European Commission publishes notice clarifying the notion of State aid

​The Commission has finally adopted its long-awaited notice on the notion of State aid. The notice provides guidance on when State measures fall within or outside of the scope of EU State aid control.

In brief

On 19 May 2016 the European Commission published its notice on the notion of State aid. The notice gives general guidance on the constituent elements of the notion of State aid by systematically summarising the case law of the EU Courts and the Commission’s decisional practice. In addition, it provides specific guidance on how the notion of State aid applies to the public funding of infrastructure. The notice is to be welcomed as it will help public authorities and undertakings to identify the State measures which need to be scrutinized under the State aid rules and will contribute to a more consistent application of the constituent elements of the notion of State aid.

In detail

Within the EU a State aid regime applies. Although there is a general prohibition of State aid, it is recognised that some government interventions are necessary to ensure a well-functioning economy. Nevertheless, State aid can only be implemented by the Member States after the European Commission has established that the aid is compatible with the internal market.

The regime applies only insofar as the proposed measure actually constitutes State aid. Article 107(1) TFEU defines State aid as any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States.

On 19 May 2016 the European Commission published its notice on the notion of State aid. The notice clarifies the key concepts of the notion of State aid, ie:

  • the notion of undertaking and economic activity
  • the notion of State origin
  • the notion of advantage
  • the notion of selectivity, and
  • the effect on trade and competition.

The notice gives general guidance on all the constituent elements of the notion of State aid by systematically summarising the case law of the EU Courts and the Commission’s decisional practice.

In addition to this general guidance, the notice clarifies how the State aid rules apply to the public funding of infrastructure. It provides an overview of how the Commission intends to apply the notion of State aid to the public funding of different types of infrastructure, including infrastructure connected to airports, ports, broadband, energy, research, railways, roads, water supply and waste water networks. The notice confirms that the State aid rules apply to the public funding of infrastructure that has an economic use, just as the rules apply to any public funding that favours an economic activity. State aid may benefit the construction, operation or use of any infrastructure, and could thus benefit various actors involved, be they developers/owners, operators or end-users of the infrastructure.

The notice only provides guidance on the notion of State aid. It does not discuss the Commission’s approach to assessing the compatibility of State aid with the internal market. Guidance in that regard can be found in a large number of guidelines, notices and in the General Block Exemption Regulation.

The notice has been adopted after an extensive consultation period and it constitutes the last (and long-awaited) part of the State aid modernisation initiative launched by the Commission in 2012. The aim of this modernisation initiative is to simplify the State aid rules so that unproblematic aid measures can be implemented without prior notification to the Commission. In view thereof the Commission has updated all major State aid regulations and guidelines.

The final text of the notice is to be welcomed as it provides a comprehensive overview of the current state of play of the EU Courts’ case law and the Commission’s decisional practice. This guidance will help public authorities and undertakings to identify the public support measures which need to be scrutinized under the State aid rules. Furthermore, it will contribute to a more consistent application of the constituent elements of the notion of State aid by the different actors involved in the enforcement of State aid, in particular the national judges.

The Commission’s notice on the notion of State aid can be found here

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