Revised GBER Reduces Need For Commission Prior Approval of State Aid But Some Conditions Stricter Than Before

by McDermott Will & Emery
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The European Commission (Commission) has adopted new rules that exempt public support given to companies by EU Member States, including regional and local authorities, from the requirement of prior notification to, and approval by, the Commission. These new rules, which revise the General Block Exemption Regulation (GBER) significantly extend the scope of support that can be granted by Member States without the Commission’s involvement. Some substantive conditions for exemption will, however, be stricter than before. Public authorities and aid beneficiaries are well advised to take the new opportunities and challenges introduced by the revised GBER into account when designing their aid measures.

The European Commission (Commission) has adopted new rules under the revised GBER that significantly extend EU Member States’ ability to grant State aid without having to wait for the Commission’s prior approval.

Background

As a general rule, EU Member States are not allowed to implement measures that qualify as State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) until those measures have been approved by the Commission. Member States are subject to a “standstill obligation”, under which aid granted prior to the Commission’s approval is illegal.

The GBER establishes an exception from the approval requirement. If a measure that qualifies as State aid falls within the scope of the GBER (i.e., is included on the closed list enshrined in the GBER), does not exceed the notification thresholds established by the GBER and fulfils all the GBER’s substantive criteria, no approval is required by the Commission and the measure is exempted from the notification requirement. For all other aid, Member States need to wait for the Commission’s approval before they implement the measure.

Following four rounds of public consultations, the Commission adopted the revised GBER on 21 May 2014. The text will enter into force on 1 July 2014 and replace the existing rules.

Extension of The Scope of The GBER

In the context of the ongoing modernisation of EU State aid law, the Commission has emphasised on numerous occasions that it intends to concentrate its scrutiny on cases that have a significant impact on the market. This aim is reflected in the extension of the scope of the GBER, which includes new, additional kinds of aid measures, plus increased notification thresholds in individual cases. The GBER should, therefore, cover an increased number of cases.

The most important extensions of the scope of the GBER are new exemptions for certain categories of infrastructure, i.e. broadband, local, research, energy and sports, for innovation and for audiovisual works and culture. The most important increase to the notification thresholds relates to aid for research and development, where the thresholds have been doubled. For risk finance, sports and multifunctional infrastructure, as well as culture and heritage conservation, companies can now receive up to €15 million under the GBER.

It is important to note that the Commission may include further categories of State aid in the GBER at a later stage. While the Commission already has the necessary authorisation to extend the categories of aid, it did not exempt them from the notification requirement yet because of a lack of specific case experience.

Practical Implication

EU Member States, local authorities and aid beneficiaries will, in general, welcome theses extensions to the scope of the GBER. The revised GBER will, for the aid measures to which these regulations apply, reduce the administrative burden for public authorities and companies benefiting from aid. The Commission estimates that about ¾ of all new State aid measures and about 2/3 of the total amount of aid expected to be granted will be exempted under the revised GBER. More aid measures can therefore be implemented without a lengthy notification procedure, meaning companies will get immediate access to aid.

Caveats

It is, nevertheless, important to note the following points:

  • A measure may be in line with the general scope of the GBER, but the notification thresholds may still not be in line with the State aid rules, meaning the aid may not be covered by the GBER. The substantive requirements of the GBER also have to be fulfilled for the aid to be authorised.
  • Although the scope of the GBER has been extended, stricter substantive compatibility criteria have also been introduced. For example, aid directed at regional development may, in the future, be granted to large companies in more developed (but still disadvantaged) regions only for investments into new activities. State aid for investments into the extension of existing activities will no longer be allowed.
  • The Commission has introduced new transparency requirements. While the revised GBER allows EU Member States to grant more aid without prior approval by the Commission, Member States will have to make public the granting of aid if the amount exceeds €500,000. EU Member States will, for the first time be required to establish a dedicated website on which they publish the identity of the beneficiary, the amount and objective of the aid and its legal basis within six months of the granting of the aid. As a consequence, even if a measure fulfils the conditions of the GBER and is therefore exempted from the notification requirement, it will still have to be made publicly known that the company received aid above the threshold. Furthermore, the Commission will have to be informed directly about aid granted to certain projects.
  • While the GBER exempts from the notification requirement measures that qualify as State aid, the Commission is not precluded from assessing whether or not a measure fulfils the substantive compatibility criteria of the GBER following a complaint, or even on its own initiative.

State aid measures not automatically exempted from prior notification by the GBER are not necessarily incompatible with the State aid rules. They simply have to be notified to the Commission, which then determines whether or not they are in line with the State aid rules under the existing guidelines and frameworks. It is likely that the Commission will have a closer look at such cases in the future, as the overall number of cases to be handled by the Commission will drop significantly following the enlarged scope of the GBER.

Public authorities and aid beneficiaries are well advised to take the new opportunities and challenges introduced by the revised GBER into account when designing their aid measure.

Katharina Dietz, a paralegal at McDermott Will & Emery’s Brussels office, also contributed to the article.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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