1 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 EC rules on state aid Ljubljana, October 2009 Annette MATTHIAS Principal Administrator DG COMP H 3 DG Competition Annette MATTHIAS Principal Administrator DG COMP H 3 DG Competition

2 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Outline 1.Why state aid control? 2.What is a state aid? 3.Can the measure be authorized? 4.State aid procedures 5.Conclusion

3 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Why state aid control? State aid control aims at - avoiding a subsidy race - ensuring proper functioning of the Internal market - facilitating a competitive European Industry - being element of cohesion

4 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Notion of state aid What is state aid? Art. 87 (1) of the Treaty: Aid granted by a Member State or through state ressources Advantage to the « beneficiary favouring » Selectivity: « certain undertakings or the production of certain goods » Effect on trade between Member States Distortion or risk of distortion of competition

5 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 State ressources Granted by a Member State or through State ressources –« Member State » includes central government, regions, communities –« Through state ressources » refers to public or private bodies established or appointed by the Member State to administer aid –Discussion on whether Structural Funds support can be seen as state ressources.

6 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 State ressources They include : - direct capital transfers - guarantees - Income foregone, e.g. tax breaks, assets sold below market price - funds under control and disposal of the State, e.g. parafiscal taxes, yield of national lottery

7 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Advantage Transfer of ressources or relief from charges which a company normally has to bear Advantage for free or without adequate consideration Exceptions: market investor principle private creditor principle compensation for SGEI (Services of general economic interest)

8 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Advantage Market economy investor principle (MEIP) Equality between private and public sectors No advantage if Member State (MS) puts capital at the disposal of an undertaking in circumstances which correspond to normal market conditions No distortion of competition, if MS behaves like a private investor

9 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Advantage SGEI: no aid if –Parameters for compensation established in advance in an objective and transparent manner –No overcompensation (costs and reasonable profits) –Tender or comparison with costs of typically well run undertaking (difficult to define) –Clear public service obligation and clearly defined

10 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Selectivity Favouring certain undertakings or the production of certain goods –Geographical specificity –Sectoral specificity –Specificity as to type of company or activity –Discretionary power of the granting authority when deciding on the beneficiary.

11 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Effect on trade Sufficient that a product or service is subject to trade between Member States Even if the aid beneficiary does not export or exports virtually all of its production outside the EU Exception:De minimis, local services

12 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Risk of distortion of competition Aid strengthens the competitive position of the beneficiary in respect to its competitors and thereby distorts competition. Not required that distortion is substantial or significant Exception: Aid under the De minimis Regulation ((EC) No 1998/2006) (No aid)

13 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 De Minimis De minimis aid is not considered to be state aid, because the effect on trade is considered not to be sufficient to provoke a distortion of competition. Therefore the question of cumulation with other state aid rules is sometimes difficult. Regulation 1998/2006 tries to clarify: no cumulation possible, if the other aid instrument relates to the same eligible costs. New Regulation: Commission Regulation Nr. 1998/2006 increases the max. aid amount to € over 3 years per undertaking Includes requirement of transparent aid, i.e. aid for which the gross aid equivalent can clearly been defined.

14 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Compatibility If state aid is involved, it can be declared compatible with the Treaty. legal instruments on on/legislation.html on/legislation.html Procedural conditions: state aid project must be notified In case of use of GBER only summary information must be send to the Commission

15 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Procedures Notification via SANI (State Aid Notification Interactive) web application After notification standstill obligation until the Commission has decided If block exempted measure no standstill obligation Possible Commission decisions: –No aid –Positive (authorized aid) –Negative –Conditional

16 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 GBER (General Block exemption Regulation) Regulation n° 800/2008 of 6/8/2008 (OJ L 214 of 9/8/2008, p. 3) Chapter I: Horizontal provisions Standardised conditions and definitions Harmonisation & simplification Chapter II: Different exempted aid types, employment aid, SME aid, investment aid, aid for environment, R&D&I etc. Chapter III:Transitional provisions Annexes: Summary information form for measures under the GBER -Definition of SME (cf Commission Recommendation 2003) -Summary information sheets for R&D and large regional projects (specific information for large individual aid measures within an aid regime, which are below the notification threshold)

17 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Monitoring On site monitoring, where CM has serious doubts that positive decision has been complied with (not used so far) Annual reports (will be introduced in state aid scoreboard) Addressee of decisions: MS Publication of decisions in Official Journal of European Communities) Search function Register- DG COMP Website

18 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Conclusion Projects realised under Structural Funds may have a state aid component, in particular when private companies are involved Possibly check with Economics or Finance Ministry, whether state aid component If yes, notify (standstill obligation) or send summary information (Aid may be granted under GBER, but information sheet should follow within 20 days) State aid authorities in Member States know how to do this via SANI application and have corresponding access rights.

19 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Thank you for your attention!