A premium paid to companies stripping car wrecks in the Netherlands, so that their parts can be re-used or recycled, is being investigated by the European Commission, which claims that the rate could be so high, that it would be an illegal subsidy, outlawed by European Union law.

EC state aid rules are designed to ensure that national governments do not give their industries an unfair advantage in the EU marketplace. The Commission has the power to order Member States to cease making payments, or even order that they are repaid, if it concludes they break the regulations.

In this instance, the Commission is focusing on a system, which sets a levy of 45 euros to be paid in 2001-2003 by car producers and importers, which is used to cover the cost of dismantling and recycling car wrecks.

Because the premium paid to dismantling companies has been established by calculating the average cost of dismantling a car wreck, and the actual costs vary significantly - with some four times as low as others - the Commission alleged that "it is likely that the premium implies overcompensation" to some companies, which could be considered illegal state aid, said an EC statement.

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