Administering State Aid
for Practitioners
Alan Coleman
Scottish Government - State Aid Unit
Aims & Objectives:
To help practitioners understand the
administration and reporting of State aid
measures and schemes, in particular around:
• De Minimis Aid
• General Block Exemption Schemes
• Aid for Services of General Economic
Interest (SGEI)
Background:
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EC requires all public authorities in Member
States to correctly administer the award of State
aid.
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Requirement on scheme administrators to
provide annual report on some types of aid
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Rules are laid out in the EC’s Procedural
Regulation (EC) No 659/1999
De Minimis Aid
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The EC considers that public funding to a single recipient of up to
€200,000 over a 3 year fiscal period has a negligible impact on trade
and competition, and does not require notification. This is called De
Minimis aid.
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The detailed rules for awarding and administering De Minimis aid are
set out EC regulation No 1407/2013 (De Minimis aid regulation).
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For undertakings active in the road freight transport sector, the De
Minimis ceiling is €100k over the same period.
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For undertakings active in the fisheries sector, the ceiling is €30k
over the same period.
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For undertakings active in the agricultural sector, the ceiling is €15k
over the same period.
De Minimis Aid
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De Minimis aid can be given for most purposes, including
operating aid, and is not project-related.
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De Minimis aid cannot be used to top up awards made under
approved State aid schemes, resulting in a circumvention of the
aid intensities set out in the rules attached to such schemes. In
these cases it can only be awarded towards separate eligible
costs.
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De Minimis aid is very widely used but is generally not well
administered.
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There is no reporting requirement for De Minimis aid in the UK
other than for agricultural or fisheries De Minimis – however new
Member States must keep a central record of all De Minimis
awards.
De Minimis Aid - Administration
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When granting De Minimis aid the funding body
must ensure that the new award does not breach
the relevant ceiling over a 3 year fiscal period.
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You must ask the beneficiary concerned about any
De Minimis aid received during the current and the
previous 2 completed fiscal years and determine
how much De Minimis aid can still be awarded
without breaching the relevant ceiling.
De Minimis Aid - Administration
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You must also inform the recipient explicitly that it is De
Minimis aid you are giving them, for their future
reference. The offer letter should include the value of
the award in Euros and the following paragraph (which
can be adapted depending on the relevant regulation
and ceiling being employed):
“Under EC regulation No 1407/2013 (De minimis aid regulation), this is a
De Minimis aid. There is a ceiling of €200,000 for all De Minimis aid
provided to any one firm over a 3-year period. Any De Minimis aid
awarded to you under this offer letter will be relevant if you wish to apply,
or have applied, for any other De minimis aid. For the purposes of the
De Minimis regulation, you must retain this letter for 3 years from the
date on this letter and produce it on any request by the UK public
authorities or the European Commission. (You may need to keep this
letter for longer than three years for other purposes.) “
De Minimis Aid – Case Study
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Organisation ‘A’ offers grants and ‘in-kind’ support for a variety of
activities, some of which are economic in nature, others are
community-based or non-commercial.
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A decision has been made to approve all awards under their
scheme via the De Minimis Regulation, to minimise the risk of
illegal State aid being awarded.
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The funder begins by asking applicants to declare how much
‘State aid’ they have received in the last three fiscal years.
Can we identify any issues/problems/observations with this approach?
De Minimis Aid – Case Study
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A decision to approve all awards as De Minimis may un-necessarily
restrict the applicant’s ability to receive this particular funding, or future
funding from other sources if their De Minimis allowance is compromised
as a result.
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If a simple assessment indicates that there is unlikely to be State aid
present, we would recommend that the De Minimis Regulation is not used
to award funding. No State aid – no State aid cover required
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Payment in kind can also be State aid – in such a case the ‘cash-grant
equivalent’ (i.e. the cash value of that ‘in-kind’ contribution) must be
calculated and reflected in any grant offer.
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In asking applicants to declare how much ‘State aid’ they have received in
the last three fiscal years, the funder is posing the wrong question. The
applicant must be asked specifically how much De Minimis aid they have
had in that period.
General Block Exemption Regulation
(GBER)
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The GBER harmonises the rules which previously existed
across five separate Regulations – GBER originally introduced
in 2008.
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From 1 July 2014 a new GBER will be adopted which will
include additional categories and provisions for awarding
compliant State aid.
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As well as encouraging Member States to focus on aid that will
be of real benefit to job creation and competitiveness, the
Regulation reduces the administrative burden for the public
sector, the beneficiaries and the EC.
General Block Exemption Regulation
The new GBER will be in force from 1 July 2014 to 31 December 2020. It
authorises aid in favour of:•
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Regional Investment
Small and Medium Enterprises
Access to Finance for SMEs
Environmental Protection
Research, Development and Innovation
Training
Disadvantaged and Disabled Workers
Making good damages caused by certain natural disasters
Social aid for residents of remote regions
Broadband Infrastructure
Culture and Heritage Conservation
Schemes for Audio-Visual Works
Sport and Multifunctional Recreational Infrastructures
Local Infrastructure
Each of the GBER articles which cover the activities listed above details the
eligible costs which may be assisted and the aid intensities (limits) which apply
to these activities.
General Block Exemption Regulation
The revision of the GBER:
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significantly extends the possibilities for Member States
to grant "good aid" to companies without prior
Commission scrutiny;
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simplifies the award of State aid and reduces the
duration of processes for aid beneficiaries;
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introduces ‘ex-post’ requirements for Member States
such as the requirement to evaluate large aid schemes
(with budgets over €150m) and introduce more
transparency on aid measures.
GBER – Administration & Reporting
Fund Administrators’ responsibilities:
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Ensure that any awards made under approved GBER schemes meet the
definitions set out in the relevant Article.
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Any funding awarded must not exceed the relevant aid intensity (or limit)
specified for the activity being supported or the agreed scheme budget.
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In order to observe the relevant aid intensity the total amount of public
support measures for the aided activity or project must be taken into
account, irrespective of whether the support is financed from local,
regional, national or community sources.
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A record must be kept of all awards made under GBER and reported to
the European Commission (via the State Aid Unit) on an annual basis.
(Reports normally gathered in April/May for the previous calendar year)
GBER - Cumulation
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As previously noted, all public funding for the aided activity or
project must be cumulated – this can include funding from such as
LAs, BIG, HIE, SE, SG, LEADER, Structural Funds and any other
public source.
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Aid exempted by the GBER can not be cumulated with any other
aid exempted under this regulation or De Minimis aid or with any
other community funding relating to the same - partly or fully
overlapping - eligible costs if such cumulation would result in
exceeding the highest aid intensity or aid amount applicable to this
aid under this regulation.
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Aid exempted by the GBER may be cumulated with any other aid
exempted under this regulation as long as those aid measures
concern different identifiable eligible costs.
GBER - Notification
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The GBER requires that some individual awards, even if made
as part of an existing approved scheme, may have to be
notified to the Commission for approval.
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Generally this applies to large individual awards where there is
a greater potential for market distortion.
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Example – Investment Aid for SMEs – Any award exceeding
€7.5m per undertaking per investment project must be
individually notified for approval.
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Scottish Government’s State Aid Unit can assist with
Notification process.
GBER – Case Study
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A public body operates a grant scheme offering aid for regional
investment by all sizes of enterprise. This scheme has been
registered with the Commission and has cover under (new) GBER
Article 14 (Regional Investment Aid)
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A medium-sized enterprise based in an Assisted Area of North
Lanarkshire applies for grant assistance towards the construction of a
new factory, project costs £1m.
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The maximum aid intensity for a medium-sized enterprise in this area
under Article 14 is 25%
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The maximum public assistance which can therefore be offered under
this scheme is £250k – the remaining £750k must come from private
sources
Services of General Economic
Interest (SGEI)
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An SGEI is a service of an economic nature that public authorities
identify as being of particular importance to citizens, but which are not
supplied by market forces alone, or at least not to the extent and under
the conditions required by society. Their provision may therefore require
public intervention.
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Examples include the provision of social housing, postal services,
lifeline ferry services and care for elderly or disabled people.
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SGEI are carried out in the public interest under conditions defined by
the State, which imposes a public service obligation on the provider(s).
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There are three different categories of SGEI set out in separate
Commission legislation; SGEI De Minimis, SGEI Decision and SGEI
Framework, all with their own administration and reporting
requirements.
Administration - SGEI De Minimis:
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Up to €500,000 can be granted over 3 fiscal years.
The aid can only be given for the provision of an SGEI.
Any form of de minimis aid granted must be cumulated and cannot exceed
the €500,000 threshold.
The €500,000 de minimis aid under this Regulation cannot be cumulated
with any compensation in respect of the same SGEI regardless of whether
it constitutes State aid.
The aid can be given as a grant, a loan or a loan guarantee.
There must be a form of entrustment between the beneficiary and the aid
grantor.
The aid grantor must inform the recipient that it is being given as de
minimis aid.
Records must be kept for 10 fiscal years from the date on which the aid
was granted.
De minimis aid cannot be cumulated with other compensation for the same
service.
In terms of interaction with general de minimis aid, cumulation up to an
aggregate amount of €500,000 is permitted.
Administration - SGEI Decision:
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Allows unlimited spend in the area of social services. Specifically - “clearly
identified services, meeting social needs as regards health and long-term care,
childcare, access to and reintegration into the labour market, the care and social
inclusion of vulnerable groups.”
For all other SGEI activity not listed above the compensation threshold is €15
million per annum. Any funding given above this threshold would have to be
notified to the EC under the SGEI Framework (next slide).
The period of entrustment with an SGEI provider should be limited to 10 years.
Compensation for air and maritime links can be given where average annual
traffic does not exceed 300,000 passengers.
Compensation to ports where average annual traffic does not exceed 300k
passengers.
Compensation to airports where annual average traffic does not exceed 200k
passengers.
Transparency - Any organisation receiving more than €15m of funding per
annum which has commercial activities outwith the scope of the SGEI must
annually publish details via the internet of the entrustment and the amounts of
aid being granted to the undertaking.
Member States are required to submit a report on the implementation of this
Decision every 2 years.
Administration - SGEI Framework:
• To be utilised if compensation exceeds €15m per annum to
undertakings operating a service outwith the field of social services.
• The EC will assess SGEI funding for compatibility.
• A more precise methodology is given for calculating the amount of
compensation allowable.
• Member States must introduce efficiency incentives to encourage the
entity providing the service to do so in the most efficient manner.
• Any aid granted must comply with the relevant public procurement
rules.
• When there are multiple organisations providing an SGEI the
compensation must be calculated in the same way to avoid
discrimination.
• Transparency - Member States funding an SGEI within the scope of
the Framework must publish details on the internet.
• As with the SGEI Decision, the EC will request a report every 2 years.
State Aid Modernisation – Transparency
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From 2016 each Member State will be required to have a
national public register of individual aid awards to ensure
peer review and greater accountability
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Details of all aid awards (not just via GBER) exceeding
€500k will have to published on this register.
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Information to be published will include name of
beneficiary, location, size and activity, regardless of the
total scheme budget.
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Further information and guidance on this process will be
provided closer to its introduction
Thank you and any questions?
Contact Details:
Scottish Government
State Aid Unit
3rd Floor
5 Atlantic Quay
150 Broomielaw
Glasgow
G2 8LU
General Enquiries - 0300 244 1385
Website – www.stateaidscotland.gov.uk