State aid, 6 December 2010
EEA State aid regime - General
• The EFTA Surveillance Authority (ESA) monitors state aid
granted by Iceland, Liechtenstein and Norway in the same
way as the Commission does in the EU, in accordance with
equivalent substantial and procedural rules
• Instruments adopted
by the Commission in its
state aid surveillance capacity also adopted by
ESA (State aid Guidelines)
A. State of play in implementing the EU
state aid acquis
1. Substantial provisions
• The primary state aid provisions in the EEA
Agreement are identical in substance to those of the
EC Treaty.
Article 61 EEA and Article 1, Part I of Protocol 3 to the Surveillance
and Court Agreement (SCA), identical in substance to (ex) Articles 87
and 88 of the EC Treaty, Articles 107 and 108 TFEU
- “Save as otherwise provided in this Agreement, any aid granted by EC Member
States, EFTA States or through State resources in any form whatsoever ... ”
- “The EFTA Surveillance Authority shall, in cooperation with the EFTA States, keep
under constant review all systems of aid ...”
2. General procedural rules (1/2)
a. procedural regulations
• Council Regulation (EC) No 659/1999 laying down detailed
rules for the application of Article 93 of the EC Treaty
→ Incorporated into Part II of Protocol 3 to the Surveillance
and Court Agreement (SCA)
• Commission Regulation (EC) No 794/2004 of 21 April 2004
implementing Council Regulation (EC) No 659/1999
→ Corresponds to ESA Decision No 195/04/COL on the
implementing provisions referred to under Article 27 in Part II
of Protocol 3 to the SCA
(provisions concerning notifications, annual reports, time
limits, recovery, etc.)
2. General procedural rules (2/2)
b. Reference/discount and recovery interest rates
• Commission Communication on the interest rates to be
applied when aid granted unlawfully is being recovered
→ Corresponds to the chapter on Reference and Discount
Rates in ESA's State Aid Guidelines
3. Financial transfers and transactions (1/3)
a. Financial Transfers to public enterprises
• Commission Directive 2006/111/EC on the transparency of
financial relations between Member States and public
undertakings as well as on financial transparency within
certain undertaking (Transparency Directive)
→ Adopted into the EEA Agreement
→ Implemented into national legislation by way of
incorporation into Regulation (IC) No 430/2008 on the entry
into force of the Commission Directive on the transparency of
financial relations between Member States and public
undertakings as well as on financial transparency within
certain undertaking
3. Financial transfers and transactions (2/3)
b. State Guarantees
• Commission Notice on the application of Articles 87 and 88 of
the EC Treaty to State aid in the form of guarantees
→ Corresponds to the chapter on State guarantees in ESA's
State Aid Guidelines
c. Public Land Sales
• Commission communication concerning aid elements in land
sales by public authorities
→ Corresponds to the chapter on State aid elements in sales of
land and buildings by public authorities in ESA's State Aid
Guidelines
3. Financial transfers and transactions (3/3)
d. Export Credit Insurance
• Communication of the Commission to Member States on the
application of Articles 92 and 93 of the Treaty to short-term
export-credit insurance (as amended)
→ Corresponds to the chapter on Short-term export-credit
insurance in ESA's State Aid Guidelines
e. Fiscal aid - Direct Business Taxation
• Commission notice on the application of the State aid rules to
measures relating to direct business taxation
→ Corresponds to the chapter on Application of state aid rules
to measures relating to direct business taxation in ESA's State
Aid Guidelines
4. Rules on the assessment of state aid with
horizontal objectives (1/3)
• Regulation (EC) No 1998/2006 on the application of Articles
87 and 88 of the Treaty to de minimis aid
→ Incorporated into the EEA Agreement
• Regulation (EC) No 800/2008 declaring certain categories of
aid compatible with the common market in application of
Articles 87 and 88 of the Treaty (General block exemption
Regulation)
→ Incorporated into the EEA Agreement
• Community framework for state aid for research and
development and innovation (R&D&I)
→ Corresponds to the chapter on Aid for research and
development and innovation in ESA's State Aid Guidelines
4. Rules on the assessment of state aid with
horizontal objectives (2/3)
• Community guidelines on State aid for environmental
protection
→ Corresponds to the chapter on State aid for environmental
protection in ESA's State Aid Guidelines
• Commission communication on State aid and risk capital
(now Community guidelines on state aid to promote risk
capital investments in small and medium-sized enterprises)
→ Corresponds to the chapter on State aid to Promote Risk
Capital Investments in Small and Medium-Sized Enterprises in
ESA's State Aid Guidelines
4. Rules on the assessment of state aid with
horizontal objectives (3/3)
• Temporary Community framework for State aid measures to
support access to finance in the current financial and economic
crisis
→ Corresponds to the chapter on a Temporary Framework for
State aid measures to support access to finance in the current
financial and economic crisis in ESA's State Aid Guidelines
5. Rules on the assessment for approval on regional
aid
• Guidelines on national regional aid for 2007-2013
→ Correspond to the chapter on National regional aid 2007 –
2013 in ESA's State Aid Guidelines
6. Rescue and restructuring aid
• Community guidelines on State aid for rescuing and
restructuring firms in difficulty
→ Correspond to the chapter on Aid for rescuing and
restructuring firms in difficulty in ESA's State Aid Guidelines
• Commission communication on Rescue and restructuring aid
and closure aid for the steel sector
→ Corresponds to the chapter on Rescue and restructuring aid
and closure aid for the steel sector in ESA's State Aid Guidelines
7. Rules on the assessment of services of general
economic interest (SGEI)
• Commission Decision on the application of Article 86(2) of the
EC Treaty to State aid in the form of public service
compensation granted to certain undertakings entrusted with
the operation of services of general economic interest
→ Incorporated into the EEA Agreement (Article 86(2) EC
corresponds to Article 59(2) of the EEA Agreement)
• Community framework for State aid in the form of public
service compensation
→ Corresponds to the chapter on State aid in the form of public
service compensation in ESA's State Aid Guidelines
8. Rules on the assessment for approval of aid to
particular sectors (1/4)
• Shipbuilding - Framework on State aid to shipbuilding
→ Corresponds to the chapter on State aid to shipbuilding in ESA's
State Aid Guidelines
• Postal Services - Notice from the Commission on the application of
the competition rules to the postal sector
→ Not adopted in the ESA Guidelines
• Broadcasting - Communication from the Commission on the
application of State aid rules to public service broadcasting
→ Corresponds to the chapter on the application of the state aid
rules to public service broadcasting in ESA's State Aid Guidelines
8. Rules on the assessment for approval of aid to
particular sectors (2/4)
• Community Guidelines for the application of State aid rules in
relation to rapid deployment of broadband networks
→ Corresponds to the chapter on Application of state aid rules in
relation to rapid deployment of broadband networks in ESA's State
Aid Guidelines
• Audiovisual production - Communication from the Commission on
certain legal aspects relating to cinematographic and other
audiovisual works
→ Chapter 2 of the Communication corresponds to the chapter on
State aid to cinematographic and other audiovisual works in ESA's
State Aid Guidelines
(Chapter 2 sets out the general orientation of the European Commission
with regard to state aid in the cinema sector)
8. Rules on the assessment for approval of aid to
particular sectors (3/4)
• Commission communication on the return to viability and the
assessment of restructuring measures in the financial sector in the
current crisis under the State aid rules
→ Corresponds to chapter on Return to viability and the assessment
of restructuring measures in the financial sector in the current crisis
under the State aid rules in ESA's State Aid Guidelines (Restructuring
Guidelines)
• Communication from the Commission on the treatment of
impaired assets in the Community banking sector
→ Corresponds to the chapter on the Treatment of Impaired Assets
in the EEA Banking Sector in ESA's State Aid Guidelines (IAG)
8. Rules on the assessment for approval of aid to
particular sectors (4/4)
• Communication from the Commission — The recapitalisation of
financial institutions in the current financial crisis: limitation of aid to
the minimum necessary and safeguards against undue distortions of
competition
→ Corresponds to the chapter on the recapitalisation of financial
institutions in the current financial crisis in ESA's State Aid Guidelines
(Recapitalisation Guidelines)
• Communication from the Commission — The application of State
aid rules to measures taken in relation to financial institutions in the
context of the current global financial crisis
→ Corresponds to the chapter on the application of state aid rules to
measures taken in relation to financial institutions in ESA's State Aid
Guidelines (Banking Guidelines)
Regionally assisted areas
1 January 2008 – 31 December 2013
• Iceland outside the capital region
• Cf. ESA Dec. 378/06/COL on on the maps of assisted areas and levels of aid
Regionally assisted areas (2)
• Map consists of two Nuts III regions
• The NUTS III region “Iceland outside the Capital region” corresponds
to the N-West, N-East and South electoral districts
• The areas included have a total population of 96 010 and an average
population density of 0.95 inhabitants
per square km (2006 est.), about one third
of the total population.
• Actual population density is 2.9 / km2
• Aid ceilings:
B. Enforcement
1. General overview of the aid measures notified to
(or reviewed by) ESA over the past five years (1/2)
• A total of 25 measures reviewed in 2004-2010
• Since 1994 ESA has published 64 Decisions relating to
Iceland and State aid
1. General overview of the aid measures notified to
(or reviewed by) ESA over the past five years (2/2)
• Out of 25 cases, 18 originate from Notifications, 6 from
complaints and 1 ex officio
• 4 currently under review, 1 SGEI, 15 Compatible/Non
aid/No objections, 3 Incompatible, 1 appropriate
measures, 1 Closed after formal invest
• 3 regard the Housing Financing Fund (HFF), 2 aluminium
smelters, 2 undersea telecom cables, 5 financial crisis
• 9 Ad hoc, 8 Schemes, 4 Non-aid, 4 N/A
• 5 regional developement objectives, 1 maritime
transport
2. Description of the State aid measures adopted in
the context of the financial crisis, state of play of the
procedure of notification to ESA
 A total of 12 different measures identified

3 originating from complaints (all alleged aid),

8 Notified measures,

1 ex-officio
 1 withdrawn, 1 approved, 1 no objections, 9 pending
 2 real economy
Financial crisis - the build-up 2003-2008
Financial crisis – the collapse
• Complete restructuring of the the financial system
since October 2008 – still ongoing
• Total assets of depository institutions (DMBs)
worth 10 times the Icelandic GDP in 2008
(Debts to match: Foreign debts of Icelandic financial
undertakings worth 7 times the GDP in 2008)
• Year-end 2009 total assets were worth 2 times the
Icelandic GDP
•
(Source: Statistics Iceland)
Financial crisis – reduction in size
DMBs total assets, % of GDP
Description of crisis measures
I. The three main banks (1)
• Collapse of Kaupthing, Glitnir and Landsbanki (the
old banks) in 2008
• Domestic market share 65-85%, 60% of the
Icelandic stock market
• Three new banks established, deposits and assets
allocated from the old banks on domestic/foreign
basis
• Restructuring ongoing, partially sold in 2009 to the
old banks as compensation for allocated assets,
partially capitalised by the state
Description of crisis measures
I. The three main banks (2)
• Mixture of good/bad banks
• Lengtly pre-notification process with ESA, 2 phased
approach
• Rescue (Notified Septeber 2010)
• Restructuring (2011)
• First Decision from ESA expected December 2010
• Internal restructuring plans in final stages
Description of crisis measures
II Byr Ltd. and III SpKef Savings Bank
• Both former savings banks
• After negotiations with creditors failed in 2010,
new undertakings were established by the state –
deposits and assets allocated from the collapsed
savings banks
• Pre-notification procedure initiated fall 2010
IV Verne Data Center
• Data Center, construction halted in 2008
• Draft Investment Agreement in 2009
• Formal investigation initiated in 2010
Description of crisis measures
V and VI Housing Financing fund (HFF)
• Temporary bond swap scheme (liquidity facility) –
notified in 2008 – approved
• Permanent bond swap scheme (transfer of
mortgage loans) – notified in 2009 – formal
investigation ongoing
Description of crisis measures
VII. Sjóvá Insurance Company
• Rescue and Restructuring of a major insurance
undertaking (ca. 30% market share)
• Viable insurance operations allocated to a new
undertaking, non-viable investment operations
remained with the old company
• New company largely owned and capitalised by the
State
• Failure to notify, information injunction, formal
investigation 2010
Description of crisis measures
VIII. Smaller savings banks scheme
• Settlement of claims owned by the Central Bank of
Iceland on 5 smaller savings banks as a result of the
failure of the three main banks
• Rescue (approved 2010)
• Restructuring (pending)
Description of crisis measures
IX. Saga Capital and VBS - small investment banks
• Alleged State aid through conversion of CBI claims
• Complaint – information request
X. Investment funds “UCITS”
• Decisions of new banks to purchase impaired
assets from investment funds managed by
subsidiaries, allegedly imputable to the state
• Complaint - formal investigation (2010)
Description of crisis measures
XI. Húsasmiðjan hardware store
• Sale of an undertaking acquired by a state owned
bank - alleged imputability
• Complaint – information request
XII. Establishment of a state owned Asset
Management Company (AMC)
• Originally envisaged for takeover of crucial
undertakings, later mainly for consultation
• Never established, notification withdrawn
Thank you