The General Block Exemption Regulation n°651/2014

Amended by regulation 2017/1084

Jean-Pierre Bove

External State aid Expert

Brussels – 2019

GBER in context Before 2001 no regulations – all aids have to be notify by MS to the EC (except de minimis

created in the 1992 EC communication on SME aid) First 4 regulations in 2001 : SME aid, Regional Aid, Training aid, de minimis aid First GBER adopted in 2008 (regulation n°800/2008) to regroup all regulations and create new

categories of aid exempted

Second GBER (651/2014) adopted in 2014 resulting from the 2012 State Aid Modernization (SAM) reform undertaken by the European Commission to improve state aid control and to simplify it: Decentralization of State aid control Small % of aid under the EC control Large % under the control of MS Monitoring, ex post evaluation and transparency Target: 90% of all aid measures could come under the GBER Regulation entered into force on July 1 2014 until 31/12/2020 – EC decided 2 years extension to

launch evaluation plan on all state aids rules. So GBER is in force until end of 2022

Amendment regulation (2017/1084) adopted in June 2017 - regulation’s amendments entered into force retroactively at the same date (July 1 2014) -> positive retroactivity Aid schemes adopted before car benefit from the more favourable provision

Ad hoc aid and aid schemes granted until 9/7/2017 on the basis of the 2014 GBER remain compatible -> no unfavourable retroactivity Aid schemes adopted before are not affected by the less favourable provisions of the regulation

What is indicatively excluded from the scope?

Some sectors

Some schemes

Some beneficiaries

Non-transparent aid

Measures exceeding certain thresholds

Internal market violations

Aids that do not produce an incentive effect

Aids that do not respect cumulation principles

Regional aid to large companies in 107(3)(c) areas except for new activities

Excluded sectors

Export activities

Energy generation, distribution and infrastructure cannot receive regional investment aid, but can receive environment aid;

Transport sector cannot receive regional investment aid

Land transport, excluding taxi operation, removal services and transport via pipelines

Water transport

Air transport, excluding space transport

Agriculture and fish sector in some category of aid

Sectors excluded from regional investment aid

Export activities

Energy generation, distribution and infrastructure

Transport sector

Land transport, excluding taxi operation, removal services and transport via pipelines

Water transport

Air transport, excluding space transport

Coal sector

Steel sector

Schipbuilding industry

Synthetic fibers sector

Excluded schemes

Schemes in some categories (regional, SMEs, R&D&I environment and broadband) with average annual public budget in excess of EUR 150 million, from six months after their entry into force

The budget should be planned at the development stage of the scheme and is not meant to exceed the cap thereafter

In that case : MS shall notify an evaluation plan to EC

Excluded beneficiaries Ad-hoc aid to firms subject to recovery order or aid schemes that do not

exclude undertakings in such situation Aid to undertakings in difficulty, (except damage caused by natural disasters,

start-up aid schemes and regional operating aid schemes) Definition: undertaking in one of the 5 following situations (with exceptions):

1) Limited liability companies: when 50% of the subscribed share capital has disappeared (e.g. negative result exceeding 50% of the subscribed share capital)

2) Companies in which some shareholders have unlimited liability: when 50% of the equity has disappeared

3) Undertaking subject to collective insolvency proceedings 4) Undertaking has received rescue aid and has not yet reimbursed the

loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan

5) Large undertakings meeting the 2 following conditions : a) the undertaking's book debt to equity ratio > 7,5 b) the undertaking's EBITDA interest coverage < 1

Conditions for exemption [1]

Aid & costs expressed before tax, discounted to moment of granting & supported by documentary evidence 2017/1084 regulation :

« The amounts of eligible costs may be calculated in accordance with the simplified cost options set out in Regulation (EU) No 1303/2013 »

Aid must be transparent: Gross Grant Equivalent (GGE) of loans on basis of reference rates and

with security

GGE of guarantee schemes based on methodology notified in advance [for SMEs on the basis of safe harbour premiums as laid down in the Notice on aid in the form of guarantees 02/08] and accepted by the EC

Capped fiscal measures.

Conditions for exemption [2]

Non-transparent aid:

Capital injection, unless the entire amount is considered as aid – No GGE for capital injection

Passed-on aid (in case of two-level schemes) without allocation methodology, with the exception of risk finance instruments and Articles 38 and 39 (energy efficiency fund)

o The advantage to the final beneficiaries must be quantified ex ante and precisely

Notification thresholds for individual aid

EXAMPLES:

SME investment: EUR 7.5 m/per undertaking/per project

Research infrastructure: EUR 20 mn per infra.

Training: EUR 2 mn per project

Innovation aid for SMEs: EUR 5m/per undertaking/per project

Aid for innovation clusters: EUR 7.5 m/cluster

Regional urban development: EUR 20 mn

Environmental investment: EUR 15 mn per undertaking/per project;

Broadband infrastructure: EUR 70 m/per project

Investment aid for local infrastructure EUR 10 mn or the total costs > EUR 20 m/project

Internal market violations

Restrictions on the location of companies

e.g. a requirement for headquarters in the granting MS at the time of granting, or a requirement to achieve a certain percentage of its turnover in the MS

Restrictions on the origin of products or services

Restriction on the possibility of aid beneficiaries to exploit R&D&I results in other Member States

Incentive effect [1]

For individual aid to large enterprises (ad hoc aid) :

the Regulation should not apply to aid for activities in which the beneficiary would already engage alone under normal market conditions

Either because they are required by law or because the market provides sufficient incentive for the activities to be undertaken

Aid must be granted only to activities that are not immediately necessary for the beneficiary

If no incentive is shown, the Commission may request the measure to be notified

Incentive effect [2]

For aid schemes involving SMEs and large companies, there is an incentive effect, if they apply in writing before project starts, providing certain information:

1) Undertaking name and size (SME or Large)

2) Project description including its start and end dates

3) Location of the project

4) List of project costs

5) Type of aid (grant, loan, guarantee, repayable advance, equity injection or other)

6) Amount of public funding needed (i.e. the amount coming from either national budgets or from directly managed EU funds)

Incentive effect [3]

The following categories are presumed to have an incentive effect as long as the specific conditions listed in the respective articles are complied with: Regional operating aid

Regional urban development aid

Aid for access to finance for SMEs

Aid for the recruitment of disadvantaged workers

Aid for disabled workers

Aid in the form of reduction in environmental taxes

Aid to compensate damage from natural disasters

Social aid for transport

Aid for culture and heritage conservation

Cumulation rules Before cumulation, each public funder must respect

individual rules (e.g. aid scheme condition) No cumulation rule for the first aid; only for the second and

the following Ceilings apply to aid from all sources which meet the 5

criteria of the concept of State aid For different eligible costs, multiple awards of aid under

Regulation allowed For same eligible costs no cumulation with other aid (within

or outside the GBER) or EU aid if highest ceilings are exceeded

Cumulation between aid scheme and “de minimis” aid on the same eligible costs, shall respect aid scheme ceiling

Ex post evaluation

Schemes with annual budget in excess of EUR 150 million for regional, R&D&I, SME, environmental aid and aid for broadband infrastructures

These schemes are covered by the GBER for an initial period of 6 months that can be extended by the Commission upon approval of the evaluation plan In absence of such an approval, the EU States shall suspend the

application of the measure and submit full notification

Notification only of the evaluation plan

Transparency EU States to publish within 6 months after the granting,

decision key information on a single website, including the name of beneficiaries and aid amounts:

Information on each scheme exempted of notification on the basis of GBER

Information on individual awards of > EUR 500,000, with the exception of SMEs in risk finance and regional urban development projects that have not carried out any commercial activity and for which the EU State can waive the transparency requirement

Monitoring No systematic control of information sheets by EC The Commission shall regularly monitor the implementation

of the Regulation Sector Budget Beneficiaries Duration Novelty issues Cumulation

Controls are carried out through exchanges of letters with Member States, and management authorities

In ESF procedures, checks are the most frequent; they concern compliance with the rules of the exempted aid scheme used.

Aid granted without fulfilling GBER condition is not legal

Excepted if one of the 5 state aid criteria is not met

Excepted if aid can be granted on “de minimis” regulation

Where MS grant aid without fulfilling the conditions of the GBER, the Commission may ask notification of all or some of the future aid measures adopted by the MS concerning in particular certain beneficiaries or certain granting authorities

any aid granted illegally must be repaid

Withdrawal of the benefit of the GBER

Traditional New

Regional aid

Aid to SMEs

Aid to access to finance for SMEs

Aid for R&D&I

Training aid

Aid for D&D workers

Aid for environmental protection

GBER aid categories

Aid to compensate for natural disasters

Social aid for passenger transport

Aid for broadband infrastructures

Aid for culture and heritage conservation

Aid for audio-visual works

Aid for innovation clusters

Aid for process or organisational innovation

Aid for sport and multifunctional recreational infrastructures

Aid for local infrastructures

Aid for ports and airports

Aid for regional operating schemes

Implemented via urban development funds

Co-financed by the European Structural and Investment Fund

To support the implementation of an “integrated sustainable development strategy”

Total investment < EUR 20 million

Managers must be selected through an open, transparent and non-discriminatory procedure and shall ensure profit-driven financing decisions

Examples: town planning investment, urban regeneration projects, housing and recreation investments

Regional urban development aid (art. 16)

Aid for cooperation costs by SMEs in ETC projects (art. 20)

Eligible costs:

Costs for organizational cooperation

Costs of advisory and support services linked to cooperation and delivered by outside consultants and service providers

Not a continuous advisory activity

Investment expenditure, travel expenses, materials, depreciation of tools

Costs of accommodation plus food

Aid intensity: up to 50% of eligible costs

At the level of individual beneficiaries

Incentive effect letter needed

Research infrastructures (art.26)

To be used only if: Economic activity of the infrastructure > 20% of the research infrastructure’s overall annual

capacity,

And to finance investment linked to the economic activity of the infrastructure

Eligible projects: Construction or upgrading of infrastructure

Account separation for infrastructure that pursues both economic and non-economic activities

Aid intensity: 50% in tangible and intangible assets

No need to calculate operating profit of the investment to reduce aid amount

Open access : Preferential access for companies that have financed at least 10% of the infrastructure

Exclusive use is not allowed

Self-monitoring of the economic and non-economic activities carried out during the whole depreciation period of the relevant assets

Price charged for the operation or use of the infrastructure shall correspond to a market price

As a result -> Aid to research infrastructure and not to end-user (passed-on aid forbidden)

Very advantageous support system for infrastructure owners

DEFINITIONS

Disadvantaged worker: if only one condition is met 1) with no regular paid employment for the previous 6 months 2) is between 15 and 24 years of age 3) has not attained an upper secondary educational or vocational qualification 4) is over 50 years old 5) lives as a single adult with one or more dependants 6) works in a sector in a sector where an imbalance between female and male

employment is observed, and belongs to the under-represented gender group 7) member of an ethnic minority

Worker with disabilities: if only one condition is met 1) recognised as worker with disabilities under national law 2) has long-term physical, mental, intellectual or sensory impairment(s) which, in

interaction with various barriers, may hinder their full and effective participation in a work environment on an equal basis with other workers;

Disadvantaged and disabled workers (schemes only) art. 32, 33

Intensity for SMEs and large undertakings (no SME bonus): 50% for disadvantaged workers

75% for disabled workers

100% for additional expenses for disabled workers

Eligible costs: Disadvantaged workers: wage costs for one year or 24 months for severely

disadvantaged workers

Disabled workers: wage costs over any given employment period

Additional expenses: adaptation of premises & equipment, staff assisting disabled workers, special facilities

Non-eligible:

recruitment to fill vacancies caused by redundancies (except in case of lawful dismissal for misconduct)

Disadvantaged and disabled workers (2)

Innovation Clusters (art 27)

A large definition:

“Structures or organised groups of independent parties (..) designed to stiumulate innovative activity through promotion, sharing of facilities and exchange of knowledge and expertise and by contributing effectively to knowledge transfer, networking, information dissemination and collaboration (..)”

Aid may be granted exclusively to the cluster operator

Access to the cluster on a transparent & non-discriminatory basis

Users shall pay market fees or fees that reflect their costs No aid for the undertakings using the cluster (even indirectly) -> no passed-on aid

Investment aid for the construction or upgrade of innovation clusters - Eligible costs: investment costs in intangible and tangible assets

- Aid intensity: 50% of investments - 65% in 107.3.A areas - 55% in 107.3.C areas

Operating aid for a limited period of 10 years

- Eligible costs: personnel and administrative costs

- Aid intensity: 50% during the period over witch the aid is granted - no bonus for clusters in regional aid areas

Energy, culture, sport, broadband, airport or port infrastructure are not covered

Investment aid to the owner (not to the user)

Aid amount = eligible costs - operating profits - ex ante, on the basis of reasonable projections - or through a claw-back mechanism (if the projections are not reasonable) - reasonable profit can be made by the operator (by using an « appropriate »

discount rate) GBER 2017/1084 modification

Operating profit: Difference between discounted revenues and discounted operating costs over the economic lifetime of the investment, where this difference is positive

.

Local infrastructures (art. 56)

Funding gap calculation

Not dedicated infrastructure (built for ex-ante identifiable undertaking and tailored to their needs)

Entrustment procedure for the operation if third parties are involved (not for in-house operators)

Open access and market price for the use

- no support for companies using the infrastructure

- No passed-on aid

Examples: co-working center, construction of rental housing, housing complex, fuelling stations, etc.

Local infrastructures (2)

Investment and operating aid to regional airports (art. 56.a)

Open use - no dedicated infrastructure No aid for airport creation or relocation Aid only to airports with up to 3 million average annual passenger traffic

Aid amount = eligible costs - operating profits ; limited to following ceilings:

50% up to 3 million passengers ; 70% in outermost regions 75% up to 1 million passengers ; 95% in outermost regions

Operating aid: airports below 200,000 passengers per year shall not exceed what is necessary to cover the operating losses and a

reasonable profit over the relevant period

The granting of the operating aid shall not be made conditional on the conclusion of arrangements with specific airlines relating to airport charges, marketing payments or other financial aspects

Investment aid for maritime ports (art. 56 b)

Eligible costs related to the port, access infrastructure and dredging Investments costs related to non-transport activities and port superstructures are

ineligible

Aid calculation: 2 possibilities 1) 80% if aid does not exceed 5 M€ or 2) Aid amount = eligible costs - operating profits; limited to following ceilings :

For port infrastructure investments: 100% for up to EUR 20 million costs;

80% for EUR 20-50 million costs; 85% in 107.3.C area; 90% in 107.3.A area

60% for EUR 50-130/150 million costs; 65% in 107.3.C area; 70% in 107.3.A area

For access infrastructure and dredging investments: 100% and up to 130/150 million

Concession in compliance with procurement rules

Investment aid for inland ports (art. 56 c)

Eligible costs: Investments for construction replacement or upgrade of the port and

access infrastructure

Dredging

Investments costs related to non-transport activities and port superstructures are ineligible

Aid calculation: 2 possibilities:

1) 80% if aid does not exceed 2 M€

or

2) Aid amount = eligible costs - operating profits; limited to:

100% up to the notification threshold

Concession in compliance with procurement rules

Thank you! jpbove@face.eu

This training has been organised by EIPA-Ecorys-PwC under the Framework Contract

Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only and do not represent the EC's official position