Ppp state aid iii

EEA – EFTA ForumState aid rules - modernisation

Advokat Hanne S. Torkelsen

E-post [email protected]

www.wla.no

The objective of state aidlegislation

• To ensure that government interventions do not distort competition and trade inside the EU/EEA.

• Research and development

• Environment

• Risk capital

• Infrastructure (i.e. broadband)

State aid is accepted to achieve certain objectives, i.a.:

• EEA agreement - Article 61 (TFEU Art 107) • Secondary legislation (directives and regulations)• Commission Decisions (i.e.re public service

compensation granted to undertakings entrusted withoperation of services of general economic interest)

• Commission Guidelines• ESA and the EEA Joint committee adopt legislative

measures for State aid rules which are identical to thatof the European Commission

State aid legislation

EFTA Surveillance Authority (ESA):• investigates allegations re illegal State Aid• approves new aid schemes and individual aid• decide that the State concerned shall abolish or

alter such aid within a period of time to be determined by ESA

If a member state does not comply with the decision within the prescribed time, ESA or any other interested State may refer the matter to the Court of Justice direct.

Enforcement in the EEA

Decisions by EFTA Court and the European Court of Justice are very important – ESA decisions may be reversed by the EFTA Court

ODA protocol 3 – On application by an EFTA state , The EFTA States can unanimously decidethat aid given or planned aid is compatible withEEA article 61 if justified by exceptionalcircumstances (before the Authority has madeits decision).

Enforcement in the EEA, cont

«[s]ave as otherwise provided in thisAgreement, any aid granted by EC MemberStates, EFTA States or through State resources in any form whatsoever which distorts or threatens to distort competition by favouringcertain undertakings or the production ofcertain goods shall, in so far as it affects trade between Contrating parties, be incompatiblewith the functioning of this Agreement»

State aid - EEA Art 61(1)

1. The measure involves an economic advantage2. Granted by State resources: public funds3. To «undertakings» - (not individuals or

households) engaged in economic activity, irrespective of its legal status and the way in which it is financed

4. Aid is selective – it favours only certainundertakings or production of certain goods

5. The aid affects competition and trade within theEEA

Cumulative criteria

State aid – EEA Art 61(1)

Art. 61 (2) Shall be compatible with EEA Agreement: • Aid to individuals• Natural disasters; exceptional occurrences

Art 61 (3). May be compatible with the EEA agreement:• Underdevelopment• European projects, serious disturbance• Certain economic activities or areas• Culture & heritage• other

Art 61(2) and (3): Exception

• EC Court decision: «Altmark criteria» and EC Regulation for compensation for services of general economic interest

• Regulation regarding «De Minimis aid» (200 000 Euro over 3 years) may be granted without notification

• Aid covered by group excemptions and guidelines (horizontalor sectoral) and hence is considered legal (for instanceregional investment aid)

Exemption from state aid

Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties, in particular to therules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Union.

EEA art 59. no 2 - SGEI

Illegal state aid must be recovered withinterest (up to 10 years!)

Existing Aid = aid existing before the entry in force of the EEA agreement – must not be recovered – only aid granted after thedecision regarding illegal aid is made by ESA

Existing or new aid - recovery

State Aid Art. 61(1)No

Case closed

Exceptionsapplicable?- De minimis aid- Block

Excemptions- Guidelines- Art 59.2

Yes

No ExistingAid?

No Recovery

System of state aid control

Aim to reduce overall state aid and to increase «horizontalobjectives» such as research and development, environment, risk capital

Commission proposal – «de minimis» aid: To keep the current treshold value at 200 000 Euro Establish a national registry for de minimis aid – within1.1.2016 - to increase surveillance and controlEstablish yearly reporting system (register) to monitor aid

Ongoing modernisation

- New «de minimis aid» in force:- Aid granted to undertakings providing a

service of general economic interestprovided that the total amount of aiddoes not exceed EUR 500 000 over anyperiod of three fiscal years.

- This also apply to the «road passenger transport sector»


The general block exemption regulation, inter alia:

• SME aid: risk finance measures will be revised and a broad category of start-up aid established

• Research and Development: definitions areimproved, reasearch infrastructures areintroduced and broader innovation aid for SME

• Category of Training Aid is established


• Definition of disadvantaged workersenlarged to include young people

• Aid for environmental protection -New block exemption for districtheating


Measure assessed in the decision:• The waste collection fee charged by municipality to its

inhabitants to finance costs (household waste) – to avoid possible cross-subsidies

• The income tax exemption for municipal wastecollectors that are part of the legal person of themunicipality

The Authority has proposed to the Norwegian Governmentas an appropriate measure:

ESA case 69911 – financing of municipal waste collectors

- To organise internal accounts in the way that theyshow separately the costs and revenuesassociated with the non-economic activities and those of economic activities

- The Norwegian authorities should ensure that thewaste collection fee will be calculated on the basis of the costs directly related to non-economicactivity as well as a proportionate share of fixedcommon cost

Financing of municipal waste collectors, cont.

- What is «a proportionate share of fixed commn cost» ?

- the principle of «full cost» (incl. capital cost) or principle of «incremental cost/marginal cost»?

- Regulation will affect the municipal waste incinerators ability to offer services in a market, and utilize the free capacity

- In the case of municipal waste incinerators, capital costs are high, and the price including full capital cost might be higher then the market price for industrial waste

Financing of municipal waste collectors, cont.

- To abolish the tax excemption, in so far as it applied to theeconomic activities of themunicipal waste collectors

Financing of municipal waste collectors, cont

- The municipalities of Trondheim has been operating a laboratory for more than 100 years in order to carry out thetask for verifying the quality of drinkingwater and foodstuffs

- In 2004 the Norwegian Food SafetyAuthority was established, whichimmediately delegated some of itsrepsonsibilities back to the Municipalityof Trondheim (Analysis Center)

Case regarding laboratories

- There is a market for laboratory services, and it is a sector subject to competition between commercial providers

- The Analysis Center provides inhouse services to the municipality, but also provides laboratory services to third parties.


ESA considered the following as an advantage:

- The municipality of Trondheim provides a number of collective services for free or at least at a price below market price

- Budget transfer to be used for upgrading the building and equipment

- Tax excemption for municipalities


- Proposed measure:

- To keep separate accounts for non-economic and economic activites

- To ensure that accounts contain the direct cost of the economic activities and a contribution to the indirect costs common to both economic and non-economic activities


- Proposed measure:

- To demonstrate that the distribution of common costs allocated to economic/non-economic activites is appropriate (i.e. use of premises, collective services etc at market prices)

- To ensure that the Analysis Center are subjected to business taxes


Thank you for your attention!

E-mail: [email protected]

www.wla.no

Ppp state aid iii

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