UK: European Commission Aims To Modernise State Aid Control

Last Updated: 16 May 2012
Article by Susan Hankey, Caroline Hobson and David Marks

On 8 May 2012, the European Commission announced the objectives of a reform of EU state aid control, which it aims to have in place by the end of 2013. The reform is part of the EU's wider agenda of fostering growth and creating appropriate conditions for economic recovery to take off and endure.

The European Commission notes that the complexity of the current rules as well as of the current procedural framework for state aid are challenges to state aid control.

The reform has three main objectives:

  • to foster sustainable, smart and inclusive growth;
  • to focus European Commission scrutiny on cases with the biggest impact on the internal market; and
  • to streamline the rules and provide for faster decisions.

The European Commission wants to ensure that the main elements of this reform enter into force at the same time. This will involve proposals for new legislation being adopted in autumn 2012 and the main instruments of the package being adopted by the end of 2013.

Fostering growth

The European Commission states that modernised state aid control should facilitate the treatment of aid which is well-designed, targeted at identified market failures and objectives of common interest and the least distortive. It notes that such aid will best contribute to growth when it targets a market failure and thereby complements, not replaces, private spending.

The European Commission continues that state aid will be effective in achieving the desired public policy objective only when it has an incentive effect i.e. it induces the aid beneficiary to undertake activities it would not have done without the aid.

As part of the growth aim, the European Commission will develop common principles for the compatibility assessment of national support projects and revise and streamline some existing texts, such as the environmental, regional, R&D&Innovation and risk capital guidelines, which could be aligned and possibly consolidated. Also rescue and restructuring guidelines for non-financial firms will be revised.

Financial institutions will be interested to note that the Commission commits to a new set of rules for rescuing and restructuring financial institutions for the post-crisis environment "when market conditions permit".

Focusing on cases with the biggest impact

The European Commission specifically envisages:

(i) a possible review of the state aid de minimis Regulation, to determine whether the threshold is still appropriate;

(ii) possibly allowing the Commission to make changes to the types of aid which are exempted from the notification requirement. These could include aid for culture, aid to make good damage caused by natural disasters and aid to (partly) EU-funded projects;

(iii) revising and possibly extending the general state aid block exemption for the categories of aid covered by the changes proposed at (ii) above.

The European Commission notes that should it increase the size and scope of aid measures exempt from the notification obligation, Member States' responsibilities for ensuring the correct enforcement of state aid rules would increase.

As part of this objective, the European Commission emphasises the need for EU Member States to take more responsibility in designing and implementing support measures and to improve co-operation with the European Commission in terms of quality and timeliness of submitting information and preparing notifications.

The Commission also wishes to see more effective national systems (including private enforcement) to ensure that state aid measures which do not require prior notification nonetheless comply with EU law.

Streamlined rules and faster decisions

This part of the package comprises:

  • clarifying the key concepts relating to the notion of state aid "with a view to contributing to an easier implementation"; and
  • enabling the European Commission to set priorities for complaints handling, rather than being obliged to examine all allegations of potential aid, as is the current position. Also, the European Commission wants better information gathering tools from market participants, so as to deliver decisions within business-relevant timelines. Business will no doubt welcome more realistic timelines, but will be keen to understand the scope of these new information gathering tools.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 08/05/2012.

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