SAM in practice
The 2014 reform of regional State aid
Northern Ireland
State aid Awareness Seminar
16 September 2014
Miek VAN DER WEE
Head of Unit
DG COMP- Regional state aid
Structure of presentation
1. Regional State aid: Basics
2. Regional aid: Where?
3. Regional aid: What for?
3.1 Initial Investment
[3.2 Operating aid]  Not in N. Ireland
4. Compatibility assessment of investment aid
5. Conclusion: Main changes Regional aid 2014-20
Regional inequalities in EU …
■ Article 3 TEU:
"The Union shall promote economic,
social and territorial cohesion, and
solidarity among Member States."
■ Article 174 TFEU
"In order to promote its overall
harmonious development, the Union
shall develop and pursue actions
leading to a strengthening of
economic, social and territorial
cohesion."
EU Regional State aid policy
■ Exemption from the general ban on State aid for regional aid
measures:
● "Aid to promote the development of areas where the standard of living
is abnormally low or where there is serious underemployment…"
(Art. 107(3)(a) TFEU)
● "Aid to facilitate the development of … certain economic areas…"
(Art. 107(3)(c) TFEU)
■ Criteria for the application of the regional aid exemptions:
● Successive Communications since early 1970’s
● Successive Regional Aid Guidelines (1998, 2006, 2013)
● Block Exemption Regulations (2006, 2008, 2014)
RAG/GBER 2014-2020
■ Purpose of regional aid:
● To promote the development of disadvantaged areas by addressing
their economic handicaps
● To promote economic cohesion of the EU
■ How?
● Support for investment and job creation by undertakings
● Support for operating expenses of undertakings (exceptionally)
■ Criteria set out in RAG & GBER:
● Where can regional aid be granted?
● What can aid be granted for?
● How much aid can be granted?
Regional aid maps - 1
For regional aid to be effective, it needs to be focused on the
regions that suffer the most serious difficulties
■ Regions with abnormally low standard of living  Art. 107(3)(a)
● Reference point is EU average
● Criterion  GDP/cap lower than 75% EU average
 Outer Most Regions (Art. 349 TFEU)
■ Other disadvantaged areas  Art. 107(3)(c)
● Ex-Article 107(3)(a) regions (2011-2013)
● Sparsely populated areas
● Other problem regions with population of at least 50,000
Regional aid maps - 2
Comparison population coverage 2006-2013 and 2014-2020:
Types of region
'a' areas
- GDP/cap < 75%
- Outermost regions
‘c’ areas
2014-2020
2006-2013
25.8%
33.0%
24.9%
32.1%
0.9%
0.9%
21.8%
13.6%
- Former ‘a’ regions
6.9%
- Sparsely populated
0.6%
- Other ‘c’ areas
Total ‘a’ + ‘c’
14.3%
47.6%
46.6%
Regional aid maps - 3
MS
Austria
Belgium
Bulgaria
Czech Republic
Cyprus
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Netherlands
Malta
Poland
Portugal
Romania
Slovakia
Slovenia
Sweden
Spain
UK
EU-27
‘a’ areas
Predefined ‘c’ Non-predefined ‘c’
25.8
12.1
17.9
100
88.1
50.0
8.0
100
24.2
2.9
0
45.9
70.4
11.9
10.3
29.0
100
100
1.8
21.2
13.9
43.8
6.3
51.3
5.0
8.0
7.5
86.3
69.2
89.4
88.5
52.9
6.8
3.9
25.2
100
13.7
15.8
10.6
47.1
12.3
28.8
0.4
7.4
33.0
22.8
14.6
Total 2014-2020
25.8
29.9
100.0
88.1
50.0
8.0
100.0
26.0
24.1
25.8
100.0
76.7
51.3
34.1
100.0
100.0
8.0
7.5
100.0
100.0
85.0
100.0
88.5
100.0
12.3
68.6
27.0
47.2
Total [2013 situation]
[22.5]
[25.9]
[100.0]
[88.6]
[50.0]
[8.6]
[100.0]
[33.0]
[18.4]
[29.6]
[100.0]
[100.0]
[50.0]
[34.1]
[100.0]
[100.0]
[16.0]
[7.5]
[100.0]
[100.0]
[76.7]
[100.0]
[88.9]
[100.0]
[15.3]
[59.6]
[23.9]
Regional aid maps - 4
Regional aid map also places limits on the amount of investment
aid that can be granted in each region:
Assisted area
(% EU GDP/head)
Large
firms
Mediumsized firms
Small
firms
'a' areas (<45%)
50%
60%
70%
'a' areas (45%-60%)
35%
45%
55%
'a' areas (60%-75%)
25%
35%
45%
Former 'a' areas (until end ‘17)
15%
25%
35%
Sparsely populated areas,
external border areas
15%
25%
35%
Other 'c' areas
10%
20%
30%
Regional aid maps - 5
Regional aid
map 2014-2017
Investment aid: “Initial investment” - 1
■ Investment in tangible and intangible assets relating to
In 'a' regions & SME in 'c' areas:
- Setting up of a new establishment;
- Diversification of output of establish-
-
ment into products not previously
produced in the establishment;
Extension of the capacity of an
existing establishment;
Fundamental change in the
production process.
■ Acquisition of assets linked to establishment that has closed or
would have closed
■ No replacement investment!
Investment aid: “Initial investment” - 2
■ Investment in tangible and intangible assets relating to
In 'a' regions & SME in 'c' areas:
LEs in 'c' areas:
- Setting up of a new establishment;
- Diversification of output of establish-
- Setting up of a new establishment;
- Diversification of activity of establish-
-
-
ment into products not previously
produced in the establishment;
Extension of the capacity of an
existing establishment;
Fundamental change in the
production process.
-
ment, if new activity is not same as or
similar to activity previously performed in the establishment;
Diversification of existing establishments into new products or new
process innovations (RAG only!!).
■ Acquisition of assets linked to establishment that has closed or
would have closed
■ No replacement investment!
Investment aid: “Eligible costs”
Two ways to calculate “eligible costs”:
■ Costs calculated on the basis of investment costs:
● Material assets (land, building, equipment)
● Immaterial assets:
- Transfer of technology
- Patents, operating or patented and non-patented know-how
licenses
- For large enterprises, limited to 50% of eligible costs
■ Costs calculated on the basis of wage costs:
Wage costs arising from job creation as a result of the initial
investment (two-year wage cost)
Investment aid: “Conditions”
■ Conditions for regional investment aid:
● Maintenance of investment (or jobs) in the region:
- 5 years for large enterprises
- 3 years for SMEs
● 25% of investment should be from own contribution or external finance,
but totally free of public support
Investment aid: “How much aid?”
■ Maximum allowable aid is defined as a percentage of eligible
costs of the initial investment (GGE)
■ Maximum aid intensity is set in the regional aid maps
■ LIPs: Scaled down “adjusted aid amount”:
Adjusted max. aid amount = RAC x [(50 + (0.5 x B) + (0.34 x C)]
(B = Cost between 50 Mio and 100 Mio; C = Cost above 100 Mio)
■ Projects involving high aid amounts  To be notified!
Notification threshold: Adjusted aid amount for investment of € 100 Mio
10% Region
25% Region
Notification required if:
Aid > € 7.5 Mio
Aid > € 18.75 Mio
Assessment: To be notified under RAG
■ Aid to shipbuilding & coal
■ Individual aid > Notification threshold
● Individual aid > Maximum aid allowed for project > €100 Mio
● NIRL (10% aid ceiling): Aid > €7.5 Mio
■ Investment by LE’s in existing establishments in ‘c’ areas:
● for diversification into new products
● for new process innovations
■ Sectoral aid schemes
■ Individual aid to companies that have closed or intend to
close down the same or similar activity in EEA
■ Aid measures involving non-transparent forms of aid
Compatibility Assessment
■ Common principles:
●
●
●
●
●
●
contribution to an objective of common interest
necessity of the aid
appropriateness of the aid
aid limited to the minimum necessary
avoidance of undue negative effects (black-list)
transparency of aid + evaluation
■ NO aid if one principle is NOT respected
■ Requirements for aid under RAG more demanding than under
GBER
1. Objective of common interest &
2. Appropriateness
RAG:
GBER:
■ ESI Funds co-financed schemes:
■ -
● Assumed
■ Other measures
● MS to demonstrate contribution
to development strategy for the
region and appropriateness of
measure
3. Incentive effect
Always: Submission of standard application form before start of work
RAG:
GBER:
Additional for LE’s:
■ Counterfactual:
● Impact on investment decision
● Impact on location choice
■ LE’s to submit evidence
● Aid schemes: Credibility check by
Additional for LE’s:
■ Documentation to be
aid grantor
● Notified ad hoc aid: MS to submit
evidence showing that aid has
incentive effect
submitted by beneficiary
showing that project would not
have been carried out in the
area concerned or would not
have been sufficiently
profitable in absence of aid
4. Proportionality
In all cases:
Aid should respect (adjusted) maximum aid intensity set out in RAM
RAG:
Additional condition for LE’s:
■ Aid should not exceed net extra
cost of implementing the project
in the area concerned
■ Verification:
● Notified individual aid: COM
● Aid schemes: MS
GBER:
■ -
5. Avoid undue distortive effects
RAG
GBER
■ Distortive effects:
● Location
● Product market (overcapacity,
market power)
GBER does not apply :
■ No aid if:
● it attracts an investment from a
poorer region (*)(°)
● relocation of an investment due to
the aid (°)
● if investment takes place on a
market with structural
overcapacity (°)
■ Sectoral aid schemes
■ Aid to beneficiary closed or
intends to close down similar
activity in EEA
(°) EC to verify when assessing notified
individual aid
(*) MS to verify when awarding aid
under scheme
6. Transparency
RAG
GBER
■ Publication on Central/Regional
Website:
● Text of aid scheme
● Aid granting authority
● Individual aid (Beneficiary, Aid
amount, Aid intensity)
■ Publication on
Central/Regional Website:
● Text of aid scheme
● Aid granting authority
● Individual aid > € 0.5 Mio
(Beneficiary, aid amount,
aid intensity, …)
■ Evaluation
● Large or novel aid schemes
● COM may limit duration to four
years
■ Evaluation:
● Schemes > € 150 Mio
● Evaluation Plan to be
approved by COM
Main changes 2014
■ Stricter requirements under RAG 2014-20
● Compatibility assessment for notified measures outside SF operations
- Incentive effect
- Proportionality
- Necessity of aid
● Limits on eligibility of initial investment projects by LE’s in ‘c’ areas
● No forum shopping
● Evaluation + increased transparency requirements
■ Widening of scope of GBER
● Lighter compatibility assessment requirements
Thank you !
Any questions ?