In context

Have public money to burn? Check the Commission’s guidance first

June 15, 2016
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In context

The European Commission recently published guidance on the notion of state aid to help companies and public authorities determine whether public investments first need to be notified to the Commission. The guidance clarifies the different elements of the notion of state aid as interpreted in EU case law. In addition, it provides specific clarifications in relation to state aid and infrastructure. Companies and public authorities should double-check the guidance to ensure they can spend public money without prior Commission scrutiny.

The guidance is the last part of the Commission’s State Aid Modernisation initiative. The guidance systematically summarises EU case law and sets out the different aspects of the definition of state aid. These aspects include: 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 guidance also provides a number of useful clarifications regarding the public funding of infrastructure, including the following:

  • Public investment for the construction or upgrade of infrastructure that is not meant to be commercially exploited is generally excluded from the state aid rules. As a result, public funding of roads available for public use and the construction of railway infrastructure, inland waterways and water supply and waste water networks are considered to be free of state aid and can be implemented by the Member State without needing to be checked under the state aid rules. This also means that public funding of infrastructure that does compete with similar infrastructure, for instance infrastructure in the field of energy, broadband, airports or ports, is subject to prior Commission scrutiny under the state aid rules.
  • Public funding of local or municipal infrastructure may fall outside the scope of the state aid rules, even if commercially exploited, due to a lack of distortion of competition and effect on trade. For example, the construction of local leisure installations, health care facilities, small airports or ports that predominantly serve local users and for which the impact on cross-border investment is marginal, is unlikely to affect trade.
  • Even if infrastructure is built through public funding, no aid is provided to its operator and users if they pay a market price to use the infrastructure. According to the guidance this will be the case if the operator or user pays a market price to use the infrastructure as a result of, for instance, a competitive, transparent, non-discriminatory and unconditional tender.

 

The guidance replaces a number of Commission Communications and Notices including the Commission Communication on State aid elements in sales of land and buildings by public authorities and the Commission Notice on the application of the State aid rules to measures relating to direct business taxation.

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