1. Notification or Block Exemption? Factors To Take Into Account

2. No Aid vs No Notification
Basic principle: planned aid measures must be notified in advance
Exception:
measure does not qualify as aid
no effect on trade
MEIP
Altmark (SGEI compensation)
aid measure exempted from notification requirement
no effect on trade: e.g. small wine museum in Sardinia
MEIP: e.g. loan at market rate
Altmark: 4 conditions for SGEI compensation not to count as SA
clearly defined public service obligation
objective and transparent parameters for compensation, established in advance
compensation limited to cost of service (taking into account relevant receipts and reasonable profit)
provider selected by tender or benchmarked against efficient undertaking

3. No Aid vs No Notification
Why does distinction matter?
objective notion of aid
cumulation rules
one-time, last-time principle
Purpose of block exemption: administrative simplification
no impact on classification as aid
derogation from notification requirement only
notion of aid: determines scope of SA control
if not aid, completely outside remit of SA control
cumulation: rules on combining several aid measures (cannot give aid under two headings for same purpose)
applies only to measures which qualify as aid
one-time-last-time principle
example:
MS gives loan to company (no notification)
could be MEIP conform (market rate)
could be rescue aid if firm in difficulty  triggers one-time-last-time

4. Legal Basis Enabling Regulation 994/98 Group exemptions:
SME aid
R&D aid
environmental protection
employment and training aid
regional aid
De minimis aid
Council Regulation
gives COM power to adopt regulations for certain aid types
areas where COM has enough experience to determine compatibility criteria

5. Block Exemptions General Block Exemption Regulation (GBER) 800/2008
De Minimis Regulation 1998/2006
SGEI Decision 2012/21
SGEI De Minimis Regulation 360/2012

6. GBER
GBER = consolidation and expansion of previous individual block exemptions
26 measures:
regional aid: investment aid + newly created enterprises
SME investment and employment aid
aid for creation of entreprises by female entrepreneurs
aid for environmental protection
aid for consultancy and participation in fairs (SMEs)
aid in the form of risk capital
aid for research, development and innovation
training aid
aid for disadvantaged or disabled workers
note notification thresholds: individual aid exceeding threshold not covered
threshold depends in measure (€2 million - €10 million)

7. GBER excluded from scope of GBER:
export aid
all ad hoc aid to large enterprises
undertakings in difficulty
Aid fulfilling all criteria is deemed compatible within meaning of Art 107(3)
also excluded: certain types of aid for certain sectors
regional aid for steel or shipbuilding
fisheries and aquaculture (except training aid, risk capital, R&D, disadvantaged and disabled workers)
coal sector (except training aid, R&D, environmental)
applies to schemes and ad hoc aid

8. De Minimis €200,000 per undertaking over 3 years
Road transport sector: €100,000 per undertaking over 3 years
excluded:
fisheries and aquaculture
primary production of agricultural products
export aid
coal sector
undertakings in difficulty
excluded also: aid for acquisition of road freight transport vehicles granted to undertakings performing road freight transport for hire or reward

9. De Minimis
Aid fulfilling all criteria is deemed not to meet criteria of Art 107(1)
no effect on trade and/or no distortion of competition
Note: strictly speaking, it is no State aid!
note focus on undertaking, not e.g. project (simplification!)
strictly no aid, but cumulation rules apply

10. SGEI Decision SGEI compensation if: < €15 million per year
hospitals
social housing and other social services
air and maritime links to islands (< 300,000 passengers)
airports < 200,000 passengers
ports < 300,000 passengers
previous decision: €30 million per year but turnover cap of €100 million
social housing and other social services: "meetingsocial needs as regards health and long term care, childcare, access to and reintegration into the labour market, social housing and the care and social inclusion of vulnerable groups"
ports and airports: passenger numbers per year

11. SGEI Decision Compatibility requirements: SGEI
entrustment act including a reference to the decision
amount of compensation: net cost plus reasonable profit
control of overcompensation
transparency requirements for aid > EUR 15 million granted to undertakings which have activities outside the SGEI
genuine SGEI: examples of manifest error???
transparency: MS must publish (on internet or by other appropriate means) entrustment and annual compensation

12. SGEI De Minimis < €500,000 over 3 years excluded:
fisheries and aquaculture
primary production of agricultural products
export aid
coal sector
undertakings in difficulty

13. SGEI De Minimis
Aid fulfilling all criteria is deemed not to meet criteria of Art 107(1)
no effect on trade and/or no distortion of competition

14. Key Concepts each block exemption has ist own compatibility rules
important to understand key concepts
Note: not all apply to all measures

15. Transparent Aid
Transparent aid = aid in respect of which gross grant equivalent can be precisely calculated in advance (without risk assessment)
Loan: gross grant equivalent calculated on basis of market interest rate
not transparent: e.g. loan with variable interest rate
more detailed guidance in individual Regulations
gross grant equivalent: before deduction of tax or other charge
guidance in Regulations on fiscal measures, capital injections, guarantees, repayable advances etc.
note: transparent aid not to be confused with transparency requirements!
GBER: summary information sheet to be sent to COM + obligation to publish full measure on internet (and maintain active web link noted in summary information sheet)
note: transparency of aid not issue under SGEI decision – compensation mechanism must be clearly set out in entrustment

16. Eligible Costs
Eligible costs = cost in relation to which aid can be paid under particular measure
State aid always granted for particular project, measure, activity
important to be clear what eligible costs are (evidence!)
not normally eligible: operating aid
GBER: express provision that "eligible costs shall be supported by documentary evidence which shall be clear and itemised"
de minimis can be used for operating aid

17. Eligible Costs depends on measure in question:
aid for new created small enterprises: legal, advisory, consultancy and administrative costs directly related to creation of enterprise
SME investment aid: costs of investment in tangible or intangible assets
aid for environmental studies: costs of study
training aid: trainer's personnel costs, travel expenses and accommodation, materials and supplies
eligible cost often pretty obvious in view of objective of aid
but always need to check carefully
e.g. aid for SME participation in fairs: covers first participation only

18. Cumulation
Cumulation = receipt by same undertaking of aid from different sources
not a problem per se: e.g. same SME can receive
training aid
investment aid to buy machine
aid for participation in fair
but: normally not for same eligible costs if maximum aid intensity exceeded

19. Cumulation Specific cumulation rules in block exemption regulations
Practical importance: intended beneficiary must disclose all aid applications for particular project!
Special case SGEI de minimis: no cumulation with other SGEI compensation, even if not aid

20. Aid Intensity
Aid intensity = percentage of eligible costs that can be covered by state aid
Applies in addition to any maximum aid amount
E.g. aid for small enterprises created by female entrepreneurs:
aid cap €1 million per undertaking
aid intensity: 15% of eligible costs
Wide variation in aid intensities allowed (10% - 100%)
100% aid intensity rare (e.g. R&D projects: fundamental research)
remember: higher aid intensity not forbidden, but has to be notified

21. Incentive Effect
Incentive effect = aid should trigger change in behaviour of undertaking
Purpose: aid should be necessary!
SMEs: application for aid must precede start of work on project
Large enterprises: must show material increase in size or scope of project or speed of completion

22. Factors to Consider
true that certain elements of block exemption regulations rather technical (e.g. cumulation rules)
but need to set criteria for compatibility in sufficiently detailed way (no assesment or evaluation)
Information available on DG COMP state aid website:

23. Factors to Consider
Advantage of using block exemption: speed (notification takes at least 2 months, usually longer)
Challenge: responsibility of MS to ensure compliance
COM follow-up via complaints, monitoring, ex officio investigations

24. Factors to Consider Mistakes likely to occur at 2 levels:
national legal basis
practical implementation
Important that rules are applied at all levels
If not: risk of negative decision ordering recovery
Remember that recovery primarily affects undertakings!

25. Factors to Consider 2 basic approaches:
design desired aid measure (objective, scope, beneficiaries), then check whether it falls under exemption (unlikely!)
decide whether measure should be notified or exempted and design it accordingly

26. Factors to Consider Answer will depend on:
how complex is the intended measure?
will measure still serve intended purpose if it is made to fit a block exemption?
do all levels of administration have knowledge to implement correctly?
Remember: you can notify for legal certainty!
DG Competition is also available for informal guidance
complexity: e.g. scheme for direct grant to SMEs for fair participation easier than guarantee scheme, aid to large enterprises etc.

27. Future Developments