Paper: Enterprise Agency instructed Ericsson to break EU rules

29.11.2012, 11:05

An audit made by the Finance Ministry shows that the Estonian arm of Swedish manufacturer of telecommunication equipment Ericsson may have to repay EUR 1.2m for grant that it received from business support agency Enterprise Estonia, writes Eesti Päevaleht daily.

Ericsson that acquired the former Elcoteq assembly plant in Tallinn in 2009 for EUR 30m had applied for a grant from Enterprise Estonia to acquire new production lines and necessary software.

The total investment made by Ericsson was EUR 4.7m, but the problem was that the company started to invest it before the grant had been paid out.

According to the auditors, Enterprise Estonia was aware of the potential breach of rules, but had encouraged the manufacturer to go on with the investment regardless.

EU funding rules for grants require that investments are not made before the grant has been approved. The logic of this requirement is that if the company goes ahead with the investment before the grant has been paid out, taking such a risk means that the company could have managed also without such a grant.

"The letter sent by Enterprise Estonia to Ericsson Estonia on December 17, 2009, recommended that they go ahead with orders for equipment, with only the invoicing and payment to take place after the application was submitted," said the auditors.
Ericsson is one of the 61 grant projects that, according to auditors, have been financed in violation of EU funding rules which means these grants can be reclaimed from recipients.

In several cases, Enterprise Estonia has retroactively re-classified the grants so that they fit with EU rules and regulations.

Enterprise Estonia has argued that the activity had not actually taken place before the application was submitted.

Raul Parusk, the acting head of Enterprise Estonia, has said that Ericsson had not started activities covered with the application before having received the yes from Enterprise Estonia.

Because of similar scandals, Ülari Alamets resigned two weeks ago as head of Enterprise Estonia.

Commenting news that Ericsson Eesti, one of Estonia’s largest foreign investors, may be forced to repay EUR 1.2m in a grant that it received from Enterprise Estonia, Seth Lacman from Ericsson Eesti says that  it would not be a problem.

In an interview to Aktuaalne Kaamera news program on ETV, Lackman said that the company had acted in accordance with the instructions received from Enterprise Estonia and is now waiting for the agency to offer a solution to the problem.

Lackman said that if the company is ordered to repay EUR 1.2m, it would be done.
Estonia has applied for a special permission from the European Commission to retroactively allow such derogation from EU rules, but it is most unlikely to be granted.