing their reintegration in the labour market after they have been released. The Land Saxony has 10 prisons («Justizvollzugsanstalten») with approximately 3 600 prisoners. Overall, 50 to 60 training and qualification projects per year should take place, i.e. overall 600 prisoners per year should be enabled to participate in training and qualification projects. (4) The legal basis of the measure are 23 and 44 of the Saxonian budget code ("Haushaltsordnung des Freistaats Sachsen (Sächsische Haushaltsordnung SäHO)") and the respective administrative regulations ("Verwaltungsvorschriften zur Sächsischen Haushaltsordnung (VwV-SäHO)"). Details of the measure are laid down in the implementing directive for subsidies for the qualification of prisoners, projects cofinanced by the ESF ("Richtlinie des Sächsischen Staatsministeriums der Justiz zur Förderung von aus dem Europäischen Sozialfonds mitfinanzierten Vorhaben zur beruflichen Qualifizierung von Gefangenen (ESF-Richtlinie Qualifizierung Gefangener)") 1, as changed by Directive dated 8 January 2010 2 and the Decree of the Saxonian Ministry for Justice and Europe dated 28 April 2010 3 (hereinafter referred to as "directive for qualification of prisoners") 2.2. Duration and budget (5) The directive for qualification of prisoners in its latest version applies from 28 April 2010 and it will expire on 31 December 2015. It covers the funding period from 2007 to 2013. The overall budget amounts to EUR 38,62 million, of which EUR 9,66 million will be financed by Saxony and EUR 28,96 million will be financed by the European Social Fund (hereinafter referred to as "ESF"). The amount of public funds to be granted is determined by eligible costs, which are costs directly linked to the project. Eligible costs consist, inter alia, of costs for personnel (related to project), costs for office supplies ("Verbrauchsmaterialien"), costs for equipment ("Ausstattungsgegenstand"), examination fees ("Prüfungsgebühren"), costs for contracted services ("Fremdleistungen") (eligible costs according to the ESF) 4. The eligible costs can be subsidised up to 100%. The grants have to be used within two months after disbursement for due payments; the educational organisation has to report on the expenditure of funds ("Verwendungsnachweis") 5. (6) In addition, each prisoner taking part in a qualification and training project will receive apprenticeship pay ("Ausbildungsvergütung") amounting to EUR 9,48 per day. 1 2 3 Saxonian Official Journal ("Sächsisches Amtsblatt") of 2.8.2007, p. 1062. Saxonian Official Journal of 4.2.2010, p. 148. Decree 1/2010, dated 28 April 2010, Europäischer Sozialfonds (ESF) im Förderzeitraum 2007-2013. 4 Regeln der Verwaltungsbehörde Europäischer Sozialfonds (VB ESF) zu den förderfähigen Ausgaben und Kosten im Rahmen der Förderung aus dem ESF und Landes- sowie Bundesmitteln in der Förderperiode 2007 bis 2013, Fassung vom 4.5.2009. 5 See further: Allgemeine Nebenbestimmungen für Zuwendungen zur Projektförderung (ANBest-P). 2

2.3. Recipients and form of the subsidies (7) Grants under the directive for qualification of prisoners will be directly paid to educational organisations. The educational organisation will provide qualification and training services to the prisoners, who will finally benefit of the measures in question. (8) The apprenticeship pay will be paid directly to the prisoner. 2.4. Subsidised training and qualification projects (9) Three modules are foreseen as regards the qualification and reintegration of prisoners ("Qualifizierung und Eingliederung von Gefangenen"): (a) Qualification projects ("Qualifizierungsprojekte") : projects should primarily aim on teaching in order to achieve a recognised training qualification ("anerkannter Berufsabschluss"); if a recognised training qualification cannot be awarded, a modular structure of training should be foreseen. The duration of each qualification project is between 3 and 12 months, if recognised training qualification will be awarded, up to 24 months. The goods produced and the services provided by the prisoners during such training and qualification projects will solely be used for the personal needs ("Eigenbedarf") of the prisoners. (b) (c) Social-pedagogical projects ("sozialpädagogische Projekte"): projects to support the preparation of the prisoners for integration in the labour market or a training and qualification project. The duration of each social-pedagogical project is between 3 and 12 months. Studies/concepts ("Studien/Konzepte"): providing studies and developing concepts for the development and improvement of qualification for prisoners. 2.5. Conditions for receiving subsidies (10) Educational organisations can apply for the subsidies to the qualification and training projects with the Sächsische Aufbaubank Förderbank (hereinafter referred to as "SAB"). (11) Before applying for subsidies, educational organisations have to submit a project proposal ("Vorhabensvorschlag") with the SAB. In such a project proposal, the applicant has to show that a preliminary co-ordination ("Vorabstimmung") with the prison in question took place, in particular on the question whether the implementation of the proposed project would be feasible. The German authorities confirmed that the preliminary co-ordination between prison and educational organisation only concerns co-ordination as regards the general conditions (rooms available in the prison, prisoners potentially taking part in the training and qualification project, specifics of working with prisoners). It is sufficient if the educational organisation states in its project proposal that it received such information from the prison. As a result, when considering the project proposal, no pre-selection as 3

regards the educational organisation will take place, in particular not within the preliminary co-ordination between prison and educational organisation. (12) After the SAB has informed the educational organisation that its project proposal is in principle eligible, the educational organisation can submit its application with the SAB. Only at this stage, the SAB will select the educational organisation. In the selection, the SAB will use the criteria determined in the publication of Saxonian Ministry for Economy, Employment and Traffic in the Saxonian Official Journal (hereinafter referred to as "publication") 6, as specified by the information sheets concerning different modules ("Förderbausteine"), 7 and the matrix for evaluating the bids ("Wertungsmatrix"). (13) The publication mentions, inter alia, the following criteria: orientation on demand ("Bedarfsorientierung"), initial situation ("Ausgangssituation"), objectives to be achieved, target group ("Zielgruppe"), regional classification ("regionale Einordnung"), steps and progression of the undertaking ("Arbeitsschritte und Vorhabensverlauf"), methodology for achieving the funding objective ("Methodik zur Erreichung des Förderziels"), competencies of the organisation ("Trägerkompetenz"), sustainability ("Nachhaltigkeit") and cost effectiveness ("Wirtschaftlichkeit"). (14) In addition, as laid down in the information sheets on the different modules, in all three modules, the educational organisation has to provide documents showing that it is qualified for the project in question and that its quality assurance ("Qualitätssicherung") is adequate. 3. ASSESSMENT OF THE MEASURE 3.1. Existence of aid (15) Article 107(1) TFEU 8 lays down that 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 and affects trade between Member States is incompatible with the internal market. 6 Bekanntmachung des Sächsischen Staatsministeriums für Wirtschaft, Arbeit und Verkehr über die Aufforderung zur Einreichung von Förderanträgen aus dem Europäischen Sozialfonds ESF vom 3. Februar 2010, Saxonian Official Journal of 18.2.2010, p. 225. 7 See http://www.sab.sachsen.de/de/foerderung/programme/p_arbeit/foerderangebote/programmealphabetisch/index.html 8 With effect from 1 December 2009, Articles 87 and 88 of the EC Treaty have become Articles 107 and 108, respectively, of the TFEU; the two sets of provisions are, in substance, identical. For the purposes of this Decision, references to Articles 107 and 108 of the TFEU should be understood as references to Articles 87 and 88, respectively, of the EC Treaty where appropriate. 4

3.1.1. State resources (16) The measure takes the form of grants financed by the ESF and national funds, administrated by German authorities, and is thus funded from State resources. 3.1.2. Advantage (17) As regards the economic advantage provided by the measure, three levels have to be distinguished prisoners, prison and educational organisation. (18) The Commission holds that the prisoners, who are finally benefitting from the measure as well as from the apprenticeship pay are not to be considered undertakings. (19) As regards the prisons, in which the prisoners who take part in the training and qualification projects are detained, the Commission does not consider them to obtain an advantage either. First, as the grants in question are granted to the educational organisations and not to the prisons, the latter do not directly benefit from the measure. The same is true for the apprenticeship pay. Second, as the products produced and the services provided by the prisoners during their training and qualification are not sold on the market by the prisons, the prisons do not pursue an economic activity on the market and can hence in this context not be considered as undertakings. In any case, the training and qualification provided to the prisoners is not aimed at the production by the prisoners while in prison, and will not improve that production process, but at the prisoners' reintegration into the labour market. (20) As regards the educational organisations, they can be considered undertakings which offer their services for payment on the market. The question is, to which extent the measure provides them with an advantage. The apprenticeship pay is paid directly to the prisoners and does not benefit the educational organisations. (21) As regards the subsidies for providing the training and qualification projects, so far, the Commission has considered similar questions involving training provided by educational organisations in two cases: (22) In one case, the State authorities chose educational organisations that were to be subsidised in order to provide training to the employees of SMEs. The Commission held that, although the aid was granted to the educational organisations, only the SMEs would benefit from the measure as it was bound to specific projects. Accordingly, the Commission only assessed the measure in relation to the benefit for the SMEs. 9 (23) In the second case, where aid was also granted to educational organisations which provided training for internal trainers of companies, the Commission held that an advantage to the educational organisations cannot be excluded. The companies paid a 9 Commission decision of 10.1.2001 on State aid N 133/2000 Germany, Richtlinie zur Förderung von Qualifizierungsmaßnahmen im Rahmen des Beschäftigungspolitischen Aktionsprogramms für Bremen und Bremerhaven (BAP), OJ C 117, 21.4.2001, p. 21. 5

reduced participation fee for their employees and it was in principle the company that benefitted. However, according to the Commission, the educational organisations could still derive a benefit from the measure in question, as it was not sure that they indeed passed on the whole advantage via reduced participation fees to the companies. 10 (24) Having said that, the conclusions drawn in these two cases cannot be applied to the measure currently under assessment. Whereas in the two cases the training was dedicated to employees, employed by companies active on the market, and finally benefitting those companies, in the case at stake the training and qualification projects are dedicated to the training of prisoners who are not employed by any company. The training and qualification projects pursue social objectives, namely to preserve and to increase the employability of such prisoners as well as to improve preparing their reintegration in the labour market after they have been released. Hence, in the further assessment, the Commission will not rely on those two cases. (25) In the case at hand, the Commission considers that the public authorities are rather purchasing services, namely training and qualification projects for prisoners, than subsidising companies. In cases where such services are purchased at a fair market value, no economic advantage will be granted to the service provider. Only if a Member State pays more than a market price, the measure would eventually have to be considered as State aid. In this context, the Commission refers to the statements relating to the privatisation of state owned companies outlined in the XXIIIrd Competition Policy report 11 and the Communication on State aid elements in sales of land and buildings by public authorities 12. According to the principles laid down there, in relation to the privatisation of a state undertaking, the sale of state-owned real estate and similar transactions, it can be presumed that the public authority pays a market price if an open, transparent and non-discriminatory bidding procedure was observed. This conclusion leads to the presumption that, in principle, no State aid is involved. The same principles can be applied to the purchase of services. 13 (26) On these assumptions, it therefore needs to be examined whether there has been an open, transparent and non-discriminatory tender procedure taken place when assigning the educational organisations with undertaking training and qualification projects. In this context it has to be noted that the Commission does not take a view on whether the tender 10 Commission decision of 11.12.2002, State aid N 244/2002, 245/2002 and 246/2002 Germany, Programm zu Förderung der regionalen Schulung betrieblicher Ausbilder in der Arbeit mit Benachteiligten Jugendlichen in Ziel-2-Gebieten et. al., OJ C 78, 1.4.2003, p. 2. 11 12 European Commission (Ed.), XXIIIrd Report on Competition Policy 1993, Brussels Luxembourg 1994. OJ C 209, 10.7.1997, p. 3. 13 See e.g. Commission decision of 2.10.2002 on State aid N 264/2002, OJ C 309, 12.12.2002, p. 15, concerning an infrastructure project mainly consisting of the supply of services, paragraph 79: "In particular, the Commission considers that when these types of infrastructure arrangements are concluded after the observance of an open, transparent and non-discriminatory procedure, it is, in principle, presumed that the level of any public sector support can be regarded as representing the market price for the execution of a project. This conclusion should lead to the assumption that, in principle, no State aid is involved." 6

procedures for training and qualification projects would fall within the scope of application of the European Public Procurement Directives and whether the requirements laid down therein would be met. (27) The Commission notes that the call for applications for subsidies to educational organisations to training and qualification projects is published in the Saxonian Official Journal as well as in the information sheets concerning different modules on the website of the SAB. All educational organisations interested can submit their applications to the SAB, offering specific qualification and training projects. The selection of educational organisations for training and qualification projects will be made according to the criteria published in the publication and in the information sheets concerning different modules on the website of the SAB. After having been awarded a training and qualification project, the educational organisation will be reimbursed only the costs actually occurred. (28) In the light of the arguments set out above, the Commission concludes that the educational organisations are chosen after an open, transparent and non-discriminatory tendering procedure. Accordingly, the reimbursement of costs actually occurred by the educational organisations can be considered as undertaken at a market value and does not give rise to an advantage. (29) It can be concluded that the measure at stake does not provide an advantage, neither to the prisoners, the prisons, nor to the educational organisations. 3.1.3. Conclusion on the existence of State aid (30) In view of the fact that the measures do not give rise to an advantage for any of the potential beneficiaries, there is no need to examine whether the measures at stake are selective, distort or threaten to distort competition and whether they may affect trade between the Member States. On the basis of the facts of the specific case, the measures do therefore not constitute State aid. 4. CONCLUSION The Commission has accordingly decided that the measure does not constitute aid. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/community_law/state_aids/state_aids_texts_en.htm. Your request should be sent by registered letter or fax to: 7

European Commission Directorate-General for Competition State Aid Greffe B-1049 Brussels Fax No: +32-2-296.1242 Yours faithfully, For the Commission Joaquín ALMUNIA Vice-President of the Commission 8