2017 has been published in the Official Journal of the European Union. The Regulation contains new state aid rules amending the General Block Exemption Regulation (GBER), according to which in particular special public funding initiatives for ports, airports, culture, sport and multifunctional recreational infrastructures and certain outermost regions of the European Union are no longer subject to prior Commission Approval.
On the one hand, the Amending Regulation - which will enter into force beginning of July 2017 – exempts further categories of state aid from the obligation of prior notification and approval pursuant to Article 108 (3) of the Treaty on the Functioning of the European Union (TFEU), and on the other hand, it in part increases the thresholds for projects that are already exempted. As a result, public investments that create jobs and promote economic growth are supposed to be facilitated without impacting competition.
Amendment of the General Block Exemption Regulation
Provided that the criteria of the GBER which entered into force in 2014 are met, the EU Member States are able to implement various measures that constitute state aid within the meaning of Article 107 (1) TFEU without prior Commission approval, because the respective projects are unlikely to distort competition. According to these provisions, approx. 95 percent of the state aid measures implemented by the Member States with a total annual expenditure of approx. EUR 28 billion are exempted. Consequently, the number of notifications to the Commission for state aid has significantly decreased since 2014.
Below, we present an overview of the amendments to the GBER that have been initiated in the context of the Regulatory Fitness and Performance Programme (REFIT).
New Exemptions for Airports
In future, investments for regional airports handling up to three million passengers per year will be exempted from the notification obligations. This requires that there is no other airport in a catchment area of 100 km or 60 minutes travel time respectively. The aid may only cover the funding gap, i.e. must not be higher than required in order to prompt companies to make the desired investment. Furthermore, it is required that the aid only accounts for a particular percentage of the total investment costs that is dependent on the size and location of the airport - for instance in an outermost region. Finally, the infrastructure that is funded has to be used to the full extent and must not be planned larger than required on the basis of expected demand. The exemption is supposed to facilitate public investment in more than 420 airports in the European Union that account for approx. 13% of air traffic.
With regard to smaller airports handling up to 200,000 passengers per year, more flexible rules for investment aid are established in the Regulation and aid to cover operating losses is permitted. In this context, the Commission points out that the small airports account for almost half of all the airports in the EU, but only handle 0.75% of the air traffic. Consequently, with regard to these airports it would be unlikely that the intra-Union trade between the Member States would be impaired.
New Exemptions for Ports
Moreover, in future, the Member States can make public investments with a threshold of up to EUR 150 million for sea ports and up to EUR 50 million for inland ports without prior Commission control, since these aids are now also exempted from the notification obligation. In this context, the threshold is dependent on whether the port is part of a core network corridor within the meaning of Regulation (EU) No. 1315/2013 on Union Guidelines for the Development of the Trans-European Transport Network (TEN). In addition, it is now possible to cover the costs of dredging in ports and access waterways. Again, further requirements are, amongst others, that the aid may only cover the funding gap and may only account for a particular percentage of the investment costs depending on the volume and type of the investment as well as the location of the port in an outermost region, as the case may be.
In accordance with the Commission’s decision practice since the GBER was adopted in 2014, there will be more flexible regulations also in other fields. For example, the limit for the exemption of aid for culture projects will be increased to EUR 150 million per project and year for investments, whereas the limit for operating aid is now EUR 75 million.
The upper limit for aid for sports infrastructures and multi-purpose recreational infrastructures will also be increased. According to the Commission, the public funding measures in this field would hardly ever constitute state aid since they would usually not concern economic activities. Even if they constitute state aid, they are unlikely to distort competition, according to the Commission’s view, as long as the criteria of the amended GBER are met.
Moreover, it will be possible for the Member States to cover transportation costs as well as other additional costs for companies in order to support the EU’s outermost regions so that the problems and special challenges these companies are facing (e.g. their remoteness and dependence on a few traded products) can be better considered in funding measures.
Besides, start-up aid for small companies that have been entered into the commercial register no more than five years ago will be permitted. This is supposed to take into consideration the fact that newly-founded companies in fields requiring a lot of research and development effort often generate losses in the first few years despite the fact that they show dynamic development and growth.
The »simplified cost options« (= simplified methods to calculate the costs eligible for support) that are used in the context of the European Structural and Investment Fund can also be applied pursuant to the GBER in future, so that discrepancies between different fields of EU law as well as administrative burdens are reduced.
A draft of the new Amending Regulation had already been made available for public download on the Commission homepage in May 2017. The final version was published in the EU Official Journal on 20 June 2017 (L 156/1) and will enter into force 20 days after the official publication.
The changes in the GBER are to be welcomed and will (further) facilitate public investment in the aforementioned areas. The project is part of the Commission’s efforts to focus state aid control on bigger cases that significantly impact competition in the Single Market. The facilitations have to be considered in connection with other measures the Commission took last year in order to modernize state aid law. This includes in particular the notice on the definition of state aid that was adopted in May 2016 as well as the Commission resolutions on purely local funding measures of September 2016 and April 2015.
With the reference to clear thresholds – in particular in the public funding of regional ports and airports – Member States will be able to grant a wide variety of aid with legal certainty and without prior notification in the future, in addition to the existing facilitations pursuant to the GBER. This constitutes a significant facilitation in practice. However, the recipients and donors of aid always bear the risk of a refund claim or of aid-related contracts to be void due to a breach of the prohibition on putting measures into effect of Article 108 (3) TFEU. Against this background, it is necessary to carry out a careful assessment of the individual case in order to minimize state aid-related risks.
Dr. Gerd Schwendinger, LL.M., Attorney at Law