Post on 13-Mar-2018
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Concept of State aid: the principles
Mihalis KekelekisExternal State aid Expert
Brussels – July 2017
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Commission Notice on the notion of State aid as referred
to in Article 107 (1) of the TFEU
OJ C 262/1, 19.7.2016
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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EU system of State Aid Control
Exceptions
applicable?
Existence
of state aid
twofundamental
issues
Procedure: notification, standstill, authorisation
[plus, register, reports, recovery, etc.]
Principle: state aid in any form is in general
incompatible with the internal market
European Commission
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Schematic overview of State aid control
Direct application of the Treaty -Notification
EU Guidelines – Examination of common assessment principles
– Notification
GBER – Automatic compatibility – No notification
No aid – De minimis aid – No notification
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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What is state aid?
Article 107(1) of the Treaty
“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 the
production of certain goods shall, in so far as it affects
trade between Member States, be incompatible with the
internal market”
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Criteria
� Aid granted to undertakings from public funds [MS or
State resources]
� Aid confers advantage
� Aid is selective
� Aid affects trade between MS
� Aid distorts or risk to distort competition
Criteria are cumulative
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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Nature of aid� Concept of aid is wider than subsidies and includes and
public measure that reduces costs normally borne in
budget of undertakings:� Grants, capital injections
� Loans at below market rates; interest subsidies
� Guarantees
� Tax advantages: tax reductions, tax exemptions
� Reductions of social security contributions
� Provision of goods and services at below-market prices
� Sale of land at below-market price by the State
� Purchase of goods and services by the State at above-market price
� Irrelevant factor the intention and objective of the
granting authorityThis training has been organised by EIPA-Ecorys-PwC under the Framework Contract
Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only and do not represent the EC's official position
Aid is given to undertakings
� “any entity engaged in economic activity”
� Regardless of legal status & way it is financed and
� Regardless of whether entity intends to make profit
� Regardless of whether it offers the services free of charge to its
users or customers
� Notion is addressed to economic activities rather than
to entities
� Economic activity is any activity that can be exercised by
private undertakings for remuneration
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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Examples of non-undertakings
� Public entities exercising public powers e.g. activities
related to army or police, maintenance of air navigation
system, customs, maritime traffic control and safety
� The organisation, financing and enforcement of prison
sentences
� Employees and Trade Unions
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Health care
Non economic activity
� Public hospitals integral part
of the national health service
� Free of charge or very small
charge
� Commercial activities to
support the NHS
� FENIN Judgement C-205/03
� Private operators offering
these services on behalf of
the State
Economic activity
� Health services for
remuneration
� Public or private health care
services
� Pharmacies
� Emergency medical care
� Ambulance services
� Competition in the market
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Education and research activities
Non economic activity
� Public education integral part of
the national educational system
� Free of charge or very small
charge
� Vocational training, kinder
gardens, universities,
independent research,
dissemination of results
� Private operators offering these
services on behalf of the State
Economic activity
� Educational services for
remuneration
� Higher education financed
entirely by students
� Public and private educational
services depending on the way
they are financially structured
� Competition in the market
� Research on behalf or with
the industry
Cultural or heritage conservation activities
Non economic activity
� Activities accessible to the
public free of charge (or with a
small charge)
� Museums, libraries, theatres,
opera houses, archaeological sites,
historical buildings, natural
heritage etc.
� Non- substitutable activities
� Public archives
Economic activity
� Activities with remuneration
� Cinemas, commercial music
performances, restoration of
private historical buildings etc.
� Customary amenities in
support of the activities
� Restaurants, shops, parking,
paid cloakrooms etc.
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Land development
Non economic activity
� Provision and supervision of
land in line with urban
development plans
� Ground work, connection to
utilities and transport network,
street construction, street lighting,
anti-noise barriers etc.
� SA. 36346 - GRW
Economic activity
� Customized development of
land
� Land redevelopment for
large retail stores
� Construction and
revitalization of buildings
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Aid granted by
a Member State
or through
State resources
� Central government, ministries or departments
� Regional governments, local authorities or councils
� Public undertakings or agencies of the State
� Funds or associations controlled by the State
are the actions
imputed to
the State?
� Does the State has discretion to control the actions ofits bodies?
Sources of funding of aid
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Imputability
C-482/99, Stardust Marine
� Level of companies’ integration in the public
administration
� Nature of activities
� Legal status of companies (i.e. subject to public law or
ordinary company law)
� Intensity of public supervision over the management of
companies
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Sources of aid including structural funds
State resources No state resources
no state controlstate control
Otherstate-
controlledresources
EU
CAP
MSpublicfunds
ESI fundsHorizon
2020Private
Recipients of funding (undertakings)
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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“by favouring” - Advantage
� Advantage is any relief from normal costs that are
inherent in the economic activity of the beneficiary
undertaking
� If State provides aid through open tender, then no state
aid
� If State behaves as any private investor or creditor then
no state aid and no need for public tender
� Indirect advantage
� Advantage at different levels (e.g. owner, operator and
user of infrastructure)
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
�Pari passu arrangements
� Tender eliminates advantage
The Advantage test
�No advantage where the State acts in the same way as a
private operator acting under normal market conditions
If not
�Benchmarking analysis
in view comparable situations
�Profitability analysis
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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Services of general economic interest
� Altmark criteria [C-280/00]
� Public Service Obligation (PSO) well defined
� Public service compensation (PSC) predetermined
� Aid covers only extra costs
� Costs not higher than those of typical undertaking or public
tender chooses the beneficiary
� If above criteria are met, PSC is not state aid
� If these criteria are not all met for a PSO, PSC can be
compatible aid under Article 106 (2)
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
“by favouring certain undertakings” - Selectivity
� Aid favours certain regions, sectors, undertakings,products
� But general measures do not involve state aid
� De jure: it results directly from the legal criteria (e.g.companies of certain size)
� De facto: it is the result of conditions imposed by MSpreventing certain undertakings from benefiting from ameasure (e.g. tax credit to investment above a certainthreshold)
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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Selective
�favouring small undertakings
over large ones in respect of the
purchase of commercial
vehicles
�favouring large insolvent
companies
�tax exemptions on exports
�derogations from tax system,
unless justified by the nature
and structure of it
General
�measures in order reduce
unemployment or to improve
working conditions
�consumer subsidies
�reduction of corporate tax
�setting corporate tax
�infrastructure projects for
public use
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Selective v general measures
Fiscal selectivity and case example
� Derogation from reference tax systems is in principle
selective
� Case C-524/14 Lubeck airport: lowering of landing and
other fees charged by the airport for all airlines
� Commission: selective - at the detriment of other airports
� General Court: general - charges set by the Land under a
particular legal regime
� ECJ: general – all airlines using Lubeck airport benefit
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“distorts or threatens to distort competition”
� If trade is affected, then competition is normally found to be
distorted because the recipient of the aid gets a better
position in the market
� Unless the service is subject to a legal monopoly and cross-
subsidization is excluded
� Commission only has to explain how aid is capable of
causing distortion
� Irrelevant arguments from MS:
� “we give aid because in other States the market conditions are
more favourable”, or
� “we give aid because competitors in other States have received aid”This training has been organised by EIPA-Ecorys-PwC under the Framework Contract
Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only and do not represent the EC's official position
“in so far as it affects trade”
� No requirement to establish that aid has real effects on
trade, but only to examine whether aid is liable to affect
trade
� The principle:
“It seems appropriate to check, in particular, whether the
beneficiary supplies goods or services to a limited area
within a Member State and is unlikely to attract
customers from other Member States, and whether it
can be foreseen that the measure will have more than a
marginal effect on the conditions of cross-border
investments or establishment”This training has been organised by EIPA-Ecorys-PwC under the Framework Contract
Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only and do not represent the EC's official position
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Case: SA 43983� Financing a Sportcamp in Germany
� Funding : 20.73 million EUR
� Commission:
� Distinction between the provision of trainingcamp and the exercise of amateur sport in anon-profit association and school educationactivities
� 0.2% annual turnover for foreign visitors;below 1% foreign visitors; 81.5% of overnightstays of all users from Bavaria; and no morethan 4% overnight stays of foreign visitors
� Thus unlikely to attract visitors from other MS
� No positive evidence of relevant cross-borderinvestments or establishment
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Case: SA 33149
� Provision of free information and advisoryservices to individuals and SMEs in adisadvantaged area of the city of Kiel (D)
� Commission:
� Services are provided exclusively to a very localmarket (19000 inh)
� Address only very small firms from the area
� Provided by a very small number of staff
� Complainant has only local operations
Thus
� Unlikely to attract customers from other MS
� No positive evidence of relevant cross-borderinvestments or establishment
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
Guidelines: Horizontal• regional development• environmental protection• R&D&I• rescue & restructuring• fiscal aid• risk capital for SMEs• PSC framework• Guidelines: Sectoral• agriculture & fisheries• audiovisual• broadcasting• broadband• transport
BE Regulations• General block exemption regulation •agriculture & fisheries•Decision on PSC
Aid outside guidelines must be within Art 107(2 or 3)• necessary & proportional• in EU’s interest• not contrary to other provisions in EU Treaty
Article 106(2): SGEIArticle 93: transport
Article 107(3): may be compatible with IM• underdevelopment• European projects; serious disturbance• certain economic activities or areas• culture & heritage• other
Article 107(2): compatible with IM• aid to individuals• natural disasters; exceptional occurrences• division of Germany
Regulation on de minimis aid=> no aid in meaning of Art 107(1)
Compatibility ExceptionsOptions
Conditions
Compatibility main principles
� Objective of common interest
� Necessity and appropriateness of aid
� Incentive effect
� Proportionality of aid
� Effect on competition and intra-Union trade
� Transparency
Ex post evaluation of certain large schemes
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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Thank You!Mihalis.Kekelekis@eftasurv.int
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position