The State Aid Action Plan
Global Competition Law Centre
19 September 2005 – Brussels
Thibaut KLEINER
DG COMP
Why a reform of State aid now?
• Lisbon Strategy:
– more growth and more employment.
– Member States should be able to target aid without
fear of sanction : innovation, research and
development; cohesion and equal opportunity; human
capital; infrastructures
– and without having to submit to lengthy procedures to
get approval on them
• Enlargement:
– opportunities for growth and for future stability
– but requires revising our regional policies, and to
refine our focus of action.
The Vision
• First response to challenges (Significant Impact
Test; LET + LASA) did not make it
=> Problematic situation
• Re-launch of Lisbon Strategy + arrival of a new
Commissioner
 Opportunity
• Instead of a piecemeal answer, global reform
proposal, i.e. new foundations
The Vision
• SAAP is not the answer to everything
 Roadmap
 Consultation document
• It is not a revolution either
 nothing really surprising
 not changing everything
• But SAAP provides clarifications + direction:
– gives legitimacy to State aid policy
– unifies State aid in a common framework (notably by
making our balancing test more explicit)
– gives global picture as well as visibility for the future
Art. 87.1 vs Art. 87.3 EC
• Art. 87.1 objective, Commission has no
discretion in its appreciation ≠ art. 87.3
broad discretion (ex: case T-67/94
Ladbroke Racing 1998)
• Balancing test addresses art.87.3
• However, legal / economic issues:
– affectation of trade (cf. de minimis aid)
– distortion of competition: qualification vs.
evaluation; clarifications may be needed
Specificities of State aid
policy
• Control of States, not of undertakings
• State resources ≠ market power
• Commission requires Council’s approval to
change procedural regulation
• Has the Commission sufficient legitimacy
to impose stricter provisions on Member
States?
= > consultation process
Ground Principles:
why controlling State aid?
• Reasons for Controlling State aid include:
– to maintain a level playing field for all companies in
the single market
– to avoid subsidy races
– To preserve benefits of competition: system of
incentives and sanctions creating efficiency and
innovation
• But State aid may be authorised for objectives of
common interest:
– State aid can tackle a market failure (efficiency)
– Or correct the outcome of functioning markets (equity)
– To deliver: growth, employment, cohesion,
environmental protection etc.
• Less and better targeted aid = ultimate objective
A refined economic approach
• Economic approach:
– Is a given measure state aid? (cf. market economy investor
principle, affectation of competition and trade)
– Should aid be approved? (cf. balancing test; economic analysis
of market failures and of distortions to competition)
• State intervention can contribute to increased
welfare, growth and stability. But risks :
–
–
–
–
Government failure
Special interests/lobbying
How to determine appropriate amount and form of aid?
Incomplete or asymmetric information
• Economic analysis to evaluate:
– Why markets are not delivering
– whether state aid is effective in reaching objectives of common
interest
The Balancing Test
To decide upon the approval of a state aid measure:
1.
a well-defined objective of common interest has to be
identified (ex: cohesion, growth, employment, environment)
the aid instrument has to well target the identified
objective of common interest :
2.
–
–
–
3.

State aid is the appropriate policy instrument
The aid measure has an incentive effect
The aid measure is proportional to the problem tackled
the distortions of competition and effect on trade
should be limited so that the aid measure is not on
balance contrary to the common interest.
Compatibility of State aid depends on balancing
negative effects with it positive effects
Improving procedures, better
enforcement & more transparency
Within the current framework
• Simplification and consolidation, e.g.
– General block exemption regulation
– De minimis threshold
• Best practices within current rules
• More effective enforcement:
– More systematic use of non-compliance procedures
– Monitoring
– advocacy
• Partnerships:
– Member States: network (independent authorities?)
– National judges
– Others: Court of Auditors? Competitors?
Improving procedures, better
enforcement & more transparency
A new procedural regulation?
• to save time and increase transparency: deadlines for
Com. but tougher with MS if poor quality of notifications;
fewer translations?
• to ensure that aid measures are duly notified: systematic
transitory recovery of non-notified aid; reviews of the
track records of Member States in terms of notification
and possible penalties?
• To achieve greater efficiency: consultation of market
participants; additional investigative powers?
• Enlarge the scope of BER to cultural?
Next Steps
• Revisions of the State aid Rules:
-
SGEI (done)
RAG
R&D and innovation
Risk capital communication
Block exemption regulation
Environmental guidelines
• Best practices guidelines
• State aid network
• Improved and consistent decision-making