European Union: State Aid Measures For Research, Development And Innovation

Faster, simpler and more transparent: EU Commission adopts new framework to facilitate state aid measures for research, development and innovation

On 21 May 2014, the EU Commission has adopted new rules for state aid measures to support research, development and innovation activities. Besides the new R&D state aid Framework, the new General Block Exemption Regulation (GBER) was released widening the scope of measures that are exempted from prior notification to the Commission. Both set of rules will enter into force 1 July 2014. Being embedded in both the EU state aid modernization initiative and the Europe 2020 Strategy, the new rules seek to insure that state aid measures to support R&D activities can be granted easier, quicker and more effective. Equally, they aim to increase legal certainty and to provide guidance with regard to the application of state aid rules.

Since research and innovation can be said to be of major importance both for economic growth and competitiveness of the European economy, the EU aims to increase R&D spending to 3 percent of GDP in the years to come. State aid shall mobilize private investment in projects that would otherwise not be implemented. In order to attain this objective, EU state aid rules become more transparent and more flexible while providing a higher degree of legal certainty. In comparison to the previous R&D state aid rules, the major changes are as follows:

Avoid financing gaps

  • A core element of the new R&D Framework is to facilitate the granting of aid measures in order to overcome financing gaps. For large companies, the new regime covers up to 70 percent of the eligible costs for individually notified measures depending on the respective research stage. Equally, when conducting applied research, the R&D framework covers up to 90 percent of the eligible costs for small undertakings. In case of fundamental research, state aid measures for R&D projects can even cover up to 100 percent of eligible costs.
  • Under the new regime, even costs of prototyping and demonstration are considered eligible for aid. Yet, if rates are granted at the higher end of the scale, the existence of a genuine financing gap has to be demonstrated. In this respect, the Commission will conduct a thorough analysis to ensure the necessity and suitability for granting such higher rates in order to avoid undue distortions of competition in the common market.

More exemptions from prior notification

  • With the introduction of the new GBER regime, the Commission increased the notification thresholds and thus, extended the scope of exemptions from prior notifications of state aid. With regard to experimental development, the threshold to notify aid measures increased from EUR 7.5 million to EUR 15 million. Equally, the thresholds for fundamental research and industrial research increased to EUR 40 million and EUR 20 million, respectively, which is twice the amount of the former regime.
  • For the first time, Member States are now allowed to grant investment aid for research infrastructures amounting up to EUR 20 million per infrastructure without prior notification.
  • The scope of aid measures to support R&D activities has been widened under the new GBER: the new rules include pilot projects and prototypes, innovation clusters as well as state aid for process and organizational innovation.
  • For the first time, ad hoc aid granted to large companies (i.e. companies, which employ more than 250 persons or which have an annual turnover exceeding EUR 50 million) may be exempted from notification requirements.

New rules aim at simplification and more legal certainty

  • In practice, it is often difficult to distinguish between economic and non-economic activities with respect to public funding of research organizations or research infrastructures. By defining precisely the economic and non-economic nature of research activities, the new R&D Framework seeks to facilitate the criteria for differentiation. Generally speaking, only the public funding of economic activities will be considered as state aid.
  • For the first time, the new R&D framework includes rules with regard to research and development services that are subject to public procurement procedures. The EU Commission will generally consider that no state aid is awarded to the undertaking delivering the relevant services as long as an open tender for public procurement is carried out in accordance with the respective EU directives.
  • R&D projects which are co-financed directly or indirectly by the European Union (such as funding provided under Horizon 2020 program) will now be presumed to constitute necessary and appropriate state aid.

Transparency rules have to be observed

Furthermore, the Commission adopted new rules concerning transparency requirements. A Communication stipulates that Member States have to publish state aid measures granted to companies exceeding EUR 500.000 on a dedicated website. The information made to be available includes the name of the beneficiary, the amount granted, the objective of the state aid measures, the date of granting as well as the legal basis. The information has to be published within six months from the granting of the aid. Full and timely publication of this information is necessary condition for the validity of the aid measure. Member States have a two years period to establish an appropriate system to collect the information necessary and to set up the website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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