EU Relaxes Rules on State Aid

The European Commission has decided to raise – to EUR 500,000 disbursed over a three-year period – the level of state aid to a company below which prior EU approval is not required. The previous ceiling was EUR 200,000.

The Commission has presented revised rules on State aid granted to companies providing services of general economic interest (SGEI). After a consultation process on the revision of the former SGEI rules from 2006, the new Regulation aims at simplifying and reducing administrative burdens for the grant of public services compensations for small SGEI and, particularly, increases to EUR 500 000 the ceiling below which de minimis aid can be granted.

State Aid is (i) any financial intervention by the State or through State resources, (ii) conferring an advantage on the beneficiary, (iii) which could distort competition and affect trade between Member States.

In principle, State Aid is not compatible with EU law and Member States are required to notify to the Commission any aid granted for its examination. However, when the amount of aid granted does not exceed the ceiling set out by this Regulation, de minimis aid is considered compatible with EU law and Member States can grant it without prior notification to the Commission; nevertheless, de minimis aid is subject of monitoring by the Commission.

Scope of the Regulation

Member States sometimes grant aid -e.g. compensations, loans or capital injections- to ensure the provision of services of general economic interest since these services need to be provided even where the market is not sufficiently profitable. For example, aid granted to public transport companies for maintaining a lower prices to make the service more accessible to citizens.

The Regulation only applies to aid granted to companies providing SGEI, which may include activities with an aim to make economic profit, such as activities in the field of energy, postal services, telecommunications, transport, public health or education.

The regulation does not apply to aid granted to:
1. companies active in the fishery, aquaculture, agriculture and coal sectors 
2. companies in difficulties
3. companies performing road freight transport
4. support exporting activities
5. support the use of domestic over imported goods

De minimis aid

Aid granted to SGEI would be considered as de minimis aid if the amount of aid granted does not exceed the ceiling of EUR 500 000 over a period of three fiscal years, regardless of the origin of the funds granting the aid. Aid exceeding the ceiling will not benefit from the Regulation and Member States must notify to the Commission.

The Regulation also requires that the amount of aid granted can be calculated precisely in advance without needing to carry out a risk assessment. The Regulation provides particular examples of this:
• loans amount must be calculated on the basis of market interest rates prevailing at the time of the grant;
• total amount of the capital injections cannot exceeding the de minimis ceiling;
• risk-capital schemes concerned must provide capital only up to the de minimis ceiling to each targeted company.
• in the case of aid provided under a guarantee scheme, the guarantee cannot exceed 80 % of the underlying loan and the guaranteed part of the underlying loan provided under the scheme cannot exceed EUR 3 750 000 per company.

Rules on cumulation of aid

The Regulation lays down rules on the cumulation of de minimis aid with other aid:
a) de minimis aid can be cumulated with de minimis aid granted under other provisions of EU law up to the ceiling of EUR 500 000.
b) de minimis aid cannot be cumulated with State aid if the cumulation exceeds the maximum laid down by other provisions of EU law.
c) de minimis aid cannot be cumulated with any compensation in respect of the same service of general economic service. 

Monitoring

Member States must: (1) set up a central register of de minimis aid containing complete information on all de minimis aid granted, and (2) record and compile all the information regarding the application of the Regulation; such information must be maintained for 10 fiscal years.

Transitional provisions and entry into force

The Regulation will enter into force 3 days after the publication in the EU Official Journal, which is expected in the following weeks. It will apply to de minimis aid granted before its entry into force if such aid fulfils the conditions laid down in the Regulation.

These rules will be valid until 31 December 2018. After the period of validity, any de minimis aid fulfilling the conditions may be validly implemented for a period of 6 months.