The European Commission publishes The Notion of Aid Notice
On 19 May 2016, the European Commission has published the – already long expected – Notion of Aid Notice (hereinafter »the Notice«) as the last part of the European Commission's State Aid Modernization (often referred to as »SAM«) initiative launched in 2012. The Notice provides guidance to Member States’ authorities, courts and undertakings on when public spending falls outside the scope of EU State aid control. In this case, it can be granted without the prior approval of the European Commission.
The notion of state aid is an objective legal concept defined by Art 107 of the Treaty on the Functioning of the European Union which can only be interpreted in a legally binding manner by the Court of Justice of the European Union. However, the role of the European Commission and its Notice must not be underestimated. The Notice systematically summarizes the case law of the EU courts and integrates the European Commission's decision-making practice in this assessment. Therefore, the Notice can be understood as an independent interpretive act by the European Commission. It allows to draw conclusions on the European Commission’s own approach towards certain novel policy developments. The latter applies, inter alia, to the European Commission's interpretation of the 'effect on trade' requirement and its more relaxed application of the ‘purely local’ State aid measures in case of services of general economic interest (see paras 190 et seq.).
The Notice provides general guidance on the all constituent elements of the notion of State aid: the existence of an undertaking, the imputability of the measure to the State, its financing through State resources, the granting of an advantage, the selectivity of the measure and its effect on competition and trade between Member States.
The Notice also includes much needed specific clarification with respect to public funding of infrastructure. The European Commission explains in the Notice that public investment for the construction or upgrade of infrastructure is free of State aid, if it does not directly compete with other infrastructure of the same kind. This is typically the case for roads, railways, inland waterways. On the other hand, infrastructure in the fields of energy, broadband, airports and ports is usually in competition with similar infrastructure and will therefore need a prior approval from the European Commission. Furthermore, the Notice sets out that even if infrastructure is built with the help of state aid, there is no aid to its operators and users if they pay a market price which is usually a result of a competitive, transparent, non-discriminatory and unconditional tender. The notice also emphasizes that EU state aid control focuses on public investments that have a cross-border effect, meaning that funding of local infrastructures or services will normally escape the scrutiny of the EU State aid rules.
The Notice replaces several Communications and Notices such as the Commission Communication on State aid elements in sales of land and buildings by public authorities. It is completing the reform of the state aid regulatory regime during which the European Commission has revised and adopted various pieces of legislation and guidelines with the aim to establish a ‘new partnership between the Member States and the Commission’ (see Competition Policy Brief EU Commission of November 2014). The Notice, being an integral part of this reform, provides more accessible guidance from the European Commission on the application of the EU state aid rules and is without a doubt a useful tool to ensure the correct application of the rules, the Member States and the undertakings should comply with. As, however, the forms of state aid are endlessly variable, there will also be state measures in the future where the qualification as state aid will not be clear cut and depend very much on a careful analysis of the underlying facts.
Any questions? Please contact: Helge Heinrich or Fabian Hübener
Practice Group: Antitrust & Competition