Compliance with the State aid rules should always be considered at the outset of a project where any form of financial assistance (support or funding) is being provided by (or through) a public body to selected organisations.
So… what is State aid? Please see here.
The State aid rules are complicated; it is not always clear if State aid is present.
Any funding or economic/financial support from a public body will be a transfer of State resources even if it originated from private sources before hitting the public body''s bank account. The presence of State aid in arrangements is not always obvious. An applicant for State aid may be acting as a "conduit" only by flowing all of the aid to third parties and therefore, when applying the State aid criteria, all potential recipients and beneficiaries of the aid must be considered, including any delivery partners, contractors or end users.
The following examples are all likely to be caught by the State aid rules and involve State aid:
A public body can only provide State aid if the proposed aid can be structured as compatible State aid, being aid:
The application of exemptions and derogations is complex, where each exemption and derogations has its own conditions that must be fully met. For example:
(i) When seeking to rely on a block exemption, all general conditions in the General Block Exemption Regulation 2014 must be fully satisfied as well as the specific conditions necessary for the particular block exemption you wish to use.
(ii) There are a number of sectors and activities that are excluded from falling within exemptions.
(iii) The size of an undertaking can be decisive on whether an exemption will validly apply and applies to the whole group structure including subsidiaries in other Member States and outside the EU.
(iv) Eligible costs and aid intensities are different for each block exemption.
(v) Cumulation rules apply and need careful attention where a project involved multi-funding streams.
(vi) The De Minimis exemption requires you to obtain details of all de minimis aid the proposed recipient has received in the relevant 3 financial year period to assess the availability of the exemption.
This process typically takes between 6 and 12 months. Each notification triggers a preliminary investigation by the European Commission, based on the relevant European Commission Guidelines or Framework for the particular category of aid involved.
These schemes are normally bespoke and contain their own set of conditions. Their use for a particular project must be assessed on a case-by-case basis to ensure the project fully comes within the scope of the approved scheme.
If unlawful State aid is given, the consequences can be severe:
It is imperative that State aid is considered early on in projects. Remember, the potential presence of State aid does not necessarily mean that a project cannot proceed, provided that it is awarded in compliance with State aid rules. Early consideration gives much greater opportunities to ensure that a project can be structured and developed in a way that will ensure State aid compliance - attempting to do this at the later stages of development once key structures have been agreed can prove extremely difficult.
Practical steps and considerations to help ensure compliance: