Less and better targeted state aid – a road map from the Commission

EN EN
EN
EN EN
COMMISSION OF THE EUROPEAN COMMUNITIES
Brussels, 7.6.2005
COM(2005) 107 final
STATE AID ACTION PLAN
Less and better targeted state aid: a roadmap for state aid reform 2005–2009
(Consultation document)
(presented by the Commission)
{SEC(2005) 795}
EN 2 EN
Introduction………………………………………………………………………………………….. 3
I A modernised state aid policy in the context of the Lisbon strategy for
growth and jobs ………………………………………………………………………….. 3
I.1 Rationale for state aid policy: why does the EU need a state aid policy?………………..3
I.2 New challenges for the EC state aid policy……………………………………………………….4
I.3 How to face the new challenges?…………………………………………………………………….5
II Focusing on the key priorities……………………………………………………………. 8
II.1 Targeting Innovation and R&D to strengthen the knowledge society…………………….8
II.2 Creating a better business climate and stimulating entrepreneurship……………………..9
II.3 Investing in Human Capital……………………………………………………………………………9
II.4 High quality Services of General Economic Interest…………………………………………..9
II.5 Better prioritization through simplification and consolidation ……………………………10
II.6 A focused regional aid policy……………………………………………………………………….10
II.7 Encouraging an environmentally sustainable future………………………………………….11
II.8 Setting up modern transport, energy and information and communication technology
infrastructures ……………………………………………………………………………………………11
III Modernising the practices and procedures of state aid………………………. 12
III.1 Better governance – a shared responsibility with Member States ………………………..12
III.2 Less bureaucracy and better targeted enforcement and monitoring ……………………..12
III.3 Adapting procedural rules to an enlarged European Union ………………………………..13
III.4 A comprehensive review of the remaining documents………………………………………14
III.5 Establishing and evaluating the new practice for the future ……………………………….16
EN 3 EN
INTRODUCTION
1. Specific challenges call for a comprehensive reform of state aid policy at this
moment. Time has come to build a momentum within the Commission and in
partnership with Member States and stakeholders, so that state aid rules better
contribute to sustainable growth, competitiveness, social and regional cohesion and
environmental protection.
2. This Action Plan is a consultation document presenting an indicative roadmap for
state aid reform during the period 2005/2009, which the Commission will conduct in
close cooperation with Member States and stakeholders.
3. The services of the Commission would welcome any comments on this Action Plan
before 15 September 2005. Moreover, stakeholders will also be involved in the
elaboration of each concrete proposal.
4. Comments should be sent to the European Commission with the reference State aid
reform by email to STATEAIDGREFFE@CEC.EU.INT or by post to:
DG Competition
State Aid Register
SPA 3, office 6/5
B-1049 Brussels
Belgium.
I. A MODERNISED STATE AID POLICY IN THE CONTEXT OF THE LISBON STRATEGY FOR
GROWTH AND JOBS
I.1 Rationale for state aid policy: why does the EU need a state aid policy?
5. Ever since the signing of the Treaty of Rome in 1957, state aid policy has been an
integral part of competition policy and the European Commission has been in charge
of preventing that aid granted by Member States unduly distorts competition.
6. Competition policy rests upon the idea that a market-based economy provides the
best guarantee for raising living conditions in the EU to the benefit of citizens, one of
the primary objectives of the EU Treaty. Functioning markets are an essential
element in providing consumers with the products they wish to obtain, at low prices.
Competition is furthermore essential to enhance the competitiveness of the European
economy, as it creates an environment in which efficient and innovative companies
are rewarded properly.
7. State aid control comes from the need to maintain a level playing field for all
undertakings active in the Single European Market, no matter in which Member State
they are established. There is a particular need to be concerned with those state aid
measures, which provide unwarranted selective advantages to some firms, preventing
or delaying the market forces from rewarding the most competitive firms, thereby
decreasing overall European competitiveness. It may also lead to a build-up of
market power in the hands of some firms, for instance when companies that do not
receive state aid (e.g. non-domestic firms) have to cut down on their market
presence, or where state aid is used to erect entry barriers. As a result of such
distortions of competition, customers may be faced with higher prices, lower quality
goods and less innovation.
EN 4 EN
8. Further, it is important to realise that state aid does not come for free. Nor is state
aid a miracle solution that can instantly cure all problems. Tax payers in the end have
to finance state aid and there are opportunity costs to it. Giving aid to undertakings
means taking funding away from other policy areas. State resources are limited and
they are needed for many essential purposes, such as the educational system, the
health system, national security, social protection and others. It is therefore necessary
for Member States to make choices transparently and to prioritise action.
9. Article 87 of the EC Treaty prohibits any aid granted by a Member State or through
State resources in any form whatsoever which distorts or threatens to distort
competition by favouring certain firms or the production of certain goods in so far as
it affects trade between Member States. The Treaty has given the Commission the
task to monitor proposed and existing state aid measures by Member States to ensure
that they do not distort intra-community competition and trade to an extent contrary
to the common interest. It falls under its responsibility to make sure that the level
playing field would be maintained between Member States, no matter their different
levels of resources and their different traditions of state intervention in the markets.
10. The Treaty explicitly allows exceptions to the ban on state aid where the proposed
aid schemes may have a beneficial impact in overall Union terms. State aid may be
declared compatible with the Treaty provided it fulfils clearly defined objectives of
common interest and does not distort intra-community competition and trade to an
extent contrary to the common interest. State aid measures can sometimes be
effective tools for achieving objectives of common interest. They can correct market
failures, thereby improving the functioning of markets and enhancing European
competitiveness. They can also help promote e.g. social and regional cohesion,
sustainable development and cultural diversity, irrespective of the correction of
market failures.
11. However, state aid should only be used when it is an appropriate instrument for
meeting a well defined objective, when it creates the right incentives, is
proportionate and when it distorts competition to the least possible extent. For that
reason, appreciating the compatibility of state aid is fundamentally about balancing
the negative effects of aid on competition with its positive effects in terms of
common interest.
12. While the horizontal state aid rules in principle cover all sectors, certain sectors have
very specific rules and due to the special nature of the rules governing agriculture,
fishery, coal production and transport, special rules apply. While the principles put
forward in the Action Plan should apply to all sectors, it does not address the reform
of these rules. The objectives of the Euratom Treaty and the obligations regarding the
World Trade Organization have also to be taken into consideration.
I.2 New challenges for the EC state aid policy
13. There are new challenges facing state aid policy at this moment, which call for
action. As was clearly expressed by the European Council of November 2004, there
is a need for renewed impetus to the so-called Lisbon Strategy. The Commission
Communication to the 2005 Spring European Council ‘Working together for growth
and jobs, a new start for the Lisbon Strategy’, has already set out a new Lisbon
Action Programme where state aid control plays an important role.
14. The European Council of March 2005 has called on “Member States to continue
working towards a reduction in the general level of State aid, while making
EN 5 EN
allowance for any market failures. This movement must be accompanied by a
redeployment of aid in favour of support for certain horizontal objectives such as
research and innovation and the optimisation of human capital. The reform of
regional aid should also foster a high level of investment and ensure a reduction in
disparities in accordance with the Lisbon objectives”.
15. State aid policy safeguards competition in the Single Market and it is closely linked
to many objectives of common interest, like services of general economic interest,
regional and social cohesion, employment, research and development, environmental
protection and the protection and promotion of cultural diversity. It must contribute
by itself and by reinforcing other policies to making Europe a more attractive place
to invest and work, building up knowledge and innovation for growth and creating
more and better jobs.
16. The enlargement in 2004 was unprecedented in size. This underlines the need for
adaptations of state aid policy and for better governance to ensure an effective
control in the enlarged Union.
17. Besides, the increasing complexity and number of documents progressively
adopted by the Commission over time have created a need to streamline state aid
policy, focus attention on the most distortive types of aid and make state aid control
more predictable and user-friendly, thereby minimising legal uncertainty and the
administrative burden both for the Commission and for Member States. There is also
a need to strengthen the commitment of Member States to their obligation to enforce
state aid rules. Finally, there is a need to increase transparency and advocacy about
state aid policy to allow undertakings, the academic world, competition specialists,
consumers and the broader public to get involved and act against unlawful aid, in
particular before national judges.
I.3 How to face the new challenges?
18. To face the new challenges requires a thorough modification of the existing state aid
rules, as regards both substance and procedures. Any effective assessment of the
allocation or distribution effects of State aid must take into account their actual
contribution to commonly agreed, politically desirable objectives. The aim is to
present a comprehensive and consistent reform package based on the following
elements:
– less and better targeted state aid;
– a refined economic approach;
– more effective procedures, better enforcement, higher predictability and enhanced
transparency;
– a shared responsibility between the Commission and Member States: the
Commission cannot improve state aid rules and practice without the effective
support of Member States and their full commitment to comply with their
obligations to notify any envisaged aid and to enforce the rules properly.
19. Economic and legal analyses are used to fulfil the Commission’s obligations under
the Treaty, in some cases to determine when a measure is state aid (e.g. application
of the market investor principle or evaluation of the justification of certain measures
by the nature or general scheme of the fiscal system) and in particular to determine
when state aid can be declared compatible with the Treaty. In assessing whether an
aid measure can be deemed compatible with the common market, the Commission
EN 6 EN
balances the positive impact of the aid measure (reaching an objective of common
interest) against its potentially negative side effects (distortions of trade and
competition). It is for Member States to provide the necessary evidence in this
respect, prior to any implementation of the envisaged measure.
20. The Commission will continue to develop criteria to fulfil its assessment of aid
compatibility, in particular through analyses of specific sectors. In general, the
positive impact of an aid depends on: i) how accurately the accepted objective of
common interest (whether social, regional, economic or cultural) has been identified,
ii) whether state aid is an appropriate instrument for dealing with the problem as
opposed to other policy instruments and iii) whether the aid creates the needed
incentives and is proportionate. On the other hand, the level of distortion created by
an aid generally depends on: i) the procedure for selecting beneficiaries and the
conditions attached to the aid, ii) characteristics of the market and of the beneficiary
and iii) the amount and type of aid. For example, restructuring aid or investment aid
to large companies should be carefully monitored to clearly address an objective of
common interest, since the impact of such measures on competition and trade will
normally be significant.
21. To best contribute to the re-launched Lisbon Strategy for growth and jobs, the
Commission will, when relevant, strengthen its economic approach to State aid
analysis. An economic approach is an instrument to better focus and target certain
state aid towards the objectives of the re-launched Lisbon Strategy.
22. Making more use of a refined economic approach is a means to ensure a proper and
more transparent evaluation of the distortions to competition and trade associated
with state aid measures. This approach can also help investigate the reasons why the
market by itself does not deliver the desired objectives of common interest and in
consequence evaluate the benefits of state aid measures in reaching these objectives.
23. One key element in that respect is the analysis of market failures, such as
externalities, imperfect information or coordination problems, which may be reasons
why the markets do not achieve desired objectives of common interest, in
particular if they are of an economic nature. In those cases, identifying the market
failure at stake will help evaluate better whether state aid could be justified and
acceptable, would represent the most appropriate solution, and how it should be
implemented to achieve the desired objective without distorting competition and
trade to an extent contrary to the common interest.
EN 7 EN
State aid in the context of the Lisbon Strategy
Competition is vital for the economy to be efficient, to untap Europe’s growth
potential to the benefit of the European citizens. In this context, “efficiency” refers to
the extent to which welfare is optimized in a particular market or in the economy at
large. A “market failure” is consequently a situation where the market does not lead
to an economically efficient outcome. Market failures have different origins, and
notably:
– Externalities: externalities exist where actors do not take full account of the
consequences of their actions on other actors in society. Market players may not
have to pay for the full social cost of their actions (negative externalities) like in
the case of pollution through industrial activity. Market players may also be
unable to reap the full benefits of their actions (positive externalities) like in the
fields of research and innovation.
– Public goods: public goods are goods which are beneficial for society but which
are not normally provided by the market given that it is difficult or impossible to
exclude anyone from using the goods (and hence making them pay for the goods).
This can be the case of national defense and some types of public broadcasting.
– Imperfect information: imperfect information may lead to transaction costs,
agency costs, moral hazard or antiselection, which in turn lead to inefficient
market outcomes. A well-known example of imperfect information can be found
in the financial market, where start-up firms usually face problems in finding
adequate funding.
– Coordination problems: markets may also not function efficiently when there is a
coordination problem between market actors. Coordination problems may exist
for example in the field of standards setting, in transport infrastructures, or in the
area of innovation.
– Market power: Another reason why the market may not lead to an efficient
outcome is the existence of market power, for instance in a situation of monopoly.
When markets do not achieve economic efficiency, Member States or the Union may
want to intervene in order to correct the market failures. Some of the abovementioned
situations may be solved by regulatory or other means. In certain cases,
however, Member States may envisage to use state aid. One important justification
for state aid is therefore the existence of a market failure.
However, it is not enough for state aid to target a market failure. Before resorting to
State aid, which is in general only the ‘second best’ option to achieve optimal
allocation of resources, it should be verified whether other less distortive measures
could remedy the market failure. State aid should be the appropriate policy
instrument and should be designed so that it effectively solves the market failure, by
creating an incentive effect and being proportionate. In addition, state aid should not
distort competition to an extent contrary to the common interest.
In the context of the re-launched Lisbon Strategy, the European Council has invited
Member States to pay attention to market failures. Moreover, an effort to ensure
social and economic cohesion and sustainable development should also be made.
EN 8 EN
II. FOCUSING ON THE KEY PRIORITIES
II.1 Targeting Innovation and R&D to strengthen the knowledge society
24. Europe’s future economic development depends on its ability to create and grow
high-value, innovative and research-based sectors capable of competing with the best
in the world. This priority of knowledge and innovation has been clearly endorsed in
the Communication to the Spring European Council.
25. In this context, in 2005, the Commission will adopt a Communication on state aid
and innovation which will analyse the need and the potential to adapt existing rules
in order to create the appropriate framework conditions to foster innovation in the
EU. This will complement the Competitiveness and Innovation Framework
Programme. Innovation is related to a process connecting knowledge and technology
with the exploitation of market opportunities for new or improved products, services
and business processes compared to those already available on the common market
and encompassing a certain degree of risk. This process may be hampered by market
failures (mostly externalities, public goods and imperfect information leading to
inefficient dissemination, insufficient funding and labour market mismatches). State
aid can be justified when it is necessary to increase the incentive to innovate and
when it does not lead to a crowding out of private initiatives or to unfair competition.
26. The Commission’s Vade mecum on Innovation has shown that a number of
possibilities already exist to grant aid to target the market failures which are
hampering innovation activities, but that the rules could nevertheless be improved.
Additional possibilities will be analysed to cover measures which can boost
innovation in the common interest. Particular attention will e.g. be paid to the
specific situation of small and medium-sized enterprises, to the role of intermediaries
(e.g. clusters, technology centres) and to highly-skilled researchers working in the
area of innovation. The specific amendments suggested in the Communication will
subsequently be made when the relevant rules are revised.
27. In addition, the Commission will modify the Community Framework for Research
and Development, in the light of the Lisbon and Barcelona objectives. This review
will also seek to better take into account the priorities of the Community’s R&D
policy such as the promotion of cross-border research cooperation, public-private
research partnerships, dissemination of research results and important research
projects of common European interest. State aid to R&D could enable Member
States to target market failures and provide the right incentives for industry to invest
more in R&D. The Commission will base the review of the framework on an
approach better reflecting an interactive industrial innovation process which can also
take account of continuous feedback from the market.
28. The framework should also take account of the growing importance of public private
partnerships in the R&D field. In particular, it should provide for adequate provisions
for collaborative research including the ownership of, access to and exploitation of
Intellectual Property Rights obtained in such projects. Furthermore, the need to allow
for aid for dissemination will have to be considered in the course of the review. The
Commission will also consider if the scope of the framework should be extended to
cover types of aid in favour of certain innovative activities, not already covered by
existing guidelines or regulations thereby creating a Framework for R&D and
innovation. In addition, if the Commission can establish clear and general
EN 9 EN
compatibility criteria on the basis of experience, it will exempt certain aid measures
from the obligation to notify to the Commission.
II.2 Creating a better business climate and stimulating entrepreneurship
29. Urgent action is needed to improve the business climate, notably by reducing the
total administrative burden, simplifying and improving the quality of legislation,
facilitating the rapid start-up of new enterprises, and creating an environment more
supportive to business.
30. To facilitate the rapid start-up of new enterprises, the Commission will review the
Communication on risk capital. The aim of the review will be to contribute to a
culture of entrepreneurship and further stimulate investment in the form of risk
capital, in particular in favour of start-ups and young, innovative SMEs, where this
can properly address identified market failures. In particular, the Commission will
focus on the need to further increase the flexibility of the rules to take into account
diversity, especially as regards the level of the safe-harbour investment tranches for
which the so-called ’equity gap’ is presumed to exist.
II.3 Investing in Human Capital
31. The achievement of a high level of employment, sustainable growth and economic
and social cohesion are key objectives of the Community. The European
Employment Strategy (EES), which is a cornerstone of the revised Lisbon Strategy,
promotes a high level of employment together with a skilled, trained and adaptable
workforce. This requires a substantial investment in human capital. In this context,
state aid could be justified when it is necessary to provide the right incentives for
employers to engage more workers, particularly those who have difficulties to access
and remain on the labour market, and to provide appropriate training for workers.
Furthermore, strengthening the adaptability and upgrading skills of workers and
enterprises overall, and improving the quality of education and training provisions
are a key to improve the capacity of the EU to anticipate, trigger and absorb
economic change of an ever accelerating pace.
32. The block exemption regulations for training and employment aids both expire at the
end of 2006. The Commission intends to simplify and consolidate these block
exemptions in the context of a general block exemption regulation, taking account of
the principles set out above.
II.4 High quality Services of General Economic Interest
33. The provision of effective and high quality Services of General Economic Interest
(SGEI) is a key component of the European welfare state and is essential for
ensuring social and territorial cohesion, including in the field of education, training
and culture, and for the exercise of an effective citizenship. High quality SGEI also
contribute to the competitiveness of the European economy. Member States enjoy a
wide margin of discretion when deciding whether and in what way to finance the
provision of services of general economic interest. However, to avoid distortion of
competition the compensations granted should make the performing of public service
missions feasible without leading to overcompensation and undue distortions of
competition.
34. The White paper on services of general interest announced that the Commission
would adopt legislative texts to provide more guidance on this principle. To increase
legal certainty, the Commission will adopt a Decision on the basis of Article 86(3),
EN 10 EN
and guidelines to specify under which conditions public service compensations
which constitute state aid are compatible with the Treaty. The Commission Decision
would grant an exemption of notification for small scale compensations. Special
conditions should also apply to hospitals and social housing companies. Finally, the
Commission will adapt the transparency directive, to take account of the evolution of
the jurisprudence of the European Courts.
II.5 Better prioritization through simplification and consolidation
35. To ensure better governance and facilitate the granting of aid, which is clearly
compatible with the Treaty, the Commission will issue a general block exemption
regulation to exempt certain categories of aid from the obligation to notify to the
Commission. The regulation will be based on the principle that state aid policy
should focus on the most distortive types of aid and that it should set clear ‘positive’
and ‘negative’ priorities.
36. The Council has enabled the Commission, through the Enabling Regulation, to
exempt certain areas in which the Commission can define general compatibility
criteria, which should lead to the same interpretations in different Member States.
The Commission has the power under certain conditions to exempt aid related to
SMEs, R&D, environment, employment, training and regional development. In the
general block exemption, the Commission intends to simplify and consolidate the
existing block exemptions (training, SME and employment) and integrate a broader
range of exemptions, notably as regards aid to support SMEs and R&D. Categories
of aid which can be clearly defined may fall within the scope of a block exemption
regulation, whilst for some forms of aid which cannot be precisely defined in
advance, guidelines may constitute a more flexible instrument.
37. The Commission will also consider integrating some categories of aid, such as
regional and environmental state aid and rescue aid for SMEs while addressing the
problems raised by cumulation of different types of aids. The Commission will also
consider exempting larger amounts of aid than presently, on the basis of economic
analysis and experience. However, this will be made on the condition of greater
responsibility by Member States in complying with the rules and criteria set by the
block exemptions.
38. In addition, the threshold under which Member States may grant de minimis aid
without further specific requirements will be increased to take account of the
evolution of the economy.
II.6 A focused regional aid policy
39. As was clearly expressed in its Communication to the Spring European Council, the
Commission is fully committed to sustainable development and to modernising and
advancing Europe’s social model. This commitment also applies to state aid policy.
40. In this context, cohesion in particular is an important element of the Lisbon strategy:
reducing disparities between the regions of Europe is a factor of stability and a
tremendous growth potential. Past enlargements have shown that there is scope for
win-win development between richer and poorer regions. State aid policy can
contribute to such a positive outcome, by preventing a damaging subsidy race
between regions, and by creating the right incentives for growth and jobs, in the
least-developed regions and elsewhere.
EN 11 EN
41. The Commission’s regional aid policy needs to be updated to take account of
developments in the seven years since the last guidelines were adopted in 1998, in
particular enlargement. The Commission has launched a review of the Community
guidelines on regional aid (or ‘RAG’), and has the intention to integrate the
Multisectoral Framework on regional aid for large investment projects. This
review will take account of the Third Cohesion Report, which suggests organising
future cohesion policy around three main objectives: a) convergence; b) regional
competitiveness and employment; and c) European territorial co-operation. These
objectives also underlie the Commission’s proposals for the structural fund
regulations.
42. Given the necessity to use investment aid to large firms sparingly in order to preserve
its effectiveness in promoting overall, long-term competitiveness through a reduction
of regional disparities, this type of aid could mainly be concentrated on the leastdeveloped
regions.
43. Regional aid must be seen in the context of the possibilities for granting aid for
horizontal purposes envisaged in this Communication, in particular for aid measures
more directly linked to the pursuit of the Lisbon agenda. It will be necessary to
examine whether and to which extent regional bonuses present in current horizontal
texts should be maintained.
44. The Commission will also examine what levels of aid can be justified outside the
least-developed regions, what the aid differentials should be, what categories of
undertaking should benefit and for which categories of aid. All this should will the
Member States sufficient flexibility to develop policies at national level to promote
regional competitiveness and employment and European territorial cooperation,
while meeting the overall objective of ‘less and better targeted aid’.
II.7 Encouraging an environmentally sustainable future
45. Environmental protection is in itself essential. It can also be a source of competitive
advantage for Europe, by providing opportunities for innovation, new markets and
increased competitiveness through resource efficiency and investment.
46. The Community guidelines on state aid for environmental protection are
applicable until 2007. In 2005, the Commission will start reflecting on ways and
means to better address the challenges and opportunities that sustainable
development creates, as set out in the Lisbon and Sustainable Development
Strategies, especially with the aim of ensuring a full internalisation of environmental
costs. In particular, the Commission will attempt to encourage eco-innovation and
improvements in productivity through eco-efficiency in line with the Environmental
Technologies Action Plan (ETAP). Certain measures might also be exempted under
the general block exemption from the obligation to notify the aid.
II.8 Setting up modern transport, energy and information and communication
technology infrastructures
47. The Lisbon Action Plan stresses that modern transport, energy and information and
communication technology infrastructures throughout the EU territory are a
prerequisite for reaping the benefits of a re-invigorated Lisbon Strategy. It therefore
invites Member States to fulfil their commitments in terms of investments for
Transport and Energy Networks. Member States increasingly rely on Public Private
Partnerships to build infrastructures. It is thus important that state aid rules are clear
for the assessment of public resources involved in Public Private Partnerships. More
EN 12 EN
generally, as a consequence of the recent opening of formerly state-controlled
markets, public bodies are increasingly involved in a number of markets. This may
raise legal issues regarding the applicability of state aid rules. The Commission will
consider the need to issue guidance in those matters.
III. MODERNISING THE PRACTICES AND PROCEDURES OF STATE AID
III.1 Better governance – a shared responsibility with Member States
48. Currently, there are certain shortcomings in the practices and procedures of state
aid policy, which can be observed in the long time frame for the treatment of cases.
To a certain extent the reason for this delay is to be found in the many obligatory
requirements in the Council procedural regulation (EC) No 659/1999 (ex: linguistic
coverage and publication requirements), and if no action is taken this time frame is
even likely to increase due to enlargement. Longer time frames are clearly an
unacceptable outcome, bearing in mind that a trade off might exist between the
duration of the procedure and ensuring an effective control while safeguarding the
rights of third parties.
49. Where possible within the scope of the current procedural regulations, the
Commission will in the short term improve its internal practice and administration,
and increase efficiency, enforcement and monitoring. Since the success will depend
on the practices in Member States too, they should also make an effort to improve
their efficiency, transparency and implementation of state aid policy.
50. The Commission will consider issuing best practices guidelines after consulting
Member States as well as the public on how procedures could be improved to better
administrate state aid control. It will notably try to instil more predictable timelines;
clear intermediary steps in the procedure and ensure higher transparency by
providing more information on Internet. The Commission will also reduce delays by
encouraging a higher quality of notifications and by discouraging incomplete
notifications by a more systematic use of the information injunction, requesting
Member States to provide complete information within a certain period.
51. While the Commission has the competence to adopt detailed state aid rules, the
successful implementation of the rules and procedures depends to a large extent on
Member States. In the context of enlargement, the screening of state aid measures
was conducted by operationally independent monitoring authorities in the new
Member States. This has been a valuable experience which should be taken into
account when considering further cooperation between the Commission and all
Member States. In this context, the Commission will examine whether independent
authorities in Member States could play a role as regards facilitating the task of the
Commission in terms of state aid enforcement (detection and provisional recovery of
illegal aid, execution of recovery decisions).
III.2 Less bureaucracy and better targeted enforcement and monitoring
52. Best practices guidelines together with the general block exemption and the
increased de minimis ceiling are expected to reduce both the time it takes before the
Commission reaches its decisions and the administrative burden for Member States.
But Member States should engage more actively to ensure that the conditions for
the exemptions are fully respected and that necessary information is kept in
accordance with the relevant rules, in order to enable the Commission to verify the
compatibility in case of doubts or complaint.
EN 13 EN
53. The effectiveness and credibility of state aid control presupposes a proper
enforcement of the Commission’s decisions, especially as regards the recovery of
illegal and incompatible state aid. Recent experience has shown that the
implementation of recovery decisions by Member States is not satisfactory and,
moreover, that conditional or positive decisions are sometimes not correctly
implemented by the Member States. The Commission will therefore:
– seek to achieve a more immediate and effective execution of recovery decisions,
which will ensure equality of treatment of all beneficiaries. To this effect, the
Commission will monitor more closely the execution of recovery decisions by
Member States. Recovery has to be carried out in accordance with national
procedures. But where it appears that recovery is not carried out in an immediate
and effective manner, the Commission will more actively pursue non-compliance
under Articles 88(2), 226 and 228 of the Treaty;
– request more transparency in the general principles of state aid control and
consider establishing a network of state aid authorities or contact points in order
to facilitate the flow of information and exchange of best practices;
– promote advocacy, awareness and understanding of state aid control at all levels
to help the granting authorities in designing measures that are compatible with the
treaty rules.
54. The Commission will step up its monitoring of the compliance by Member States
of conditions laid down in state aid decisions, including the respect of the provisions
of the block exemption regulations. It will also encourage Member States to engage
in benchmarking to verify that state aid is achieving the objective and is the best type
of state intervention for any given objective. This could be done in partnership with
national Courts of Auditors.
55. The Commission will also engage in advocacy to encourage stakeholders to ensure
that the rules of state aid are fully respected. Article 88(3) EC has direct effect and
gives national judges the power to suspend and provisionally recover aid granted
illegally before its approval by the Commission. Private litigation in front of national
courts could therefore provide increased discipline in the field of state aid. The
awareness of company auditors, national market regulators and national Courts of
Auditors could also be reinforced. To this effect, the Commission has launched a
study focusing on two main aspects of enforcement of state aid law at national level;
namely the role of national courts in the protection of rights conferred upon
interested parties, notably competitors of the beneficiaries of unlawful aid, and the
enforcement at national level of negative decisions, in particular those with recovery
obligation.
56. One additional area where national judges could play a greater role could be in
controlling whether measures deemed to fall under a block exemption or under the de
minimis thresholds, and which have therefore not been notified to the Commission,
actually fulfil the necessary criteria. If needed, the Commission will consider
reviewing the Notice on cooperation between national courts and the Commission in
the state aid field, in particular whether to expand its scope to other national bodies.
III.3 Adapting procedural rules to an enlarged European Union
57. The Commission will examine all possible actions to lower administrative costs and
improve the procedural rules with a particular aim to reduce the time period for
treatment of cases in which the Commission has opened procedure; to provide a clear
EN 14 EN
incentive to comply with the obligation to notify aid measures and to achieve an
enhanced efficiency, monitoring and enforcement. In this context, the Commission
intends to present a consultation document in 2007 which will be discussed with
Member States, and could lead to a proposal for amendment of Council
Regulation (EC) No 659/1999 (procedural Regulation).
58. Possible options to consider are e.g.:
– To save time and increase transparency, the Commission could increase the use
of the internet; the Commission could also commit to conclude its investigation in
shorter time-frame, provided Member States ensure good co-operation, that
procedures be opened in case of doubts, and that negative decisions could be
adopted if all relevant information has not been submitted before a certain
deadline. In addition, administrative procedures and linguistic issues such as
translation requirements could be reviewed.
– To ensure that aid measures are duly notified, the scope of the recovery
injunction could be expanded to invoke a systematic transitory recovery of nonnotified
aid and some sort of deterrence mechanism on Member States could be
introduced for measures which have not been notified. For instance, periodical
reviews of the track records of Member States in terms of notification could be
implemented. Where it appears that a Member State fails in notifying properly its
state aid, the Commission could pursue the non-compliance under Articles 226
and 228 of the Treaty to seek penalties.
– To achieve greater efficiency, the discussion and design of appropriate measures
could be formalised more precisely. Also, the Commission could enhance the
consultation of market participants and the gathering of relevant sectoral
information through new instruments granting additional investigative powers. A
written procedure for the Advisory Committee on state aid could also be foreseen.
59. In addition the Commission will evaluate the need to enlarge the scope of Council
Regulation (EC) No 994/98 enabling the Commission to block exempt additional
types of measures, e.g. aid for culture and heritage conservation. In that context, the
Commission intends to clarify the roles and uses of block exemptions and guidelines,
and will consider the possibility of giving the block exemptions not only a positive
effect like the one they already have, but also in certain cases a negative effect. This
would mean that some criteria for exemption of notification would also be criteria for
compatibility of aid, which would enable the national jurisdictions to apply block
exemptions directly not only by declaring the compatibility by also the
incompatibility of certain aid.
III.4 A comprehensive review of the remaining documents
60. The Commission has considered the necessity to review every single Commission
document related to the granting of state aid. In the last stage of the reform the
Commission will aim at reviewing the remaining documents, where necessary, so
that the same principles are applied consistently and comprehensively in all state aid
instruments.
61. Along those lines, the Commission will review the Communication on short-term
export-credit insurance, and the methodology for the calculation of reference and
recovery rates. Before the new rescue and restructuring aids guidelines published in
2004 lapse in 2009, the Commission will start reflecting upon the need to change
some of the existing provisions of the guidelines. In particular, it will take into
EN 15 EN
account the amendments of regional aid policy, the relationship with different
national insolvency procedures and the rules for the social protection of the
workforce of companies under restructuring.
62. Media, audiovisual services, creative industries and the cultural sector as a whole
have a high potential in terms of innovation, competitiveness, growth and job
creation. They are also key in preserving and promoting the rich cultural and
linguistic diversity in the EU. In examining state aid issues in these sectors, the
Commission fully takes into account the relevant Treaty provisions (particularly
Articles 151(4) and 87(3)(d)) and the Protocol on the system of public broadcasting
in the Member States annexed to the Treaty of Amsterdam, and reflects the specific
public interests attached to these activities. In that respect, it will revisit its
Communication on the application of state aid rules to public service
broadcasting. Notably with the development of new digital technologies and of
Internet-based services, new issues have arisen regarding the scope of public service
broadcasting activities. It will also consider reviewing the Communication on
certain legal aspects relating to cinematographic and other audiovisual works
(cinema communication). In addition, and on the basis of its experience in this
field, the Commission could ask the Council to extend the scope of the Enabling
Regulation, so that cinema can also benefit from a block exemption.
63. In addition, the Commission will engage in a broader thinking about the ways in
which state aid is given to undertakings. Some aid measures are more transparent
than others; some are more directly targeted towards precise objectives. This raises
questions about the effectiveness and distortive effects of different forms of aid.
Therefore, the Commission will issue a consultation document on the aid element
in different forms of aid, in order to collect the view of member states and of
undertakings. The consultation could indicate whether the Commission should
systematically be stricter towards certain forms of aid than towards others.
64. To complement that general reflection, the Commission will revisit its Notice on
state aid in the form of guarantees to incorporate its experience and assess whether
the current rules and criteria should be amended. In the same context, the
Commission will consider revising its Notice on the application of the state aid
rules to measures relating to direct business taxation published in 1998, in
particular to examine whether it should be extended to indirect taxation.
65. Finally, the Commission will decide whether a Framework for state aid to
shipbuilding is still needed or if the sector should simply be governed by horizontal
rules.
66. Following agreement on a new Council regulation on rural development, expected
for June 2005, the Commission will undertake a review of the existing specific
measures for state aid in the agricultural sector. Draft proposals will be presented
in time to allow for formal adoption in 2006 and application from 1 January 2007
onwards.
EN 16 EN
III.5 Establishing and evaluating the new practice for the future
67. After having finalised the comprehensive review of State aid, the Commission will
conduct an evaluation exercise, in order to make sure that the new rules and practice
of state aid policy work properly for the benefit of European citizens. If necessary,
new actions will be proposed.
68. Figure 1 gives an overview of the road map 2005-2009 with an indicative division in
three stages.
Figure 1: Roadmap 2005 -2009 (indicative)
Modifications 2005/2006 2007/2008 2009
Substance Road map for state aid reform
2005-2009
Regional aid guidelines
General Block Exemption (SME,
employment, training, R&D, de
minimis, regional, environment)
Communication interest rates
Guidelines R&D and Innovation
Communication short term credit
insurance
Communication risk capital
Decision and guidelines on the
Services of General Economic
Interest and transparency directive
Guidelines environment
Framework on State aid to
Shipbuilding
Assessment/modification of the rescue
and restructuring aid guidelines.
Notice on state aid in form of
guarantees
Communication on direct business
taxation
Communication on state aid to public
broadcasting.
Possible additional block exemptions
Assessment of
the reform and
review of
existing state
aid rules
Consultation
documents
Communication on innovation Consultation document on possible
modification of Council Regulation
(EC) No 659/99.
Consultation document on the different
forms of aid
Procedure Internal best practices guidelines
Promotion of state aid advocacy.
Increase monitoring of decisions
and recovery
Possible proposal for amendment
of the Council Regulation (EC)
No 994/98 (enabling regulation)
Possible proposal for amendment of
Council Regulation (EC) No 659/99
(procedural Regulation)
Notice on cooperation between
national courts and the Commission in
the state aid field
EN 17 EN
69. Figure 2 gives an overview of the expected major changes to the architecture of State
aid rules.
Figure 2: EXPECTED MAJOR CHANGES TO THE ARCHITECTURE
Current Future
Rescue and restructuring
Large Investments
Risk Capital
Environnement
Regional
R&D
Guidelines, Frameworks,
etc
Services of general economic
interest
Rescue and restructuring
Risk Capital
Environnement
Regional
R&D
Guidelines, Frameworks, etc
Services of general
economic interest
Employment
Training
SME
Block exemptions
De minimis
Services of general
economic interest
General block exemption:
SME (including risk capital
and aid related to innovation
activities), Training,
Employment, R&D,
Environment, Regional
Blocks exemptions
De minimis
* * *