Search in Features

State aid: speedier implementation of publicly funded projects?

Monday November 4th, 2013

The European Commission (“Commission”) has announced plans to extend the scope of the General Block Exemption Regulation (GBER), following two consultations which ended in June and September 2013 respectively.

The GBER automatically approves a number of categories of state aid. The extension, once approved, will incorporate seven further categories of state aid into the exemption. It is expected that these new categories will be welcomed by local, regional and devolved authorities. David Hansom and Kate Newman from VWV LLP look at some of the issues.

David Hansom

David Hansom

European Union (EU) rules stipulate that if financial support provided by a public body to an undertaking constitutes unlawful state aid, it cannot be applied until it has been notified to and approved by the Commission, unless an exemption applies. Notification can take between six and nine months and is not guaranteed to result in the Commission approving the measure.

Aid granted pursuant to a GBER exemption does not need prior notification to the Commission. The following are the new proposed grounds of aid to be covered by the Block Exemption:

Natural disasters: Compensation for up to 100% of an undertaking’s losses following an earthquake, avalanche, landslide or flood will be exempted for up to four years from the date of the disaster. The amount of aid required must be assessed by an independent expert but can be provided both for loss of assets and loss of income owing to a suspension of business activities not exceeding three months.

Transport in remote regions: Residents of remote regions (including islands) can benefit from as much as a 50% subsidy on a return ticket for air and sea transport to other airports or ports in the European Economic Area (EEA).

Broadband infrastructure: Investment in passive broadband infrastructure, related civil engineering works, basic broadband networks and high-speed next generation networks will enjoy investment aid in areas where it is unlikely that there will be any commercial provision in the next three years. The Commission has suggested that there should be a maximum threshold of €70m per project and that aid will only be granted after a competitive selection process has been conducted.

Innovation clusters: Innovation clusters are important because they stimulate innovation through shared facilities, exchanging knowledge and expertise and through collaboration. The Commission has said that aid can be provided for clusters’ construction, upgrade or operation up to a threshold of €5m.

Process or organisational innovation: Up to €5m of aid can be provided for innovation to improve companies’ processes and business organisation. A small or medium enterprise (SME) cannot receive more than 50% of eligible costs and a larger organisation can only receive up to 15% of eligible costs when collaborating with an SME.

Culture and heritage conservation: While aid can be provided for cultural activities and heritage such as museums and archaeological sites, aid for audio-visual works, film studios or the press is not covered. Both investment aid and operating aid may be provided, subject to thresholds of €70m and €25m per year, respectively.

Sports and multifunctional infrastructure: Low thresholds were proposed for the upgrade or construction of recreational facilities. Aid must be under €15m or the total costs must be under €30m, with aid covering a maximum of 75% of eligible costs. Aid can even be provided for stadia used for professional sport as long as one professional team does not have more than 80% of the annual usage.

Summary and transitional provisions

By adding these exemptions, the Commission believes that there will be greater legal clarity and that a number of publicly funded projects will be implemented more quickly. This is particularly useful for projects that do not have any appreciable effects on competition. It is also mooted that further exemptions will be created for other industries including the fisheries, food and forestry sectors.

When relying on the GBER it is important to note that there are detailed rules attached to the definitions of eligible aid, eligible costs, scope, density and maximum extent of aid which must be complied with in each case.

The existing GBER was due to expire on 31 December 2013. The Commission has recently confirmed that the existing GBER is to be extended until 30 June 2014 after which the new GBER will take effect.

The amendments to the GBER may benefit certain organisations before the new GBER enters into force on 1 July 2014. Under the new GBER’s transitional provisions, aid granted before this date but after the new GBER amendments have been finalised, and which meet its requirements, will be exempted even if the aid does not fall within the scope of the current GBER. Practically, care is needed with these transitional provisions to ensure that any aid made in reliance of a new measure under the existing GBER can properly be said to fall within the exemption on both timing and technical grounds.

 

David Hansom

Online: www.vwv.co.uk

Twiter: @vwvlawfirm

LinkedIn: David Hansom

 

If you require any procurement training, whether you’re working within the public, private or third sectors, please log onto our training partner’s site, PASS, here.

Leave a Reply

debug