State aid: Commission adopts Regulation automatically approving aid for jobs and growth - Frequently Asked Questions
European Commission - MEMO/08/482 07/07/2008
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Brussels, 7th July 2008
State aid: Commission adopts Regulation automatically approving aid for jobs and growth - Frequently Asked Questions
The GBER simplifies the treatment of state aid measures clearly favouring job creation and boosting competitiveness, i.e. the objectives promoted by the Lisbon agenda, and measures in favour of SMEs, in line with the Small Business Act recently adopted by the Commission (see IP/08/1003). In so doing, the Commission encourages Member States to shift existing aid budgets towards "better targeted" aid that is of real benefit to the European economy and society as a whole. The 26 state aid measures which fulfil the conditions laid down in the GBER are considered to be compatible with state aid rules without requiring prior notification to the Commission, as would otherwise be foreseen by the EC Treaty. This significantly reduces the administrative costs for the beneficiary, the Member State and the Commission. It should also allow the Commission to focus its attention on the most distortive types of aid.
The number of block exempted measures has nearly tripled compared to the existing regulations. There are now 26 support measures covered by the GBER, as compared to only 10 in the 4 existing regulations.
Moreover, for a series of aid measures covered by existing instruments, the Commission has substantially increased the aid intensities and the notification ceilings. This means that higher amounts of SME investment aid, training aid, and employment aid, amongst others, can be granted as compared to the past.
The GBER also contains a series of conditions which aim to ensure that the aid measures will indeed lead the beneficiary to undertake a project or activity which he would not have engaged in without the aid (incentive effect). The Regulation should also lead to increased transparency as compared to the existing block exemption Regulations (BER). This should allow third parties and other interested parties, like national judges, to have a better view whether aid has been granted and, if so, which conditions have to be fulfilled for the aid to be compatible.
What is a block exemption Regulation?
In a block exemption Regulation, the Commission declares that certain categories of state aid are compatible with the Single Market and shall not be subject to the requirement of prior notification laid down in Article 88(3) of the EC Treaty. Consequently, Member States may implement state aid measures which fulfil the conditions of the Regulation without having gone through the notification procedure.
The substantive conditions imposed by the GBER often correspond to requirements laid down in Community frameworks and guidelines: it determines eligible beneficiaries, sets maximum aid intensities, defines eligible expenses and may include additional conditions for certain aid measures. The content of these conditions is inspired from the practical experience gained by the Commission, especially through the application of pre-existing frameworks and guidelines. Relevant experience is drawn, inter alia, from the recently adopted guidelines on State aid for environmental protection (see IP/08/80 and MEMO/08/31), the risk capital guidelines (see IP/06/1015) and the Framework on R&D&I (see IP/06/1600 and MEMO/06/441). The conditions imposed by the GBER must be as straightforward as possible because the text will be applied directly by numerous national administrations in all Member States including, in case of litigation, national judges.
The fact that a state aid measure is not covered by the GBER does not imply that it is going to be prohibited by the Commission: measures falling outside the scope of the GBER will merely remain subject to the standard obligation of prior notification to the Commission. The objectives and effects on competition of such measures will be assessed, by the Commission, on the basis of guidelines, frameworks and other instruments.
How does the GBER contribute to the Small Business Act?
The Small Business Act adopted by the Commission on 25/6/2008 (IP/08/1003) states that European SMEs deserve to be better assisted to fully unlock their potential of long term sustainable growth and of more job creation. In line with the "Think Small First Principle", the GBER simplifies procedures and reduces costs most prominently for SMEs. It increases the aid intensity for SMEs and makes it easier for SMEs to benefit from aid for training, research and development, environmental protection and innovation.
Specific provisions will allow SMEs to benefit from investment aid, aid for young innovative enterprises, aid for paying consultancy services, aid contributing to industrial property costs, aid in the form of risk capital and aid for adapting to new environmental Community standards, to name just the most prominent ones.
Finally, the GBER includes a series of simplified requirements in favour of SMEs. SMEs will benefit, for instance, from more straightforward regarding the condition of incentive effect and the qualification as "undertakings in difficulty".
In what way will the GBER simplify state aid rules?
One of the main objectives of the reform of state aid rules, set out in the State Aid Action Plan in 2005 (see IP/05/680 and MEMO/05/195) is to create a simple, user-friendly and coherent set of legislative rules applying to those types of aid which can be considered to fulfil the conditions of compatibility outlined in Article 87(3) of the EC Treaty.
Simplification can best be achieved with the adoption of "block exemptions" exempting Member States from the obligation of prior notification of the aid to the Commission. The categories of aid which may be included in such a block exemption are determined in the Enabling Regulation of the Council.
In this framework, the GBER incorporates into a single text a series of existing block exemption Regulations adopted since 2001: investment aid for SMEs, research and development aid in favour of SMEs, aid favouring employment, training aid and regional aid.
In addition, the Commission integrated into the GBER five types of aid which had so far not been block exempted, but which feature highly in the Commission's agenda for growth and jobs, the revamped Lisbon agenda: aid favouring environmental protection, aid in the form of risk capital, research and development aid for large companies, innovation aid, aid for newly created small enterprises and aid for enterprises newly created by female entrepreneurs. The exemption conditions for these categories are largely inspired by the requirements of the guidelines and frameworks adopted, since 2006, by the Commission.
Moreover, in line with the Commission's "Better Regulation" agenda, the GBER harmonises a large number of horizontal aspects applying to the different aid areas concerned. A common horizontal chapter therefore contains, amongst others, common definitions of standard concepts, common requirements as regards the transparency of aid, shared provisions requiring the aid to have an incentive effect, a comprehensive overview of the sectoral exclusions applying to the different types of aid and uniform requirements as regards monitoring.
With a view to stimulating an open and transparent debate, three different draft versions of this regulation have been discussed with Member States and other stakeholders since April 2007 (IP/07/549 and MEMO/07/151). The results of these consultation rounds are available on the Commission website.
As announced in the State Aid Action Plan, 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 GBER.
What are the basic rules of state aid policy?
State aid policy is one of the three main pillars of EU competition policy. State aid control stems from the need to maintain a level playing field for all companies active in the Single Market, irrespective of the Member State in which they are established. State aid control also contributes to avoiding contests between Member States where they try to outbid each other to attract investment. Preserving competitive markets is the best way for European citizens to get the products they want at competitive prices, and to foster innovation and growth.
The EC Treaty (Article 87) prohibits any aid granted by a Member State in any form whatsoever which distorts competition by favouring certain firms or the production of certain goods where such aid affects trade between Member States. A number of exceptions are allowed. However, all state aid measures need to be notified by the Member States to the Commission prior to their implementation (article 88), unless they are covered by a block exemption Regulation. The Commission has the exclusive competence to declare such aid compatible with the EC Treaty.
Does the GBER constitute a relaxation of state aid rules?
No. The GBER does not alter the fundamental architecture of state aid control: Member States remain obliged to notify all state aid to the Commission prior to its implementation, unless is covered by the GBER. However, the Regulation significantly reduces the bureaucratic burden with respect to those aid measures which, upon notification, would anyhow have been approved by the Commission on an individual basis. This fits both into the Commission's "better regulation and simplification" agenda, and into the Commission's agenda to promote "Less and better targeted aid". The GBER facilitates the possibilities for Member States to grant subsidies that clearly fulfil horizontal objectives in line with the European Union's Lisbon objectives and with the Commission's Small Business Act (such as environmental protection, promotion of research and development and entrepreneurship).
B. THE AID MEASURES PROMOTED BY THE GBER
What measures are included in the GBER?
In this respect, the GBER constitutes an important contribution to the Small Business Act adopted by the Commission in June 2008 (see IP/08/1003). Indeed, all of the 26 categories of aid provided in the regulation can be provided to SMEs. To the extent such categories are also available to large companies, SMEs will benefit from a special top-up (10 % for medium-sized companies and 20 for small-sized companies).
What are the major differences between the existing block exemption Regulations and the new general block exemption Regulation?
- No environmental aid was previously included in any BER. The GBER therefore constitutes a first in that it allows Member States to provide environmental aid – including certain environmental tax reductions – without the obligation of prior notification to the Commission. The conditions imposed by the GBER are based on the requirements laid down in the recently adopted guidelines on state aid for environmental protection (see IP/08/80 and MEMO/08/31). The GBER provides however for simplified cost calculation method as compared to the guidelines: it essentially allows disregarding operating benefits when providing environmental investment aid. This should facilitate Member States tackling environmental challenges, including the challenges of climate change by means of well-targeted subsidies.
How does the GBER promote women in business?
The Commission has reviewed the possibility of market failures in the creation of businesses by particular categories of persons. It is, at this stage, in a position to conclude that women have lower than average rates of business start-ups as compared to men. This is confirmed both by Eurostat data and studies realised both at national and at European level. This is an obstacle to the further economic development of the EU.
The GBER therefore includes, for the first time, a specific provision for Member States' aid for helping women in setting up a business. Member States are allowed to support, both in assisted and non-assisted regions, the creation of small enterprises owned and run by women. This will allow women entrepreneurs overcoming specific market failures, including, most prominently, difficulties in accessing finance. Such positive action in favour of women entrepreneurship is a novelty at European level. It intends to promote substantive rather than formal equality between men and women in the area of self-employment. This approach is in line with the measures promoted by the Commission in the context of the Renewed Social Agenda presented on 2/7/2008 (IP/08/1070).
In addition, the GBER includes, for the first time, child care and parent care costs as part of the eligible cost basis of a series of aid measures. This should allow Member States, in cooperation with employees and other social partners, to contribute to employees and entrepreneurs achieving a better work/life balance.
Which types of aid are excluded from the scope of the GBER?
Existing block exemption Regulations (BER) and state aid guidelines exclude certain industrial sectors from their scope of application. This is generally due to specific economic features of the sector, like, for instance, the declining nature of an industry, the overcapacity of the sector or the fact that certain sectors - like primary agricultural production or fisheries - remain subject to rules for a common organisation of the market at European level. The GBER contains a consolidation and simplification of all of these sectoral exceptions. Those exceptions apply essentially to the following sectors: the fishery and aquaculture sectors (subject to their own specific block exemption – see IP/08/1088), the agricultural sector, the coal sector, the shipbuilding sector, the steel sector and the synthetic fibres sector.
The GBER also excludes aid to undertakings which are subject to an outstanding order from the Commission to recover incompatible aid already granted. This is in line with the case-law of the Court of Justice (Deggendorf). This limitation, in line with the State Aid Action Plan, is to ensure proper enforcement of state aid rules by reinforcing the effectiveness of recovery orders.
The GBER also completely excludes companies in difficulty from its scope of application. Indeed, according to the Commission's policy, any aid provided to such a company has the character of rescue and restructuring aid. Such aid measures should thus, as a matter of principle, be examined exclusively under the Community guidelines on state aid for rescuing and restructuring firms in difficulty.
However, in order to facilitate Member States' assessment regarding the question whether or not a beneficiary is to be considered as being in difficulty, the GBER provides for a simplified definition. This simplification applies purely for the purposes of the GBER and does not affect the interpretation to be given to the definition of "enterprises in difficulty", when applying the rescue and restructuring guidelines.
Does the GBER apply regardless of the amount of aid?
No. The GBER contains so-called ceilings for individual notification. This means that aid measures exceeding these ceilings still have to be notified to the Commission individually in order for the Commission to analyse their effects on competition and contribution to the common interest. The GBER has largely simplified the application of these ceilings, but individual notification obligations persist beyond those ceilings. For instance, aid favouring environmental investment amounting to more than €7.5 million will need to be notified to the Commission before being granted.
The increased level of these ceilings confirms the objective of the Commission to focus its attention on state aid cases implying serious risks for competition and trade. By contrast, a higher number of comparatively small cases will be exempted from notification because it is assumed that the overall balance of the effects of these subsidies is positive for the Community.
The GBER is published on the website of the Commission at: http://ec.europa.eu/comm/competition/state_aid/reform/reform.cfm
 A complete list of the block exemptions is available at http://ec.europa.eu/comm/competition/state_aid/legislation/block.cfm
 "The entrepreneurial gap between men and women", Statistics in Focus, 30/2007, available at http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-07-030/EN/KS-SF-07-030-EN.PDF
 OJ C 244, 1.10.2004, p. 2–17