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State Aid Law of the European Union edited by Hofmann, Herwig C H; Micheau, Claire (11th August 2016)

Part III Rules for the Compatibility of State Aid, 5 Aid Exempted from Notification to the Commission: The General Block Exemption Regulation (GBER)

Viktor Kreuschitz, Hanns Peter Nehl

From: State Aid Law of the European Union

Edited By: Herwig C. H. Hofmann, Claire Micheau

From: Oxford Competition Law (http://oxcat.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber: null; date: 02 July 2020

Subject(s):
State aid provisions — European Union — Commission — State aid

(p. 324) Aid Exempted from Notification to the Commission: The General Block Exemption Regulation (GBER)

Section 1.  Introduction

Article 108(4) of the Treaty on the Functioning of the European Union (TFEU) allows the Commission to issue a regulation exempting Member States from the notification obligation as regards certain categories of aid, provided certain conditions are respected. The Council determines these categories in advance by means of a Regulation adopted on the basis of Article 109 TFEU. Such a Regulation was adopted for the first time in 1998 (so-called ‘Enabling Regulation’)1 in view of the 2004 and 2007 waves of EU accessions and was repealed by Regulation 2015/1588.2

The Commission used the possibilities under the ‘Enabling Regulation’ for the first time in 2001 and adopted the block exemption regulation for small and medium-sized enterprises (SMEs)3 followed by a block exemption regulation for employment in 2002.4 Under the State aid action plan of 2005, the Commission issued a block exemption for regional aid in 20065 and announced the intention to consolidate the existing block exemption regulations in one document in order to enhance their readability and to allow for better prioritization of the cases within the Commission.6 In 2008 the Commission adopted the GBER7 and repealed the previous regulations. In the GBER, the Commission exempted from the notification obligation seven categories of aid, by laying down general and specific compatibility conditions for aid regarding regional development, SMEs, risk capital, research and development, environmental aid, disadvantaged and disabled workers, and training.

On the basis of the experience gathered since the first ‘Enabling Regulation’ of 1998, the Commission announced in its Communication on the State Aid Modernization (SAM)8 of May 2012 the intention to propose additional categories of aid measures that can be exempted from notification in order to focus its enforcement on the cases with the biggest (p. 325) impact on the internal market. Thus, in December 20129 the Commission proposed to the Council changes to the Enabling Regulation to allow the Commission to declare eight additional categories of aid compatible with the internal market and therefore to exempt these from ex ante notifications. After intense discussions in the Council, the proposal of the Commission was in its entirety endorsed and only within six months the Council adopted a new Regulation modifying the ‘Enabling Regulation’.10 In July 2013 new categories of aid have been included in the enabling Regulation, such as aid for innovation, culture, natural disasters, sport, certain broadband infrastructure, other infrastructure, social aid for transport to remote regions, and aid for certain agriculture, forestry, and fisheries issues.

In May 2014 the Commission adopted a new GBER,11 including ex ante compatibility conditions for thirteen aid categories; this entered into force on 1 July 2014 and repealed the GBER 800/2008. According to the transition provisions, any individual aid granted before 1 January 2015 in line with the previous GBER shall remain compatible with the internal market and the aid granted after that date shall be in line with the new Regulation, except for regional aid. Furthermore, any aid that has been granted before the entry into force of this new Regulation that is in compliance with all its conditions12 is deemed to be compatible with the internal market. Thus, the Commission has regularized the aid granted in the past, especially for infrastructure.

The objective of the GBER is to declare compatible with the internal market—by reference to Article 107(3) of the Treaty and thus to exempt from the notification obligation under Article 108(3) of the Treaty—all individual aid and aid schemes which satisfy the conditions defined in the Regulation. By issuing the GBER, the Commission used its wide margin of discretion under Article 107(3) of the Treaty and established the criteria according to which the aid measures are deemed to be compatible with the internal market. However, as explained by the EU Courts in Freistaat Sachsen case law,13 the Commission has not exhausted its wide margin of discretion under Article 107(3) of the Treaty by issuing a GBER; it can always assess the compatibility of an aid measure with the internal market directly on the basis of the Treaty. In the Freistaat Sachsen case, the issue was in particular whether for notified aid measures that are not covered by a GBER, Commission guidelines or regulations are exhaustive or not for analysing the compatibility of those notified measures. The Commission had assessed the notification from Freistaat Sachsen for an aid scheme for SMEs on the basis of the 2001 GBER14 and directly on the basis of Article 107(3)(c) of the Treaty and found that some of the measures were not compatible with the internal market, because the aid intensities exceeded those of the GBER and because some of the measures (like export aid and operating aid) were excluded from the scope of the Regulation and in absence of any justification from Germany could not be found compatible with the internal market. The General Court explained that the purpose of the block exemption Regulation is to lay down the compatibility rules under Article 107(3) TFEU and to exempt from the notification obligation. However, this does not imply that the Commission may not examine the (p. 326) compatibility of another type of aid measure to SMEs directly on the basis of the Treaty. The General Court confirmed that the Commission may establish general implementation rules that structure its margin of discretion conferred by Article 107(3) of the Treaty, but it cannot deprive itself of its wide margin of discretion when analysing an individual case which is not covered by general implementation rules, such as block exemption regulations or guidelines. This discretion is therefore not exhausted by the adoption of such rules and there is in principle no obstacle to any individual assessment directly on the basis of the Treaty and outside these rules, provided that the Commission respects the primary law, such as the Treaty and the general principles of European law (such as equal treatment).

The Commission ensures that the positive effects of the aid measures covered by the GBER outweigh the negative effects on the internal market through the design of the compatibility conditions and by laying down the necessary safeguards.

Section 2.  Safeguards to Ensure a Positive Balance of the Aid Exempted from Notification

While the Commission’s experience in applying the exceptions under Article 107 of the Treaty has allowed extending the scope of block exemptions, it has also revealed the necessity for strengthening transparency, monitoring, and proper evaluation of very large aid schemes in light of their effect on the competition within the internal market.

Therefore, the Commission introduced in the new GBER the necessary safeguards to ensure that the positive balance of the aid measures exempted from the notification obligation was maintained. The safeguards introduced in the new GBER refer to the obligation to publish individual grants above 500,000 euros on a public website and to evaluate the impact of very large schemes on the internal market. In addition, the Commission can withdraw the benefit of the GBER if a Member State has granted aid on the basis of the new GBER without respecting its conditions.

A.  Transparency

According to Article 9 of the GBER, Member States shall publish the text of the aid scheme, the summary information sheet regarding the aid scheme as sent to the Commission,15 and minimum information16 on individual aid above 500,000 euros on national or regional State aid websites. For fiscal aid schemes and risk finance it is required to publish individual aid only in ranges, in order to protect any business secrets. The information regarding the individual aid shall be published within six months from the date when the aid was granted or for fiscal aid within one year from the date the tax declaration was due.

By 1 July 2016 these State aid websites shall be in place. The transparency obligation goes hand in hand with the requirements of structural funds according to which the disbursement of the funds is published on the website of the managing authorities. This should facilitate the implementation of the new requirements. In ten Member States17 there are (p. 327) already State aid registries or de minimis registries that could be adapted to ensure compliance with the new requirements of the GBER.

It is worth underlying that the transparency requirement is a compatibility condition and all individual aids exceeding 500,000 euros granted after 1 July 2016 must be published on the State aid website of the Member State in order to be covered by the new GBER.

B.  Evaluation

A novelty brought by the new GBER is that it requires an evaluation plan for aid schemes with an average annual budget of 150 million euros in order to remain exempted from the notification exemption. Thus, according to Article 1(2)(a) of the new GBER, aid schemes with such large budgets fall outside the scope of the GBER if the Commission has not approved an evaluation plan within the first six months from the entry into force of the scheme.

It seems that the Commission is worried about the cumulative effects of individual aids granted on the basis of schemes with large budgets. Even if the aid amount per project/undertaking is below the notification threshold, the cumulative effects of these small amounts may distort the internal market, if the aid is not effective in reaching the common objective despite the fact that the aid is formally in line with the rules. Therefore, aid measures that are based on efficiency objectives are more likely to be distortive if their impact in terms of contribution to the common objective is not significant. Against this background, in the GBER only regional investment aid, SMEs aid, aid for access to finance for SMEs, RDI aid, and aid for environmental protection are captured by the evaluation obligation. Aid measures which mainly have an equity objective are exempted from the mandatory evaluation obligation despite their budgets. These are the following:

  • •  operating aid in outermost regions or sparsely populated areas (Article 15 of the GBER);

  • •  training aid schemes (Article 31 of the GBER);

  • •  aid for disadvantaged workers and for workers with disabilities (Articles 32–5 of the GBER);

  • •  aid in the form of reductions in environmental taxes under Directive 2003/96 (Article 44 of the GBER);

  • •  aid for making good the damage caused by certain natural disasters (Article 50 of the GBER);

  • •  social aid for transport for residents of remote regions (Article 51 of the GBER);

  • •  aid for culture and heritage conservation (Articles 53 and 54 of the GBER);

  • •  aid for sport and multifunctional recreational infrastructures (Article 55 of the GBER);

  • •  aid for local infrastructures (Article 56 of the GBER).

Even if it is not mandatory to carry out an evaluation of these schemes, it may be in the interest of the Member States, for reasons of good public policies, to measure the impact of the spending of taxpayers’ money before deciding to continue with the aid schemes.

For the aid schemes subject to an evaluation plan on the basis of Article 2(1)(a) of the GBER, a plan must be notified to the Commission within twenty working days from the entry into force of the scheme. When deciding on the evaluation plan, the Commission decides also on whether the underlying scheme may further benefit from the GBER exemption. It is worth underlying that the Commission is assessing only the evaluation plan and (p. 328) not whether the conditions laid down in the underlying scheme are compatible with the internal market on the basis of the GBER or not. It is the responsibility of the Member State to ensure that the scheme is in line with the conditions of the GBER.

In order to ensure that the evaluation threshold in Article 2(1)(a) of the GBER is not circumvented, any alterations of such aid schemes fall outside the GBER (see Article 2(1)(b) of the GBER). However, on the basis of the implementing regulation18 only an increase of more than 20 per cent of the budget of a scheme qualifies as alteration of a scheme and turns an existing aid into new aid that is subject to the notification obligation. It remains to be seen how these provisions will be applied in practice by Member States and monitored by the Commission.

The notification of an evaluation plan is a sui generis notification, as strictly speaking this is not an aid scheme. These notifications are similar to regional aid maps that are not as such aid schemes but are necessary for the assessment of certain categories of aid. As the notifications of evaluation plans are based on Article 108(3) of the TFEU, the conditions of the procedural regulations are applicable. This means that the Commission has two months from the moment the notification is complete to decide on the evaluation plan. In the decision, the Commission will establish the methodology of the evaluation plan, the indicators to be used to evaluate the impact of aid, and the entity/person who will carry out the evaluation plan or the selection criteria of such an entity/person. The aim of an evaluation plan is to assess the impact of the aid on the envisaged objective. For approving the methodology, the analysis of the counterfactual (ie what would have happened in the absence of aid) is essential. Equally important is to establish the positive and negative effects of the aid. The Commission has explained in a staff-working document19 the purpose of evaluation plans and exemplified the methodologies that are more likely to be accepted.

Though the evaluation plans can be considered to be a ‘new territory’ for State aid policy, they are not unfamiliar to the Member States. Under structural funds, the Member States have already undertaken evaluation plans of measures supported by operational programmes. However, under EU structural funds rules, the Commission is not approving ex ante the methodology of the evaluation plan envisaged by the authorities like under State aid rules. Therefore, the Commission explains in its staff-working document20 that evaluation plans approved for State aid purposes may also be used for the purposes of structural funds. This clarification simplifies significantly the administrative burden of national authorities that will not have to duplicate the exercise.

At the end of 2014 the Commission approved the first evaluation plans for regional aid schemes put in place by the Czech Republic21 and the United Kingdom22 under the GBER. In the Czech evaluation plan, three questions were answered on the basis of quantitative indicators: (a) how did the assisted companies develop in comparison to a control group in terms of result indicators?; (b) did amendments of the scheme implemented on the basis of (p. 329) findings of the mid-term evaluation report contribute to better achieve the objectives of the scheme?; and (c) what are the lessons learnt for future aid schemes?

The UK evaluation plan is composed of two elements: impact and economic evaluations. The objective of the impact evaluation is to robustly establish the causal effects of projects and programmes funded through the aid scheme on beneficiary firms. The impact evaluation will look in particular at the causal effects of the aid scheme on firm level subsidies and grants and loans programmes. The impact evaluation will explore the causal effects which the aid scheme had on businesses in terms of the intermediate outcomes (capital investment, training expenditure, numbers of workers trained, research and development expenditure, patents) and final outcomes (sustainable private-sector employment levels, profitability, productivity). The objective of the economic evaluation is to establish how far the costs of the aid scheme were justified by the benefits achieved. This evaluation is composed of the cost-effectiveness analysis and a cost-benefit analysis.

C.  Monitoring and withdrawal of the benefit of the GBER

On the basis of Article 108(1) of the TFEU, the Commission shall, in cooperation with the Member States, keep under constant review all systems of aid existing in those States. Therefore, the Commission monitors, on the basis of a sample check, the application of the GBER at the level of the aid scheme and the individual application of the aid scheme. To allow effective monitoring, Member States must keep records of the individual grants for ten years and shall provide within twenty working days the information to the Commission, upon request.

Because of the increased scope of the GBER, the Commission moves from an ex ante approach to an ex post approach. With this new landscape, it can be expected that the monitoring exercise of the Commission will be enlarged compared to previous years.

On the basis of the monitoring results, the Commission may decide to withdraw the benefit of the GBER for future aid schemes for those Member States that have granted aid on the basis of the GBER but without respecting all the compatibility conditions. This principle existed also in the previous GBER but was never used in practice, maybe because the problems detected were on a smaller scale and not systemic. Therefore, the sanction has been streamlined in the new provisions to allow a targeted withdrawal of the benefit of the GBER at the level of a particular scheme, beneficiary, region, and granting authority and not at the level of the Member State concerned. This allows the problem to be targeted, and to act where necessary. It remains to be seen whether the streamlining of the sanction will incentivize the Commission to make use of it in practice when it detects a problem.

Section 3.  Exclusion of Potential Distortive Aid Measures from the Scope of GBER

To maintain the positive balance of the aid, in the sense that the positive effects of the aid outweigh the negative effects, certain measures, sectors, activities, or companies are excluded from the scope of the GBER. In general, the scope of the new GBER is similar to the previous Regulation; the only difference is that new clarifications and exceptions have been included.

Like under the previous Regulation, export aid, firms in difficulty, or companies that are subject to an outstanding recovery order following a Commission decision should fall outside the scope of the GBER.23

(p. 330) The novelties brought by the new Regulation refer to the definition of firms in difficulty for both SMEs and large enterprises. The criteria used to identify the situation when a company is deemed to be in difficulty are similar to the hard-core criteria of the Rescue and Restructuring Aid Guidelines.24 Thus, a limited liability company is deemed to be in difficulty if more than half of its subscribed share capital has disappeared as a result of accumulated losses. In the case of a company where at least some members have unlimited liability for the debt of the company, it is deemed to be in difficulty if more than half of its capital has disappeared as a result of accumulated losses. Also, when a company is subject to collective insolvency proceedings or fulfils the criteria under its domestic law to be placed in collective insolvency proceedings at the request of its creditors, or when the company has received a rescue aid or is subject to a restructuring plan, it is considered to be in difficulty. The GBER introduces two thresholds to deem a large company in difficulty. Thus, in the last two years the company’s book debt-to-equity ratio, must have been greater than 7,5 and the EBITDA interest coverage ration that must have been below 1,0.25

As regards the sectoral scope, in principle aquaculture, fisheries and agricultural are excluded from the scope of the GBER because of the sectoral rules. However, for outermost regions, there is a choice of granting aid to the primary production under the GBER or under the agricultural block exemption regulation. Also, for consultancy aid for SMEs, aid for risk finance, RDI aid, or aid for disadvantaged workers and workers with disabilities, there is a choice between the agricultural rules or the GBER. Aid to facilitate the closure of uncompetitive coalmines, as covered by Council decision No 2010/787, also falls outside the GBER. In addition, for regional aid, further sectors are excluded from the scope of the GBER.26

The new GBER explicitly excludes from its scope aid measures which contain conditions that infringe Union law (eg freedom of establishment, free movement of capital). Thus, it is not possible to condition the granting of the aid to having the headquarters in the Member State concerned or to being predominantly established in that Member State. Further, it is not allowed to subject the aid to the obligation to use nationally produced goods or national services. As regards RDI aid, any restriction on the beneficiary to exploit the results in another Member State is falling outside the GBER. As described in Part III, Chapter 3, Section 3 – ‘RDI Aid’, any such notified aid measure will be deemed to have undue manifest negative effects that cannot be outweighed by positive effects and therefore is not compatible with the internal market.

Section 4.  General Compatibility Criteria under GBER (Chapter I of the GBER)

Aid schemes, individual aid, and ad hoc aid are exempted from the notification obligation provided the general conditions laid down in chapter I of the GBER, described in this section, together with the specific conditions in chapter III of the GBER are respected.

First of all, the aid amount should remain below the notification threshold listed in article 4 of the GBER. Thus, the individual aid under aid schemes or ad hoc aid should be capped to those thresholds to fall within the remits of the GBER. If those thresholds are exceeded, the whole aid amount is subject to notification and not only the amount exceeding the notification threshold. In addition, projects cannot be artificially split to circumvent those thresholds.

(p. 331)

Table 6.1  Main thresholds requiring a notification to the Commission under Article 108 TFEU

Main categories of aid

Main notification threshold

Regional aid

Aid for costs exceeding EUR 100 million

Urban development aid

EUR 20 million

Investment aid to SMEs

EUR 7.5 million per undertaking, per project

Aid for consultancy, participation in fairs in favour of SMEs

EUR 2 million per undertaking, per project

Risk finance

EUR 15 million per undertaking

Training aid

EUR 2 million per training project

Aid for the recruitment of disadvantaged workers

EUR 5 million per undertaking, per year

  • Aid for the employment of workers with disabilities in the form of wage subsidies

  • Aid for compensating the additional costs of employing workers with disabilities

EUR 10 million per undertaking, per year

EUR 10 million per undertaking, per year

Investment aid for environmental protection

EUR 15 million per undertaking, per investment project

Aid for the district heating or cooling distribution network

EUR 20 million per undertaking, per investment project

Aid for energy infrastructure

EUR 50 million per undertaking, per investment project

Aid for broadband infrastructures

EUR 70 million total costs per project

Investment aid for culture and heritage conservation

  • EUR 100 million per project

  • Operating aid for culture and heritage conservation: EUR 50 million per undertaking, per year

Aid schemes for audio-visual works

EUR 50 million per scheme, per year

Investment aid for sports and multifunctional infrastructures

  • EUR 15 million aid or total costs exceeding EUR 50 million per project

  • Operating aid for sport infrastructure: EUR 2 million per infrastructure, per year

Investment aid for local infrastructures

EUR 10 million aid or total costs exceeding EUR 20 million per infrastructure

In the Table 6.1 the main notification thresholds are presented:27

To be able to verify whether the aid falls within the scope of the GBER, the gross grant equivalent must be calculated precisely ex ante without undertaking any risk assessment (ie transparency of the aid). For direct grants or interest subsidies the aid is deemed to be transparent because the full amount is considered to be aid. For loans, the reference rate communication can be used as a benchmark to calculate the aid element. For guarantees, different possibilities are available. The safe-harbours for SMEs from the Guarantee Communication28 can be used or, for large enterprises, Member States may use any methodology approved by the Commission on the basis of the Guarantee Communication.

All aid must have an incentive effect. An aid is presumed to have an incentive effect if its beneficiary has submitted an aid application before the start of works. The new GBER (p. 332) requires that the aid application contain minimum information, like name of the aid beneficiary and size, description and location of the project, list of project costs, and the type of aid. Ad hoc aid to large enterprises is subject to additional requirements. Thus, the aid beneficiary must demonstrate what would have happened in absence of the aid and the granting authority must ensure that that documentation establishes the existence of a counterfactual. For example, for regional aid, it must be established that in absence of the aid, the project would not have been carried out in the area concerned or would not have been sufficiently profitable in that area. For all other aid categories, the counterfactual could consist of a material increase in the scope of the project/activity, in the total amount spent by the beneficiary due to the aid, or a material increase in the speed of completion of the project/activity concerned.

Compared to the previous GBER, in the new Regulation the formal requirements are simplified and the counterfactual analysis is only required for ad hoc aid to large enterprises, which was excluded from the scope of the previous GBER.

For fiscal aid, the aid is deemed to have an incentive effect if the aid scheme has been adopted before the start of works on a project/activity and there is no margin of discretion on the side of the granting authority to grant the aid if the objective criteria are fulfilled (ie automatic fiscal aid schemes).

For those categories of aid that are not necessarily linked to an investment, the incentive effect is presumed if conditions other than the application for aid before the start of works are fulfilled. Thus, for regional operating aid (Article 15 of the GBER), access to finance for SMEs (Articles 21 and 22 of the GBER), aid for the recruitment of disadvantaged workers or employment of persons with disabilities (Articles 32 and 33 of the GBER), aid for the additional costs of employing workers with disabilities (Article 34 of the GBER), aid in the form of reductions in environmental taxes (Article 44 of the GBER), aid for covering the damage caused by natural disasters (Article 50 of the GBER), social aid for transporting residents from remote regions (Article 51 of the GBER), and aid for culture and heritage conservation (Article 53 of the GBER), the aid is deemed to have an incentive effect if the conditions in the relevant articles in chapter III of the Regulation are fulfilled.

All aid measures under the GBER should respect the aid intensity/amounts enshrined in the Regulation. For the purpose of calculating the aid intensity, the aid amount and value of the eligible costs shall be taken into account before any tax deduction of other charges. If the aid is paid in several instalments, each tranche should be discounted to its value when the aid is granted by using the discount rate applicable at the moment of granting. However, for fiscal aid, the aid tranches should be discounted on the basis of rates applicable at the moment the tax advantages take effect. Because repayable advances are considered less distortive than other forms of aid, by using this aid instrument the aid intensities established in chapter III of the Regulation for each aid category can be increased by ten points, except regional aid.

The new GBER brings some novelties also regarding the cumulation of aid. To ensure that the notification threshold and the maximum aid intensities in chapter III of the Regulation are respected, the total amount of aid granted from different sources must be taken into account. Therefore, for the same eligible costs, different aid categories can be cumulated, provided the highest applicable ceiling is respected.29 Likewise, aid under the GBER can (p. 333) be cumulated with de minimis provided the ceilings of the GBER are respected. Thus, de minimis aid cannot be used to top up the aid under the GBER.

The new GBER clarifies that the aid for access to finance for SMEs (eg risk capital) can be cumulated with other types of aid under the GBER for which the eligible costs can be identified. On the other hand, aid for projects without identifiable costs can be cumulated with aid for projects without identifiable costs, provided the highest relevant total financing ceiling established in the GBER or in another block exemption regulation or decision adopted by the Commission is respected.

Another important change brought in the new GBER refers to the cumulation of aid under the GBER with finance from European funds managed by the Commission or other bodies of the Union. Thus, for the calculation of the notification threshold and of the maximum aid intensities of the GBER, only the State aid that falls under the GBER is taken into account. However, it must be ensured that the most favourable funding rate laid down in the Union rules is respected if the State aid is combined with Union funds for the same eligible costs.

Section 5.  Newly Introduced Categories in the GBER

On the basis of the modified enabling Regulation, the Commission has introduced seven new aid categories under the GBER, namely:

  • –  Aid to mitigate damages caused by certain natural disasters;

  • –  Social aid for transports concerning people living in remote regions;

  • –  Innovation aid;30

  • –  Aids for broadband infrastructures;

  • –  Aid for culture and heritage conservation (including audio-visuals);

  • –  Aid for sport and multifunctional recreational facilities; and

  • –  Local infrastructure.

The GBER announced that the Commission will evaluate whether aid to airports and ports infrastructure can be brought under the GBER. This will depend on whether operational exemption criteria ensuring ex ante compatibility conditions for such categories can be established on the basis of the Commission experience in those fields.

A.  Aid to mitigate damages caused by certain natural disasters

For the first time, the Commission is exempting from the notification obligation an aid category which is deemed to be compatible with the Treaty under Article 107(2)(b) of the Treaty. Although State aid that is deemed to mitigate for damages caused by natural disasters is compatible with the internal market, the Commission is responsible for verifying that the occurrence of such a disaster justifies the aid.31

Therefore, under the GBER the Commission has laid down the criteria that justify such aid and has exempted from the notification obligation aid schemes introduced within three years from the occurrence of a natural disaster.

(p. 334) In order to fall under the GBER, it is important that the aid is only compensating the damages caused by a natural disaster and does not overcompensate the beneficiary. First, it has to be established that the event at stake has been formally recognized by the competent authorities as a ‘natural disaster’ and second, that there is a causal link between the damage and the natural disaster.

Furthermore, the aid and any other payments received as compensation for the damage (eg from an insurance company) shall not exceed 100 per cent of the eligible costs. Those costs can refer to damages linked to buildings, equipment, machinery or stocks, and loss of income within six months of the occurrence of the disaster. Only costs that are considered by an independent expert or by an insurance company to be a direct consequence of the disaster can be eligible for aid. The GBER goes even further and explains how to calculate the material damages and the loss of income. Thus, the calculation of the material damage shall be based on the repair costs or economic value of the affected asset before the disaster. In any event, it cannot exceed the repair costs or the decrease in fair market value caused by the disaster, calculated as a difference between the property’s value immediately before and after the occurrence of the disaster. As for the loss of income, the calculations shall be based on the financial data32 of the beneficiary by comparing it for the six months after the occurrence of the disaster with the average of three years out of five years before the disaster occurred.

Aid on the basis of block exempted schemes can be granted within four years following the occurrence and the aid amount must be calculated at the level of each beneficiary. There is no individual notification threshold for aid granted to each beneficiary under such a scheme. In addition, the ‘Deggendorf’ principle33 (ie new aid cannot be granted until any illegal and incompatible aid is repaid) is not applicable to this aid category.34 This means that a company that has suffered damages caused by a natural disaster can receive the compensation even if it has not repaid the incompatible aid declared by the Commission.

B.  Social aid for transport concerning people living in remote regions

In the new GBER, the Commission has laid down for the first time the criteria for an aid measure to fall within the scope of Article 107(2)(a) of the Treaty and be exempted from the notification obligation. Thus, aid for air and maritime passenger transport is compatible with the internal market, provided the following conditions are respected:

  • –  Only residents in remote regions can receive a 100 per cent compensation for the price of a return ticket from or to a remote region, including all taxes and charges invoiced by the carrier to the consumer on a route linking an airport or port in a remote region with another airport or port within the European Economic Area.

  • The aid is for the benefit of the final consumer and shall be granted without discrimination as to the identity of the carrier or type of service and without limitation as to the precise route to or from the remote region.

Outermost regions, Malta, Cyprus, Ceuta, and Melilla, and other islands which are part of the territory of a Member State, and sparsely populated areas are considered to be remote areas and may grant aid to cover the transport costs of their residents.

(p. 335) Social aid can be granted on the basis of aid schemes put in place under the GBER and there is no need to individually notify the aid because there is no individual notification threshold.

C.  Aid for broadband infrastructures

Investment aid for broadband network development can be granted under the GBER, provided those investments take place in areas where no comparable infrastructure exists or is unlikely to be deployed by market operators within three years from the moment of publicizing the planned measure.

The aid can cover the costs for the deployment of a passive broadband infrastructure, the civil engineering works related to this, or for the deployment of a basic or next-generation access network. To ensure that the aid is limited to the minimum, it is required to grant it on the basis of an open, transparent, and non-discriminatory competitive selection process, in full respect of the principle of technology neutrality.35 However, aid above EUR 10 million is subject to a monitoring and claw-back mechanism to cater for uncertain future costs and revenues, thus ensuring a balanced sharing of uncertain gains.

To maintain a positive balance of the aid and to limit the negative effects of the aid to the minimum, market conditions have been introduced in the GBER as regards the use of broadband infrastructure/network. Thus, the network operator should give the widest possible passive and active wholesale access to the subsidized infrastructure, including physical unbundling in the case of next-generation access networks. In addition, such a wholesale access shall be granted for at least seven years and the right of access to ducts or poles shall be unlimited in time. The access price shall be based on the principles laid down by the national regulator, who should be consulted when setting the price and the access rights, or in the event of disputes between access seekers and the subsidized operator.

For assisted areas, Member States can choose for granting the aid between the conditions laid down under the specific article in the GBER for broadband infrastructure (ie Article 52) or those laid down for regional investment aid in Article 15 of the GBER. In principle, because of the specificities of assisted areas, aid granted on the basis of the regional aid provisions (Article 15 of the GBER) is subject to less restrictive conditions than under the broadband provisions (Article 52 of the GBER). For example, regional aid must be individually notified to the Commission if aid is granted for a project with eligible costs exceeding EUR 100 million, whereas aid under the broadband provisions (Article 52 of the GBER) should be notified to the Commission if the total costs per project are above EUR 70 million. On the other hand, under the broadband provisions there is no maximum aid intensity foreseen, although there is an obligation to introduce monitoring and a claw-back mechanism if the aid exceeds EUR 10 million.

D.  Aid for culture, heritage conservation, and audio-visual

To the extent that public support for culture and heritage conservation constitutes State aid within the meaning of Article 107(1) of the Treaty, the GBER sets out in two articles the (p. 336) compatibility conditions for such aid. Article 53 of the GBER sets out the rules for aid to culture and heritage conservation and Article 54 for aid schemes for audio-visual works.

A positive and a negative list of culture purposes and activities are provided in the GBER. Thus, public support to museums, archives, libraries, cultural centres, theatres, cultural and natural heritage sites, cultural events, and education activities or to music and literature (including translations) could be considered compatible with the internal market on the basis of the criteria laid down in Article 53 of the GBER. However, public support to press and magazines (written and electronic), fashion, design, and video games is not falling within the scope of the GBER, because these activities have a predominantly commercial character that leads to higher potential for competition distortions.

The aid can cover both the investment and the operating costs of culture activities. However, the aid amount shall not exceed the difference between the eligible costs and the operating profit of the investment that should be deducted ex ante on the basis of reasonable projections. If this is not possible, a claw-back mechanism should be foreseen when granting the aid. For operating aid, the amount should not exceed what is necessary to cover the operating losses and a reasonable profit over the relevant period. To facilitate the granting of aid below EUR 1 million, the maximum aid amount may be set at 80 per cent of the eligible costs as an alternative method to the funding gap described previously.

The maximum aid amount for publishing music or literature corresponds to the difference between the eligible costs and the project’s discounted revenues, or 70 per cent of the eligible costs.

On the basis of Article 54, aid schemes may be put in place to support audio-visual works. It is for the Member States to establish effective processes to determine that the subsidized project is a cultural product. For example, one or more persons may be entrusted with the selection or verification against a predetermined list of cultural criteria.

Script-writing, development, production, distribution, and promotion of audio-visual works may be eligible for aid up to 50 per cent of the production and distribution costs and 100 per cent for the pre-production. The intensity for the production costs may be increased to 60 per cent if more than one Member State is financing the cultural product and if producers from several Member States are involved. The aid intensity may be increased to 100 per cent for difficult audio-visual works and co-production involving countries from the Development Assistance Committee (DAC) list of the Organization for Economic Cooperation and Development (OECD). Film studio infrastructure is not eligible for aid.

An important compatibility criterion is linked to the territorial restrictions sometimes imposed by Member States when subsidizing audio-visual works. Therefore, in order to be compatible with the internal market, the minimum level of production activity on the territory of the Member State concerned should not exceed 50 per cent of the overall budget and the maximum expenditure subject to the territorial spending obligation shall not exceed 80 per cent of the overall production obligation. In addition, the aid shall not be reserved exclusively for nationals and beneficiaries shall not be required to have the status of undertakings established under national commercial law. These compatibility conditions translate the established case law36 according to which State aid cannot be declared compatible with the internal market if it entails a non-separable violation of other provisions of the Treaty (eg free movement of goods, persons, and establishment).

(p. 337) E.  Aid for sport and multifunctional recreational infrastructure

Multifunctional recreational infrastructures refer to facilities offering cultural and recreational services, with the exception of leisure parks and hotel facilities. For assisted areas, investment aid for hotel facilities may be granted on the basis of the provisions of regional aid under Article 15 of the GBER.

Investment aid granted for the construction or upgrading of sport and multifunctional recreational infrastructure may be exempted from the notification obligation, provided the conditions in Article 55 of the GBER are respected. Likewise, aid under the GBER can cover the costs for providing services by the infrastructure such as personnel costs, materials, contracted services, communication, energy, maintenance, rent, or administration costs. The investment aid can cover the difference between the eligible costs and the operating profit of the investment that should be deducted from the costs ex ante on the basis of reasonable projections or through claw-back mechanisms. For operating aid, the amount shall not exceed the operating losses over the relevant period.

In order to ensure that the users of the subsidized infrastructure do not benefit from the aid granted for the construction or upgrading of the infrastructure, certain restrictions are imposed. Thus, a single professional sport user shall not exclusively use the sport infrastructure and a minimum annual use of 20 per cent by other non-professional sport users should be ensured. In addition, when a professional sport club uses the subsidized infrastructure, the pricing conditions should be made publicly available.

Likewise, to eliminate any potential aid at the level of the constructor or operator of the subsidized infrastructure, the concession or other entrustment shall be assigned on an open, transparent, and non-discriminatory basis with due regard to the applicable procurement rules.

F.  Local infrastructure

As a last resort for the compatibility of aid to infrastructure, the GBER provides in Article 56 the conditions for subsidizing the construction or upgrade of local infrastructure other than those covered by the other sections in the GBER. The notion of local infrastructure is defined more through negative lists. Thus, ports and airports are excluded from the scope of Article 56 like other types of infrastructure for which there are specific articles in the GBER (broadband, sport, culture, and RDI infrastructure). For assisted areas, Member States may choose between the provisions in Article 15 or those in Article 56 to subsidize the construction or upgrade the local infrastructure.

Under Article 56, the construction and upgrade of local infrastructure that improves the business and consumer environment, and modernizes and develops the industrial base may be supported with public funds provided it is not a dedicated infrastructure. An infrastructure is deemed to be dedicated when its characteristics, capacity, or other features are tailor-made to one or few companies. Similar to the conditions for subsidizing sport and multifunctional recreational infrastructure, any concession or entrustment to a third party to operate the subsidized infrastructure should be assigned on an open, transparent, and non-discriminatory basis, with due regard to the public procurement rules. Likewise, the investment aid for subsidizing local infrastructure should correspond to the difference between the eligible costs and the operating profit that shall be deducted ex ante from the eligible costs or ex post through a claw-back mechanism. In addition, the use of the infrastructure shall be provided on an open, transparent, and non-discriminatory basis and the prices charged to the users should correspond with market prices.

(p. 338) Section 6.  Conclusion

The GBER strikes the right balance between increasing its scope and limiting the negative effects of the aid to the minimum, by including the necessary safeguards and criteria. The transparency of aid and evaluation of large schemes are new features in the world of State aid and it remains to be seen how they will be used in the next modernization of the rules due in 2020.

By providing compatibility conditions in the GBER for the construction and operation of specific types of infrastructure (such as RDI, culture, broadband, and sport), the Commission has created the legal framework for public support to infrastructure. This was needed especially after the Court seemed to have enlarged the notion of State aid and thereby the scope of Article 107(1) of the Treaty after the Leipzig-Halle37 ruling. In this latter case, the Court confirmed that the construction of an infrastructure that is meant to be exploited economically, such as a commercial airport runway, is an economic activity in itself, which means that State aid rules apply to the way in which it is funded.

Footnotes:

1  Council Regulation (EC) No 994/98 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid, OJ L142, 14/05/1998, p 1.

2  Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid, OJ L 248, 13/07/2015, p 1.

3  Commission Regulation No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to SMEs, OJ L 10, 13/01/2001, p 33.

4  Commission Regulation No 2204/2002 of 12 December 2002 on the application of Articles 87 and 88 of the EC Treaty to State aid for employment, Official Journal L 337, 13/12/2002, p 3.

5  Commission Regulation (EC) No 1628/2006 of 24 October 2006 on the application of Articles 87 and 88 of the Treaty to national regional investment aid (Block Exemption Regulation for regional aid), OJ L 302, 01/11/2006, p 29.

6  See point 25 of the State Aid Action Plan and EU Competition Law, Volume IV, State Aid, Book Two, edited by Wolfgang Mederer, Nicola Pesaresi, and Marc Van Hoof, Clayes & Casteels, September 2008, paragraph 4.107 ff.

7  Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (GBER), OJ L 214, 09/08/2008, p 3.

8  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions EU State Aid Modernization (SAM), COM/2012/0209 final.

9  See Commission’s proposal of 05/12/2012, COM (2012) 730 final, available at http://ec.europa.eu/competition/state_aid/legislation/enabling_regulation_en.pdf, press release IP/12/1316 of 05/12/2012 and MEMO/12/936 of 05/12/2012.

10  Council Regulation No 733/2013 of 22 July 2013 amending Regulation (EC) No 994/98 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid, OJ L204, 31/07/2013, p 11.

11  Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187, 26/06/2014, p 1.

12  For the aid granted before the entry into force of the new GBER, the compatibility condition under Article 9 of the GBER regarding the publication of individual aid above EUR 500,000 is not applicable because it is a new requirement introduced under SAM and such aid could not have met this requirement.

13  See T-357/02 RENV Freistaat Sachsen v Commission, ECLI:EU:T:2011:376.

14  Commission Regulation No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to SMEs, OJ L 10, 13/01/2001, p 33.

15  See Annex II of the GBER.

16  See Annex III of the GBER. Information regarding the beneficiary (name, identification number, type of enterprise), region, and activity of the beneficiary and regarding the aid measure (aid element, aid instrument, date of granting, objective of the aid, granting authority) shall be published.

17  In Slovenia and Estonia there are electronic State aid registries with public access. In other Member States there is only a de minimis registry (eg in Czech Republic and Slovakia) and in others (eg Hungary) there is only a database that is kept by different granting authorities. In Romania, Italy, and Croatia the authorities are developing a State aid registry in order to comply with the requirements under EU structural and investment funds.

18  See Article 4 of the Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, OJ L 140, 30/04/2004, p 1.

21  See Commission decision SA.38751 (2014/N)—Czech Republic—Evaluation plan for the block exempted large aid scheme ‘Law on investment incentives’, C (2014) 9931 final of 10 December 2014.

22  See Commission decision SA.39273 (2014/N)—United Kingdom, Evaluation plan for the block exempted large aid scheme ‘Regional Growth Fund’, C (2014) 9319 final of 11 December 2014.

23  This is called the ‘Deggendorf’ principle from the established case law T-244/93 and T-486/93 TWD Textilwerke Deggendorf GmbH v Commission, ECR1995 p II-02265, where the General Court held that the Commission may condition the compatibility of a new measure to the repayment of another illegal and incompatible aid measure.

24  Communication from the Commission—Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty, OJ C 249, 31/07/2014, pp 1–28.

25  See definition in Article 2(18) of the GBER 651/2014.

27  For regional aid and RDI aid see Part III Chapter 3 Section 1—‘Regional Aid’ and Section 3—‘RDI Aid’.

28  Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees, OJ C 155, 20/06/2008, p 10.

29  An exception is foreseen for aid in favour of workers with disabilities. Thus, such aid can be cumulated with other aid categories of the GBER above the highest aid ceiling, provided that such a cumulation does not result in an aid intensity exceeding 100 per cent of the relevant costs over any period for which the workers concerned are employed.

30  See Part III Chapter 3 Section 3—‘RDI Aid’.

31  See checklist published by Commission services on the public website of DG Competition that Member States may use as guidance to prepare notifications of aid to make good the damage caused by natural disasters, available at: http://ec.europa.eu/competition/state_aid/studies_reports/disaster_aid_checklist_en.pdf.

32  Such as earnings before interest and taxes (EBIT), depreciation, and labour costs related to the establishment affected by the natural disaster.

33  T-244/93 and T-486/93 TWD Textilwerke Deggendorf GmbH v Commission, ECR1995 Page II-02265.

34  See Article 1(4)(a) of the GBER.

35  As defined by the Commission in the Broadband guidelines in point 78(e), the technological neutrality is respected if the tender does not favour or exclude any particular technology or network platforms. Thus, the bidders have the possibility to propose the provision of required broadband services using or combining whatever technology they deem most suitable, and the granting authority on the basis of objective tender criteria selects the most suitable technological solution or mix of technology solutions.

36  See Case C-156/98 Germany v Commission [2000] ECR I-6857, para 78 and Case C 333/07 Regie Networks v Rhone Aples Bourgogne [2008] ECR I-10807, paras 94–116.

37  Joined Cases T-443/08 and T-455/08 Freistaat Sachsen, Flughafen Leipzig/Halle et al v Commission [2011] ECR II-1311, in particular paras 93 and 94, upheld on appeal, see Case C-288/11 P, Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH v Commission [2012] ECR I-0000.