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Detailed rules on the application of Article 108 on the functioning of the European Union EC Treaty

With a view to providing a procedural regulation on the application of Article 108 (ex-Article 88) of the TFEU and in order to increase the transparency and legal certainty of state aid, the Council has adopted this Regulation on the implementation of state aid.

ACT

Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (now Article 108) [See amending acts].

SUMMARY

Save as otherwise provided in regulations made pursuant to Article 109 (ex-Article 89) of the Treaty or to other relevant provisions thereof, any plans to grant new aid must be notified to the Commission in sufficient time by the Member State concerned, which is required to provide all necessary information in order to enable the Commission to take a decision. Where the Commission considers that information provided by the Member State is incomplete, it may request all necessary additional information.

Any notifiable aid must not be put into effect before the Commission has taken or is deemed to have taken a decision authorising it (standstill clause). It must be notified on a notification form as set out in Annex I, Part I to Regulation (EC) No 794/2004. From 1 January 2006 notifications will be transmitted electronically, unless otherwise agreed between the Commission and the notifying Member State.

Where, after a preliminary examination, the Commission finds that the notified measure raises doubts as to its compatibility with the common market, it will decide to initiate formal investigation proceedings pursuant to Article 108, Paragraph 2 (ex-Article 88, Paragraph 2) of the Treaty. The decision will summarise the relevant issues of fact and law, include a preliminary assessment by the Commission of the proposed measure and set out the doubts as to its compatibility with the common market. The Member State concerned and interested parties may submit comments within a period of less than one month, which may be extended by the Commission.

The formal investigation proceedings will be closed by means of a decision. The Commission may find that:

  • the notified measure does not constitute aid;
  • the doubts as to the compatibility of the notified measure with the common market have been removed and the aid is compatible with the common market (positive decision). The Commission may attach to a positive decision conditions subject to which aid may be considered compatible and lay down obligations to enable compliance with the decision to be monitored (conditional decision);
  • the notified measure is incompatible with the common market and may not be put into effect (negative decision).

If the Member State fails to comply with a conditional or negative decision, the Commission may refer the matter to the Court of Justice direct.

The Member State concerned may withdraw the notification before the Commission has taken a final decision. It may also amend an aid that has already been notified and approved. The amendments, notified using the form given in Annex II to Regulation (EC) No 794/2004, should not influence the assessment of the aid measure's compatibility with the common market. The increase resulting from an amendment may not exceed 20% of the initial budget of an existing aid scheme.

The Commission may revoke a decision where it was based on incorrect information.

Where the Commission has in its possession information from whatever source regarding alleged unlawful aid, it must examine that information without delay. It may request information from the Member State concerned.

The Commission may, after giving the Member State concerned the opportunity to submit its comments, adopt a decision requiring the Member State to suspend any unlawful aid (suspension injunction).
In the same way, the Commission may adopt a decision requiring the Member State provisionally to recover any unlawful aid until it has taken a decision on the compatibility of the aid with the common market (recovery injunction) if the following criteria are fulfilled:

  • according to an established practice, there are no doubts about the aid character of the measure concerned, and
  • there is an urgency to act, and
  • there is a serious risk of substantial and irreparable damage to a competitor.

The Commission may authorise the Member State to couple the refunding of the aid paid illegally with the payment of rescue aid to the firm concerned.

If the Member State fails to comply with any of the above-mentioned injunctions, the Commission is entitled to refer the matter to the Court of Justice and apply for a declaration that the failure to comply constitutes an infringement of the Treaty.

Where negative decisions are taken in cases of unlawful aid, the Commission will decide that the Member State concerned must take all necessary measures to recover the aid from the recipient (recovery decision). The Commission would not require recovery of the aid if this were contrary to a general principle of Community law. The powers of the Commission to recover aid will be subject to a limitation period of ten years.

The Commission may obtain all necessary information from the Member State concerned for the review, in cooperation with the Member State, of existing aid schemes pursuant to Article 108, Paragraph 1 (ex-Article 88, Paragraph 1) of the Treaty. Where it concludes that an existing aid scheme is not or is no longer compatible with the common market, it will issue a recommendation proposing appropriate measures to the Member State concerned. The recommendation may propose:

  • substantive amendment of the aid scheme, or
  • introduction of procedural requirements, or
  • abolition of the aid scheme.

Any interested party may submit comments following a Commission decision to initiate the formal investigation procedure and may inform the Commission of any alleged unlawful aid and any alleged misuse of aid.

Where the Commission has serious doubts as to whether decisions not to raise objections, positive decisions or conditional decisions are being complied with, the Member State concerned must allow the Commission to undertake on-site monitoring visits. The officials authorised by the Commission to check compliance will be empowered:

  • to enter any premises and land of the undertaking concerned;
  • to ask for oral explanations on the spot;
  • to examine books and other business records and take copies.

Officials authorised by the Member State in whose territory the monitoring visit is to be made may be present at the monitoring visit.

Member States must send the Commission annual reports on all existing aid schemes with regard to which no specific reporting obligations have been imposed by a Commission decision. Member States must transmit annual reports to the Commission electronically at the latest by 30 June of the current year.

The Commission will be assisted by an Advisory Committee on State Aid, composed of the representatives of the Member States and chaired by the representative of the Commission. The Committee must, among other things, be consulted before the Commission adopts any implementing provision concerning the form, content and other details of notifications, or annual reports.

REFERENCES

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal
Regulation (EC) No 659/1999

16.4.1999

16.11.2000

OJ L 83 of 27.3.1999

Amending act(s)Entry into forceDeadline for transposition in the Member StatesOfficial Journal
Regulation (EC) No 794/2004

20.5.2004

-

OJ L 140 of 30.4.2004

RELATED ACTS

PROCEDURE FOR TREATMENT OF STATE AID

Notice from the Commission on a simplified procedure for treatment of certain types of State Aid [Official Journal C 136 of 16.6.2009].
The simplified procedure established by this Notice aims to make Community State Aid control more predictable and efficient, pursuant to the general principles set out in the State Aid Action Plan. This procedure applies to aid which is clearly compatible and which has been the subject of a notification. This Notice specifies the categories of aid which could benefit from this treatment and provides the requirement for pre-notification contacts between Member States and the Commission as well as the publication of a summary of the notification on the Commission’s website.

Code of Best Practice for the conduct of State aid control procedures [Official Journal C 136 of 16.6.2009].
The Code of Best Practice aims to improve the treatment of State Aid. It applies to aid which does not come under the scope of the General Block Exemption Regulation and which is not affected by the simplified treatment for State Aid. The Code of Best Practice provides for more regular contact in advance of the notification and better information for stakeholders throughout the whole process.

COMPLAINTS

Form for the submission of complaints concerning alleged unlawful State aid [Official Journal C 116 of 16.5.2003].
Any person or company may submit a complaint to the Commission. The procedure is free. However, when investigating complaints the Commission is obliged to respect the procedural rules set out in Regulation (EC) No 659/1999, and in particular the rights of defence of the Member State. Moreover, as an alternative, or as well as submitting a complaint to the Commission, it is usually possible for third parties whose interests have been adversely affected by the granting of unlawful aid to pursue the matter before the national courts. The communication provides the form the Commission needs in order to be able to follow up a complaint about alleged unlawful aid.

ELECTRONIC TRANSMISSION

Details of arrangements for the electronic transmission of state aid notifications including addresses, together with the arrangements for the protection of confidential information [Official Journal C 237, 27.9.2005].
Arrangements have been made for the electronic transmission of notification forms and supplementary information sheets. A secure system, notably including a PKI (Public Key Infrastructure) encrypted e-mail system, has been put in place.

PROFESSIONAL SECRECY

Commission communication of 1 December 2003 on professional secrecy in State aid decisions [Official Journal C 297 of 9.12.2003].
This communication sets out how the Commission intends to deal with requests by Member States, as addressees of State aid decisions, to consider parts of such decisions as covered by the obligation of professional secrecy and thus not to be disclosed when the decision is published. The communication is consistent with the case law of the Court of Justice, which considers that professional secrecy covers both business secrets and other confidential information.

SETTING THE REFERENCE AND DISCOUNT RATES

Communication from the Commission on the revision of the method for setting the reference and discount rates [Official Journal C 14 of 19.1.2008].
The reference and discount rates are used as a proxy for the market interest rate and to enable the compliance of State Aid with Community regulations to be checked. The revision of the method for calculating the reference and discount rates is due to the need for uniform financial parameters, particularly in the new Member States. The new method is based on the 1-year IBOR (inter-bank offered rate on the money market) increased by margins which will be applied depending on the rating of the undertaking concerned and the collateral offered. The new method will enter into force on 1 July 2008.

UNLAWFUL STATE AID

Commission notice on the determination of the applicable rules for the assessment of unlawful State aid (notified under document number C(2002) 458) (Text with EEA relevance) [Official Journal C 119 of 22.5.2002].
For the purpose of transparency and legal certainty, the Commission informs Member States and third parties that it has decided to apply the same rule in respect of all instruments indicating how the Commission will exercise its discretion in order to assess the compatibility of State aid with the common market (frameworks, guidelines, communications, etc).

Commission communication on the interest rates to be applied when aid granted unlawfully is being recovered [Official Journal C 110 of 8.5.2003].
When negative decisions are taken in cases of unlawful aid, the Commission decides that the Member State concerned must take all necessary measures to recover the aid from the beneficiary. The aid to be recovered must include interest at an appropriate rate fixed by the Commission. Interest is payable from the date the unlawful aid was at the disposal of the beneficiary until the date of its recovery.

The communication was amended in Official Journal C 150 of 27 June 2003.

It should be added that Chapter V of Regulation (EC) No 794/2004 lays down the method of setting the interest rate and the method of applying the interest.

OBSOLESCENCE OF CERTAIN DOCUMENTS

Commission communication concerning the obsolescence of certain State aid policy documents [Official Journal No C 115 of 30.04.2004].
Following the adoption by the Commission of Commission Regulation (EC) No 794/2004, certain texts have become obsolete; they are listed in the communication.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

Last updated: 21.09.2009

See also

  • For details on how to contact the European Commission regarding state aid, see the DG Competition webpage.
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