HOW TO
SUCCESSFULLY GAIN
COMMISSION
APPROVAL
3 June 2014
Overview
1.
When does State aid have to be notified?
2.
Block Exemption Regulations
3.
Full notification
4.
How to avoid State Aid
5.
State aid and infrastructure - Leipzig Halle decision
6.
Implications of not notifying
7.
Roles and responsibilities
8.
NI Regional Stadia case
What is State Aid?
Treaty on the Functioning of the European Union
Article 107 (1)
“Save as otherwise provided in the Treaties, any aid
granted by a Member State or through State resources in
any form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or
production of certain goods shall, in so far as it affects
trade between Member States, be incompatible with the
internal market.”
Obvious State Aid
• Grants
• Loans below ‘market’ rate of interest
• Equity injections on less than ‘market’ terms
• Guarantees
• Derogations from a Tax
Less Obvious State Aid
• Sale of land below market prices
• Rents at less than market rates
• Secondment of Civil Servants
• Services provided by State resources at a reduced or
zero cost
Why have State Aid rules?
• Level playing field for commercial competition
• Smooth functioning of the internal market
• Avoid a subsidy race to the bottom
How to identify State Aid
Basic 4 Point Test
–
there is an intervention by the State or through State
resources;
–
the intervention gives the recipient a selective economic
advantage;
–
competition will be or may be distorted;
–
there is a potential effect on trade between Member States.
•
Only the European Commission and National Courts are
competent to conclude whether State Aid is present.
•
UK takes a risk based approach to State Aid
•
No obligation to notify if assessment is no State aid is present
What is an undertaking?
• State aid rules only apply to ‘undertakings’
• Undertakings are private and public organisations
involved in activities that are economic.
• Undertakings do not have to be profit-making.
• Activities are probably economic if there are commercial
companies providing the same product or service.
• Public and voluntary sector organisations, including
universities and charities, can be classified as
undertakings.
How to obtain EC approval
• Seek cover within an existing scheme
• Block Exemption Regulations (GBER, SGEI Decision)
• De Minimis Regulation
• Full Notification
Block Exemptions
• Fast (20 working days) and simple procedure for
obtaining State Aid approval
• Schemes that a MS say comply with the block exemption
regulations are not assessed by the EC
• Main block exemption regulation is the General Block
Exemption Regulation
• 13 different types of state aid in the 2014 -2020 GBER
• SGEI Decision also an option in certain cases
Block Exemptions
• Big advantage – reduction in administrative costs for the
beneficiary, the Member State and the Commission.
• It also allows the Commission to focus its attention on
the most distortive types of aid.
• Disadvantage – responsibility for ensuring compliance
rests with the Member State
• Commission Monitoring – SFA (MX9/2008)
De Minimis
• Industrial de minimis ceiling - €200,000 per undertaking during current
and last 2 financial years
• De minimis must be cumulated with other de minimis
• Recipient must declare what other de minimis aid it is receiving
• Grant provider must check recipient will not exceed the €200k ceiling
• No Commission monitoring
• SGEI de minimis (up to €500k) also a possibility in some cases
• Agricultural de minimis up to €15k
Full notification
• Start early – consider State Aid issues during policy
development
• Allow at least 12 months for a full notification
• Study carefully relevant Commission frameworks,
guidelines and previous decisions
• Seek specialist State Aids advice – including considering
pre-notification discussions with the Commission
• Legal advice may be needed in innovative or difficult
cases
Implications of not notifying
• Notifiable aid granted without approval is illegal
• EC may investigate even if there isn’t a complaint
• If a negative decision
– Aid (plus interest) must be repaid by the beneficiary.
– No further aid to beneficiary until aid repaid.
– No further aid may be granted by the Scheme /
Programme, until it is notified and approved
– Government may have to pay damages to
competitors of beneficiary
How to avoid State aid
• Aid repaid at market rates
– 2008 EC method for setting reference and discount rates
– 2011 Sachsen-Anhalt subordinated loans decision
• Pari Passu investment
• Market Economy Investor Principle
– Applicable to ‘public undertakings’
– When a public authority invests in an enterprise on terms and in
conditions which would be acceptable to a private investor
operating under normal market economy conditions, the
investment is not a state aid.
State aid and Infrastructure
• Leipzig/Halle decision - General Court finds that the
construction of infrastructure linked to its later operation constitutes
an economic activity.
• March 2011 DG Comp writes to DG Regio... “after the Leipzig/Halle
ruling, it cannot be denied anymore that the financing of any type of
infrastructure (excluding infrastructure related to security, safety,
etc.) that is later commercially exploited is State aid relevant.”
• April 2014 DG Comp decision in relation to the NI Stadia (Windsor,
Casement park and Ravenhill)... “the funding of the necessary
infrastructure, which will be used in part for commercial activities,
could constitute aid, according to the Leipzig/Halle airport judgement
of the Court of Justice, if all the requirements of 107(1) are fulfilled.”
Roles and Responsibilities
• DETI
– Provide advice & raise awareness (NI Depts & NDPBs)
– Monitor & report (to DBIS)
• DBIS
– Provide advice & raise awareness (UK wide)
– ‘Sign up’ / ‘approve GBER’ notifications (via UKREP)
• NI Public Sector Bodies
– Assess & manage compliance risks
– Prepare notification & provide info to Commission
– Maintain records
Regional Stadia
Development
in Northern Ireland
SA.37342 (2013/NN)
Windsor
Park
Casement
Park
Ravenhill
Park
NI Regional Stadia notification (1)
• Outline Business Case prepared in 2010
• 14 December 2012 – first contact with DCAL
• January 2013 – DCAL starts work on pre-notification
• 15 February 2013 – Senior legal counsel opinion received
• 20 March 2013 – Crusaders Football Club submit JR papers
• 1 May 2013 – Crusaders lawyer contacts DG Comp
•
22 May 2013 – JR leave granted on grounds of State aid
NI Regional Stadia notification (2)
• 12 June 2013 – DG Comp not prepared to discuss matters
that are before the National Courts (i.e. Windsor Park).
Happy to discuss Casement and Ravenhill.
• 10 July 2013 – Non-meeting with DG Comp
• 14 Aug 2013 – High Court dismisses JR request
• 11 Sept 2013 – Pre-notification
• 15 Nov 2013 – Formal notification
• 24 Jan 2014 – Further information provided
• 9 Apr 2014 – No objection decision
Further Information
• DETI State Aid Unit – Stephen Moore
• Tel: 028 9052 9415
• email: stephen.moore@detini.gov.uk