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Community framework for State aid for research and development

This framework is directed at Member States and aims to facilitate their use of State aid for research, development and innovation. It should enable them to employ their aid in support of these three disciplines to encourage investment. As such, it constitutes an essential tool for growth, competitiveness and employment within the European Union (EU). In concrete terms, its objective is to ensure that all aid granted is of maximum benefit, addresses the needs of the market and promotes rather than distorts competition.

ACT

Communication from the Commission - Community framework for State aid for research and development [Official Journal C 323/1 of 30.12.2006].

SUMMARY

The present Community framework contributes directly to the strategy for growth and jobs by:

  • extending the field of R&D to that of innovation;
  • stimulating research, development and innovation without distorting competition;
  • encouraging new investment in very specific domains such as aid to young, innovative companies or innovation clusters.

This framework is applicable as of 1 January 2007.

Aims

The aim of this framework is two-fold and entails:

  • helping Member States to devote a greater proportion of their total public aid budget to research, development and innovation;
  • optimising allocation of aid within these three sectors, taking account of economic considerations.

This should increase available funding without hindering competition or trade, whilst enhancing the effectiveness of public spending.

State aid and RDI: weighing up the positive and negative effects

To determine whether or not State aid is compatible with the common market, the Commission has to weigh up the negative and positive effects.

State aid will be authorised where it:

  • counters a failing in the market and meets an objective of common interest (growth, jobs, cohesion, environment, etc.);
  • is correctly targeted and constitutes an appropriate tool;
  • offers real added value (the net impact in terms of distortion of competition and effects on trade must be positive).

Market failings

The framework identifies the main market failings which could adversely affect research, development and innovation in relation to:

  • dissemination of knowledge;
  • coordination;
  • networking;
  • information.

To address these failings, a range of guidance has been issued for various types of State aid:

  • aid for R&D projects;
  • aid for technical feasibility studies;
  • aid to cover SMEs' costs relating to intellectual property rights;
  • aid to young, innovative companies;
  • aid in support of organisation and process innovation in the service industry;
  • aid for recourse to innovation support and advisory services;
  • aid to SMEs for temporary employment of highly qualified personnel;
  • aid for innovation clusters *.

Control of State aid

This framework gives the Commission new means of improving the control of State aid.

To prevent major distortion, cases involving significant funding and consequently increased risks will be subject to extensive assessments.

Background

The prosperity of European concerns on a global scale requires them to be at the cutting edge of research, development and innovation, but at present these three areas are suffering a lack of investment. The most effective means of encouraging companies to invest is to promote healthy competition. Nevertheless, in some cases the market alone is unable to stimulate RDI sufficiently and recourse to State aid (although prohibited in principle by the EC Treaty) may be required. The purpose of the Community framework is to prevent the potentially disastrous consequences of excessive or ill-directed aid.

Key terms used in the act
  • Innovation clusters: groups of independent companies active in a particular sector and region, intended to stimulate innovation by promoting intensive interaction, resource-sharing and exchange of knowledge and know-how, effectively contributing to the transfer of technology, networking and dissemination of information between the component companies.

RELATED ACTS

Commission Communicationof 22 November 2006 to the Council, the European Parliament and the European Economic and Social Committee: "Towards a more effective use of tax incentives in favour of R&D" [COM(2006) 728 final - Not published in the Official Journal].

State Aid Action Plan- Less and better targeted State aid: a roadmap for State aid reform 2005-2009 [Consultation document - not published in the Official Journal].

Last updated: 12.09.2007
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