The European Commission has today authorised Denmark to pay compensation in cases where farmers with conventional or organic production suffer economic losses when genetically modified (GM) material is found in their crops. This is the first case where the Commission has authorised such state aid. The compensation will be granted only if the presence of GM material exceeds 0.9 % and is limited to the price difference between the market price of a crop that has to be labelled as containing GM material and a crop for which no such labelling is required. The compensation is entirely financed by obligatory contributions from farmers who cultivate genetically modified organisms (GMOs).

The admixture of conventional crops with GM material may cause economic losses to the farmer with conventional crops if his products have to be labelled as containing GM material and he gets a lower price for them. This is in particular the case with products from organic farming. At this point no insurance products against this risk exist in the European Union.

The Danish compensation scheme institutes a compensation fund, wholly financed by the producers of GM crops with an annual parafiscal tax of DKR 100 (€ 13.4) per hectare of land cultivated with such crops, to cover the economic losses due to admixture with GM material. The scheme is administered by the Danish authorities.

Compensation may be paid only to farmers and if the amount of GM material exceeds 0.9 % of the conventional or organic crop, which means that the product has to be labelled as containing GMOs, as provided by EU law (Regulation (EC) No 1829/2003 on genetically modified food and feed). The amount of compensation is limited the price difference (based on official market prices) between the GM crop and conventional or organic crops.

The payment of compensation does not free the GM farmer from any civil or criminal liability under Danish law. The Danish authorities will in all cases take action to recover the compensation paid from the farmer from whose fields the GM material has spread.

The compensation fund will be replaced by private insurance as soon as such is available. The duration of the compensation scheme is limited to 5 years.

The Commission finds that such aid contributes to a successful co-existence of GM crops with conventional and organic crops, not the least because it is wholly financed by the Danish farmers with GM crops and ends when insurance products covering the risk of admixture become available on the Community market. Such aid appears to improve the structures of agricultural production in a way that is compatible with Community policy concerning such co-existence.

Therefore the Commission has approved the aid on the basis of EU state aid rules (Article 87(3)(c) of the EC Treaty).

The text of the decisions will shortly be made available on the Internet at http://europa.eu.int/comm/secretariat_general/sgb/droit_com/index_en.htm#aides under the aid number N 568/2004.