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European Commission

MEMO

Brussels, 13 June 2014

State aid: Commission facilitates support for important projects of common European interest

The European Commission has adopted a new Communication setting out criteria under which Member States can grant public support for the implementation of Important Projects of Common European Interest (IPCEIs) in line with EU state aid rules. The communication is part of the State Aid Modernisation (SAM) (see IP/12/458), setting an ambitious modernisation programme of state aid control to foster sustainable, smart and inclusive growth.

What is the purpose of the IPCEI communication?

The communication is aimed at facilitating the implementation of major projects that make a significant contribution to economic growth, jobs and the competitiveness of the European industry and economy. Such projects may trigger strong spill-over effects on the entire Single Market and the European society but are often difficult to finance because of the significant technological or financial risks and the necessary transnational cooperation such projects entail. The Communication will enable Member States to fill the funding gap and thereby realise projects that otherwise would not have taken off.

The Commission is in charge of controlling state aid in the Single Market to avoid that Member States grant selective advantages to companies to the detriment of others. The Communication sets out the criteria under which the Commission will assess aid measures put in place by Member States to support IPCEIs. This allows businesses and Member States to rely on stable and transparent rules when designing their support measures.

The Communication will enter into force on 1 July 2014.

Why was it necessary to introduce a new communication?

Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU) allows Member States to grant state aid to promote the execution of important projects of common European interest. However, there is no general framework setting out how the Commission would assess the conformity of such projects with the state aid rules. Only the 2008 Environmental Aid Guidelines and the 2006 Research and Development and Innovation Framework contained some provisions on support for IPCEIs. However, those rules were limited to projects in the field of environmental protection and research whereas today's communication provides clear criteria for the assessment of any project with a high potential of furthering EU objectives, even in fields where no guidance was available before. It also facilitates large projects of transversal nature which include activities that would otherwise need to be assessed under several different sets of state aid rules, for instance, projects involving important R&D activities followed by testing and first production of innovative products. Finally, by designing rules which, on the one hand, define the common features of IPCEIs independently from the sector concerned, and on the other hand, allow for an ad hoc assessment of the specific characteristics of each project, the Commission gives a clear signal that such projects are an EU priority.

What are typical examples of important projects of common European interest (IPCEIs)?

Below are a few non-exhaustive examples to illustrate the concept of IPCEI:

In the area of R&D, the joint development of a research infrastructure of a pan-European interest that is necessary for the development of top level science and innovation in the EU could be considered an IPCEI, in particular if it is part of the roadmap for the European Strategy Forum for Research Infrastructures (ESFRI). For instance, the cost of €1.5 billion for the construction of the European Spallation Source linear proton accelerator in Sweden, with its data management centre in Denmark, is being financed by 17 participating countries.

Trans-border transport projects, in particular those supported under the TEN-T programme, which play an important role for the mobility of persons and goods in the Single Market and for territorial cohesion in the EU, could also be considered IPCEIs. Furthermore, projects that enhance cross-border interconnection and interoperability, and which have a clear transnational dimension, in particular within the framework of the European Rail Traffic Management Systems (ERTMS) could also be IPCEIs.

What are the criteria for IPCEI to be compatible with EU state aid rules?

When assessing the compatibility of state support for the execution of an IPCEI, the Commission will first analyse whether the aid is necessary and proportionate. As a simple rule, the aid must not subsidise the costs of a project that an undertaking would cover anyway without state aid, and it must not compensate for the normal business risk of an economic activity. The aid will be considered proportionate if the same result cannot be achieved with less aid. In order to verify that, the Commission will compare the scenario with aid with the alternative scenario without aid, the so-called counterfactual scenario. Secondly, the Commission will verify that the negative effects on competition and trade between Member States are limited and are outweighed by the positive effects in terms of contribution to the common European interest.

How important does a project have to be to qualify as an IPCEI?

Rather than taking a quantitative approach, the importance of a project is defined by a set of criteria that take into account the relevance of the project for the European economy and society at large, its contribution to achieving EU objectives and the added value it represents as compared to the state of the art in the sector concerned.

An important indicator of a project's importance is the participation of several Member States. However, the Communication allows exceptions to this requirement, for instance for interconnected research infrastructures or Trans-European Network Transport (TEN-T) projects that are of transnational importance because they are part of a physically connected cross-border network or are essential to enhance cross-border traffic management or interoperability. This allows taking into consideration the specificity of transport networks which, although connecting locations in different Member States, would typically be financed by each Member State only for the respective part of the network that cuts across its territory.

Why is competition law assessment needed for projects co-financed by the EU?

Unlike EU funding, which is open to eligible applicants from all Member States without discrimination, state support carries the risk of favouring certain companies and conferring to them an economic advantage as compared to their competitors. State aid also may encourage the delocalisation of economic activities from one Member State to another. The objective of state aid control is to prevent such distortions by minimising the cost for the taxpayers, avoiding harm to the competitive process which drives innovation and lower prices for business and consumers, and promoting an integrated Single Market. This control is equally important for projects co-financed from EU funds, such as TEN-T. The benefits of such large investment projects should not be confined to single firms but extend to the EU at large. Thus, it is necessary to notify the part of the support coming from national budgets in order to ensure that there is no distortion of competition in the market. In the communication, the fact that a project receives EU funding is considered a positive indicator. Moreover, Member States may flag such projects as priority and ask the Commission for a speedier treatment.

What is the relationship between the IPCEI Communication and other state aid rules?

The IPCEI Communication does not exclude the granting of state aid to IPCEIs under other state aid rules. However, those provisions may not fully address the relevance and specificities of IPCEIs. As compared to other state aid provisions, the Communication allows a greater variety of support instruments (e.g. repayable advance, loans, guarantee, grants etc.), as well as the possibility to cover up to 100% of the funding gap on the basis of a large scope of eligible costs. Moreover, under the Communication, Member States may grant aid up until the first industrial deployment of new research-intensive products or services, which, unlike the provisions of the R&D&I framework, allows to support the full development process or the deployment of innovative production processes.

In addition, the IPCEI Communication covers so-called "integrated projects" with a view to support initiatives consisting of a number of individual but complementary projects that form a coherent system necessary for achieving an important objective of common European interest (usually integrated in a common structure or roadmap aiming at the same objective and based on a systemic approach). This allows considering a group of complementary projects as a whole, when an individual assessment of each project would not reach certain thresholds required for granting aid under the IPCEI Communication or other state aid rules, or would fail to capture the synergies and the strategic importance of the "integrated project" as a whole. For "integrated projects", a joint notification will be necessary in view of the need to assess the coherence of the entire package.

Of course, projects of local importance or financed by only one Member State or that fail to fulfil all criteria for receiving aid under the IPCEI communication, may be eligible for support under other state aid rules.

Does the Commission take account of global competitiveness?

Yes. The objective of the Commission is to work towards ensuring that firms in the EU compete on the merits at a global level. Therefore, when assessing the necessity and proportionality of aid, the Commission may take account of aid of an equivalent intensity for similar projects, either received during the last three years or planned, granted to competitors outside the EU. The aim is to ensure that there is a level playing field on a global level, and that companies established in the EU compete on an equal footing with their non-EU peers.

Contacts:

Antoine Colombani (+32 2 297 45 13, Twitter: @ECspokesAntoine)

Yizhou Ren +32 2 299 48 89)


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