Draft Notice on the Notion of aid
DG COMP A3
1 April 2014
Context: State Aid Modernisation
Objectives of SAM:
• Foster growth in a strengthened, dynamic and competitive
internal market
• Focus enforcement on cases with the biggest impact on the
internal market
• Streamlined, simplified rules and faster decisions
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Draft notion of aid notice meant as a guidebook for
national authorities and stakeholders to determine
whether a measure constitutes State aid
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Objectives of the draft notice
• Reorganise, update and integrate in a single text
Commission guidance on specific aspects of the notion of
aid (MEIP, fiscal aid, land sales)
• Present in a systematic way jurisprudence of EU Courts and
Commission practice
• Need to balance between simplicity, accuracy and
comprehensiveness
• NB: Given that the notion of State aid is an objective legal
concept defined by the TFEU, the Commission's role is
limited to clarifying how it understands and applies
Art 107 (1) in line with the case-law of the EU Courts
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Content – overview and key concepts
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Undertaking / economic activity
State origin: Imputability & State resources
Advantage
Selectivity
Distortion of competition & effect on trade
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1. Undertaking / economic activity
• Undertaking = entity engaged in economic activity
• Economic activity = offering goods/services on a market
• This chapter of the notice corresponds in large parts to the
text of the SGEI Communication
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1. Economic activity & infrastructure
• Aéroports de Paris: operation of an airport = economic
activity
• Leipzig/Halle: construction of infrastructure that is meant to
be commercially exploited = economic activity
• Public funding of infrastructure that is not meant to be
commercially exploited excluded from the application of the
State aid rules; e.g. general infrastructures freely accessible,
such as public roads, bridges or canals
• Mixed use of infrastructure : non-economic activity, if
economic use remains purely ancillary, i.e. directly related
and necessary for operation of the infrastructure (no more
than 15% capacity), or is intrinsically linked to non-economic
use (DE nature conservation case)
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2. State origin: Imputability
• When involvement of public authorities (Stardust indicators)
• Measure is imputable to MS if public authorities designate a
private or public body to administer the aid
• Imputability to MS excluded if EU law requires MS to
implement a measure (but measures remain imputable to MS
if specific EU provisions simply authorise them: Alumina
cases)
• Measures adopted jointly by several Member States imputable
to all the Member States concerned (cf. ESM)
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2. State origin: State resources
• All resources of public sector including intra-State entities
(decentralised, regional etc.) and resources of public
undertakings
• Subsidies financed through parafiscal charges/
compulsory contributions imposed on private entities by
the State and managed in accordance with public rules
(Essent, Vent De Colère)
• Exception if pure redistribution between private entities
without further public involvment (PreussenElektra)
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2. State origin: State resources
• Granting access to public domain or natural resources or
granting special or exclusive rights without adequate
remuneration in line with market rates (Nox)
(exception: when the State acts as a regulator –
Bouygues; London cabs?)
• Resources coming from the Union (e.g. from structural
funds) or international financial institutions (IMF, EBRD) if
national authorities have discretion as to their use (in
particular the selection of beneficiaries)
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3. Advantage
Any economic benefit which an undertaking would not have
obtained under normal market conditions
• Only effect of the measure relevant (not cause /
objective)
• Can take the form of positive granting, but also relief of
economic burden
• Includes compensation for regulatory costs
• Compensation for the provision of a service of general
economic interest excluded if four Altmark criteria are met
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3. Advantage – MEO test
• "Market economy operator" (MEO) test when a public
body realises an economic transaction: would a
comparable private operator have acted similarly?
• Same concept covering market investor / vendor /
creditor tests developed by Court
• Form of intervention (e.g. fiscal means) does not rule
out applicability of MEO test
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3. Advantage – MEO test
Application in practice
• A. Market conditions can be empirically established
• Pari passu transactions (really same situation? Not if
private operators have previous exposure or synergies)
• Tender procedures (open, transparent and unconditional?)
• B. Benchmarks
• Similar transactions provide a range of market values
• Standard assessment methodology (IRR, NPV)
• Specific proxies for loans (Reference Rate Communication)
and guarantees (Guarantee Notice)
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4. Selectivity
MATERIAL SELECTIVITY:
• The measure applies only to certain (groups of) undertakings
or certain sectors of the economy in a MS
• De jure/de facto selectivity (measure de facto selective if is
structured in a way that its effects significantly favour a
particular group of undertakings)
• Selectivity may stem from discretionary administrative
practices
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4. Selectivity of measures mitigating
the normal charges of undertakings
Three-step analysis:
• System of reference
• Derogation
• Justification by the nature or the general scheme of the
(reference) system (e.g., the need to fight tax evasion or
avoid double taxation)
NOTE: exception if boundaries of system of reference are
designed in clearly arbitrary way, de facto
certain undertakings – Gibraltar, Ferring
favouring
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4. Selectivity
• REGIONAL SELECTIVITY (Azores) :
• Institutional autonomy
• Procedural autonomy
• Economic and financial autonomy
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4. Selectivity – specific fiscal aid
issues
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Cooperative societies
Undertakings for collective investment
Tax amnesties
Tax settlements and rulings
Depreciation/amortisation rules
Flat-rate tax regime for specific activities
Anti-abuse rules
Excise duties
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5. Distortion of competition &
effect on trade
• Distortion of competition – generally assumed as soon
as State grants a financial advantage to an undertaking
in a liberalised sector where there is/ could be
competition
• Distortion of competition – exceptionally excluded:
• if given service is under legal monopoly and is not in
competition with similar (liberalised) services
• the service provider cannot be active
(due to regulatory or statutory constraints)
in any other liberalised market
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5. Distortion of competition &
effect on trade
No effect on trade – examples:
• local swimming pools
• local museums
• hospitals aimed at local population
• news media in minority languages
• local conference centres
• ski lifts
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Thank you!
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