The European Commission widened the scope of the General Block Exemption Regulation on 17 May 2017. The new rules exempt, for the first time, support measures for ports and airports and give Member States more flexibility to support culture, multi-functional sports arenas and businesses in the EU’s outermost regions, without having to seek prior Commission approval.
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The EU Treaty gives the Commission the task of enforcing EU state aid rules. Member States are normally required to notify their plans for state aid to the Commission and should only go ahead, if they have received the Commission’s prior approval.
However, the General Block Exemption Regulation declares specific categories of state aid compatible with the Treaty, provided they fulfil the clear conditions, and exempts these categories from the requirement of prior notification and approval. This allows Member States to implement state aid measures directly, with full legal certainty and without prior control by the Commission.
What is the General Block Exemption Regulation?
The 2014 General Block Exemption Regulation exempts certain categories of state aid from the requirement of prior notification to the Commission, if these are unlikely to distort competition in the Single Market. State aid measures which meet the criteria of the Regulation can be implemented by Member States directly, without prior Commission approval. As a result, about 95% of state aid measures implemented by Member States (with a combined annual expenditure of about 28 billion) are now exempted.
The criteria set out in the General Block Exemption Regulation determine, in particular, eligible beneficiaries, maximum aid intensities (i.e. the maximum proportion of the eligible costs of a project that can benefit from state aid) and eligible expenses. These criteria are derived from the Commission’s market experience and decision-making practice.
The fact that a state aid measure does not meet the criteria of the General Block Exemption Regulation does not mean that it is incompatible with EU state aid rules. It only means that the measure must be notified to the Commission, which will then assess case-by-case whether the measure can be approved under EU state aid rules.
Why has the Commission widened the scope of the General Block Exemption Regulation?
The aim is to facilitate public investment that can create jobs and growth whilst preserving competition. This will be achieved by giving Member States more flexibility to implement state aid measures without prior Commission approval.
The amended Regulation simplifies the procedure for public investments in ports, airports, culture, multi-purpose sports arenas and the EU’s outermost regions. It will make it easier to implement crucial infrastructure investments quicker, and with full legal certainty for project developers and aid granting authorities.
What are the main new elements of the General Block Exemption Regulation?
The General Block Exemption Regulation now exempts, for the first time, state aid to airports and ports from prior Commission approval. It also widens the existing exemptions for state aid to culture, multi-purpose sports arenas, and the EU’s outermost regions.
New exemption for airports:
The Regulation introduces a new exemption from the obligation to notify state aid measures to the Commission for approval before they are implemented, covering investment aid for airports handling up to 3 million passengers per year. The main conditions for this exemption are the following:
– Aid should not be granted to airports located in the catchment area (100 kilometres distance or 60 minutes of travel time) of another airport.
– The funded infrastructure should be fully used in the future and will not be larger than expected demand.
– The aid does not go beyond what is necessary to trigger the investment, taking into account future revenues from the investment (i.e. aid can only cover the “funding gap”).
– Only a certain percentage of the investment costs can be subsidised (depending on the size of the airport and on whether the airport is located in a remote region).
For small airports handling up to 200,000 passengers per year, the Regulation sets out more flexible rules for investment aid and also allows aid to cover operating losses.
New exemption for ports:
The Regulation introduces a new exemption from the obligation to notify state aid measures to the Commission for approval before they are implemented, covering maritime ports and inland ports. The main conditions are the following:
– The aid cannot exceed a certain absolute threshold (between 40 million and 150 million), depending on whether the project concerns a maritime port or an inland port and whether the port is included in a core network corridor under the TEN-T Regulation.
– The aid does not go beyond what is necessary to trigger the investment, taking into account future revenues from the investment (i.e. aid can only cover the “funding gap”).
– Only a certain percentage of the investment costs can be subsidised (depending on the size and the nature of the investment and on whether the port is located in a remote region).
– Only investment costs are eligible for aid (with the exception of dredging, for which both investment and maintenance costs are eligible for aid).
– Concessions to third parties for the construction, upgrade, operation or rent of port infrastructures must be assigned on a competitive, transparent, non-discriminatory and unconditional basis.
For small projects in ports, the Regulation lays down more flexible rules for investment aid.
Other simplifications and clarifications:
The Regulation also introduces new and more flexible rules in other areas, based on the Commission’s case practice since the adoption of the General Block Exemption Regulation in 2014. In particular:
– The upper limit for aid to culture and to multi-purpose sports arenas, which can be implemented under the Regulation, has been increased. Public support in these areas is rarely state aid, since they do not usually involve economic activities, and where aid is involved it does not pose a threat to competition, if the criteria in the Regulation are met.
– The rules on state aid to support the EU’s outermost regions have been clarified and further simplified. Member States will now be able to fully cover both the transport costs and other additional costs that undertakings operating in those regions have, across all sectors of the economy.
– The Commission has clarified that projects funded by Member States that meet the criteria of the “Seal of Excellence” quality label under the EU Horizon 2020 SME-instrument can receive public support without the need to notify it to the Commission, in line with the criteria set out in the Regulation.
– Start-up aid for small companies up to 5 years from their registration is now authorised. Until now start-ups that were considered as “companies in difficulty” could not benefit from start-up aid. However, innovative start-ups or start-ups in research and development intensive sectors often incur losses in their first years before they can sell their products, even though they can in fact be dynamic and growing.
– The Regulation allows the “simplified cost options” (simplified methods for calculating cost eligible for support) that apply under the EU’s Structural and Investment Funds to be used under the General Block Exemption Regulation. This reduces differences between different areas of EU law and reduces administrative burdens.
How does the update to the General Block Exemption Regulation fit in with Regulatory fitness and simplification?
Under EU state aid rules Member States must in principle notify state aid to the Commission and wait approval before implementing it. However, the Commission has exempted aid measures from this obligation, where they meet certain criteria, through its General Block Exemption Regulation. This enables Member States to pay aid directly and quickly, without any procedural obstacles.
The General Block Exemption Regulation therefore plays a crucial role in reducing administrative burdens and costs for public authorities and project developers, as well as for the Commission. At the same time the Regulation gives public authorities and project developers legal certainty that the aid is in accordance with EU state aid rules.
The amended Regulation simplifies the application of State aid rules for investments in ports, airports, culture, multi-functional sports arenas, as well as for aid to businesses in the EU’s outermost regions.
This is fully in line with the objectives of the Commission’s Regulatory Fitness and Performance of EU Legislation (REFIT) agenda, which aims to ensure that EU laws deliver their intended benefits for citizens, businesses and society while removing red tape and lowering costs.
What are the next steps?
The amending Regulation will enter into force 20 days after publication in the Official Journal of the European Union. The amending Regulation, together with an explanatory note, is available here.
Source: European Commission
