The European Commission is in charge of ensuring that State aid granted by Member States complies with EU rules. At the heart of this responsibility lies the notification procedure, under which Member States have to notify any planned aid measures to the Commission before putting them into effect. Therefore, generally, aid measures can only be implemented after approval by the Commission.
The General Block Exemption Regulation (“GBER”) introduces an important exception to the obligatory notification procedure. It declares specific categories of State aid compatible with the Treaty if they fulfil certain conditions and it exempts these categories from the requirement of prior notification to the Commission. By doing so, it allows Member States to implement public support measures directly, without prior Commission approval.
The European Commission has further widened the scope of the General Block Exemption Regulation. The new rules concern:
- Aid granted through national funds for projects also supported under certain EU centrally managed programmes;
- State aid to support the twin transition to a green and digital economy that will, at the same time, help the recovery from the effects of the coronavirus pandemic.
Please see also the related press release.
What is the General Block Exemption Regulation?
The 2014 ‘General Block Exemption Regulation‘ exempts certain categories of State aid from the requirement of prior notification to the Commission, when the benefits to society outweigh the possible distortions of competition that the aid may cause to the Single Market. State aid measures that meet the criteria of the Regulation can be implemented by Member States directly, without prior Commission approval. As a result, more than 96% of new of state aid measures implemented by Member States are now exempted.
The criteria set out in the General Block Exemption Regulation determine, in particular, eligible beneficiaries, maximum aid intensities (i.e. the maximum proportion of the eligible costs of a project that can benefit from State aid), aid amounts and eligible expenses. These criteria are derived from the Commission’s market experience and decision-making practice.
The fact that a State aid measure does not meet the criteria of the General Block Exemption Regulation does not mean that it is incompatible with EU state aid rules. It only means that the measure must be notified (prior to its implementation) to the Commission, which will then assess whether the State aid can be approved under other EU State aid rules.
Why has the Commission amended the General Block Exemption Regulation?
The aim of the current extension of the General Block Exemption Regulation is, firstly, to improve the interplay between EU funding rules under the new Multiannual Financial Framework (“MFF” the “budget” of the EU) on the one hand and EU State aid rules on the other hand. With this extension, the Commission, also introduces further possibilities for Member States to provide State aid to support the recovery from the economic impact of the coronavirus pandemic in a sustainable and resilient way without prior notification.
As regards the first aspect, the GBER extension aligns EU funding rules and EU State aid rules in certain areas. This will reduce unnecessary complexities, for example by allowing Member States to rely on the assessment of projects already carried out at EU-programme level, rather than having to carry out a separate assessment for State aid purposes when combining with national funding or funding under shared management programmes. At the same time, the rules ensure that competition in the EU Single market is preserved, amongst others by ensuring that public funding addresses market failures, does not crowd out private investments and is limited to the minimum necessary to achieve the public policy goals.
The extension of the GBER introduces new rules in the following areas:
- Financing and investment operations supported by the InvestEU Fund;
- Research, Development and Innovation (RD&I);
- European Territorial Cooperation (ETC) projects, also known as Interreg;
In addition to these areas, the revision also introduces new block exemptions for European Innovation Partnership for agricultural productivity and sustainability (‘EIP’), and Operational Group projects or community-led local development (‘CLLD’) projects.
Furthermore, the extension of the GBER provides for additional possibilities for Member States to support the transition to a green and digital economy in a way that will speed up their economic recovery from the coronavirus pandemic. This will allow for the quick implementation, without prior notification to the Commission, of crucial State aid measures that will accelerate the twin transition and, at the same time, the recovery from the economic effects of the pandemic in a sustainable and resilient way. For this purpose, the rules in the following areas have been revised:
- Aid for energy efficiency projects in buildings;
- Aid for publicly accessible electric recharging and hydrogen refuelling infrastructure for road vehicles;
- Aid for fixed broadband networks, 4G and 5G mobile networks, certain trans-European digital connectivity infrastructure projects and certain vouchers.
What are the main new elements of the General Block Exemption Regulation?
The amendment of the General Block Exemption Regulation (“GBER”) provides new rules to: (i) accompany the new Multiannual Financial Framework; (ii) support the twin transition to a green and digital economy and (iii) the recovery from the economic effects of the coronavirus pandemic.
1. Measures to accompany the new Multiannual Financial Framework:
New rules for State aid involved in the implementation of the new InvestEU program
The aim of the InvestEU Fund is to provide for an EU guarantee to support financing and investment operations to address specific market failures and mobilise additional private and public investment in support of the Union’s internal policies. Member States have a possibility to contribute their resources to the EU guarantee under the Member State compartment and/or to finance financial products via national promotional banks or other public finance institutions under the support of the InvestEU Fund.
Financial products supported by the InvestEU Fund may involve funds controlled by Member States, including Union shared management funds, contributions stemming from the Recovery and Resilience Facility (“RRF”), or other contributions by Member States, in order to increase leverage and support additional investments in the Union. For instance, Member States have the possibility of contributing a part of Union shared management funds or Recovery and Resilience Facility resources to the Member State compartment of the EU guarantee. Moreover, Member States can finance financial products backed by the InvestEU Fund through their own funds or national promotional banks. The GBER amendment introduces block exemptions for situations where such funding constitutes State aid and will, thereby, improve the interplay between the InvestEU Fund and State aid rules. This will facilitate the deployment of Member States’ resources to finance the target investments under the support of the InvestEU Fund, while at the same time ensuring that potential competition distortions are minimised.
The amendment introduces two new block exemptions, catering for the following scenarios:
- The first (general) scenario provides for eligibility and exclusion criteria for the final recipients, as well as maximum financing amounts for a wide range of different policy areas (broadband; energy generation and infrastructure; social, educational, cultural and natural heritage infrastructure and activities; transport and transport infrastructures; other infrastructures than transport; environmental protection, including climate protection; research, development, innovation and digitalisation). The scenario provides for additional possibilities for block exempting aid for SMEs and small mid-caps, even beyond the listed policy areas.
- The second scenario applies to financial products supporting smaller financing (up to €7.5 million per beneficiary), provided to final recipients by commercial financial intermediaries which retain some risk exposure. There will be no limitations (“eligibility criteria”) for final recipients under this scenario, except for the exclusion of large firms in financial difficulties.
New rules in the area of Research, Development and Innovation:
The GBER amendment will facilitate the way in which centrally managed funding from Horizon Europe can be combined or, in cases of projects having received a Seal of Excellence, substituted with national funding. Following a detailed mapping exercise of the different sets of rules, the amendment aligns certain aspects of State aid rules, on the one hand, and Horizon Europe on the other. This will prevent potential discrepancies that could cause delays or difficulties in the roll-out of R&D&I funding under the new Multiannual Financial Framework.
More concretely, the amendment provides for exemptions to the notification obligation and of the requirement to carry out at national level an assessment of the quality of an R&D&I project already assessed under the rules established under Horizon 2020 and Horizon Europe programmes in the following areas:
- Aid for SMEs for research and development projects as well as feasibility studies awarded a Seal of Excellence quality label under the Horizon 2020 or the Horizon Europe programme;
- Aid for Marie Skłodowska-Curie actions and ERC Proof of Concept actions awarded a Seal of Excellence quality label under the Horizon 2020 or the Horizon Europe programme;
- Aid provided to a co-funded research and development project or a feasibility study implemented by at least three Member States, or alternatively two Member States and at least one associated country, and selected on the basis of the evaluation and ranking made by independent experts following trans-national calls, in line with the Horizon 2020 or Horizon Europe programme rules;
- Aid provided to co-funded Teaming actions, involving at least two Member States and selected on the basis of the evaluation and ranking made by independent experts following transnational calls under the Horizon 2020 or the Horizon Europe programme rules.
New rules for European Territorial Cooperation (also known as “Interreg”)
The promotion of European Territorial Cooperation (“ETC”) projects has been an important priority in the EU’s Cohesion policy for many years. Under State aid rules, a block exemption for aid provided in the context of such ETC projects already existed. Given the experience gained in the area, the GBER amendment extends the possibilities for providing aid to ETC projects in two ways:
- The already existing block exemption, which was limited to aid being provided to SMEs, is extended to allow aid to be provided also to large companies without prior notification;
- In addition, a new, simplified, block exemption for very small amounts of aid provided to ETC projects is introduced (up to €20 000 per beneficiary per project).
New rules for European Innovation Partnership for agricultural productivity and sustainability (‘EIP’) Operational Group projects and community-led local development (‘CLLD’) projects
The amendment introduces new block exemptions for SMEs participating in community-led local development (‘CLLD’) projects, designated as LEADER (“Liaison Entre Actions de Développement de l’Économie Rurale”) projects for local development under the European Agricultural Fund for Rural Development, or European Innovation Partnership (‘EIP’) for agricultural productivity and sustainability Operational Group projects.
In addition to a general provision, spelling out eligible costs and maximum aid intensities, the amendment introduces a simplified block exemption for small amounts of funding per project, not exceeding €200.000 for CLLD projects and €350.000 for EIP Operational Group projects.
2. Measures to support the twin transition to a green and digital economy as well as the recovery from the economic effects of the coronavirus pandemic
The GBER extension revises and provides block exemptions in areas that are key to the transition to a green and digital economy. The measures Member States will be implementing under these new rules will, at the same time, help to implement their Recovery and Resilience Plans (in particular under the European Flagships “renovate”, “recharge and refuel” and “connect”), as well as other measures taken at national level to support the recovery from the economic effects of the coronavirus pandemic, in a fast and streamlined manner.
Aid for energy efficiency measures in buildings
The amendment simplifies the rules for State aid for energy efficiency measures in buildings by:
- simplifying the way of calculating the eligible costs for certain categories of buildings, including residential buildings;
- including a new possibility of combining aid for energy efficiency measures in those buildings with aid for on-site renewable energy installations, storage facilities for the renewable energy produced, equipment and infrastructures for the recharging of electric vehicles and investments in the digitalisation of the building;
- including a new possibility allowing for the aid measures to also relate to the facilitation of energy performance contracts.
Aid for publicly accessible recharging or refuelling infrastructure for zero and low emission road vehicles
The amendment introduces a new block exemption for aid for publicly accessible recharging or refuelling infrastructure for the supply of electricity and hydrogen to zero and low emission road vehicles for transport purposes. This will facilitate aid for comprehensive networks of such infrastructures in the Member States far beyond what was possible under the GBER rules in place until today (under which only aid for local measures was block exempted and larger networks of recharging and refuelling infrastructures were subject to a notification procedure and prior approval by the Commission).
Aid for broadband infrastructures
In order to facilitate the digital transition, including in the context of the recovery, the amendment also revises the rules on aid for broadband infrastructures:
- Revision of the rules for fixed broadband networks:
The amendment allows aid for investments in fixed broadband networks in the following cases:
- to connect households and socio-economic drivers in areas where there is no network able to reliably provide speeds of at least 30 Mbps download present or credibly planned to be deployed within three years from the moment of publication of the planned aid measure or within the same timeframe as the deployment of the subsidised network;
- to connect households and socio-economic drivers in areas where there is no network able to reliably provide speeds of at least 100 Mbps download present or credibly planned to be deployed within three years from the moment of publication of the planned aid measure or within the same timeframe as the deployment of the subsidised network; and
- to connect only socio-economic drivers in areas where there is only one network able to reliably provide speeds of at least 100 Mbps download, but below 300 Mbps download, present or credibly planned to be deployed within three years from the moment of publication of the planned aid measure or within the same timeframe as the deployment of the subsidised network.
- Introduction of new rules for aid for 4G and 5G mobile networks;
- Introduction of new rules for aid for projects of common interest in the area of trans-European digital connectivity infrastructure; and
- Introduction of new rules for aid schemes for certain vouchers for consumers in order to facilitate teleworking, online education, training services, or for SMEs.
Are there any other measures contained in the amendment that could facilitate the application of State aid rules during the ongoing coronavirus pandemic?
The coronavirus pandemic continues to significantly affect undertakings in the EU. In response to the pandemic, the Commission adopted temporary rules in March 2020, (“Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak”, as amended on 2 April 2020, 8 May 2020, 29 June 2020, 13 October 2020 and 28 January 2021) to give Member States a flexible framework to support their economies. One aspect of these temporary rules is that companies that were not in difficulty before 31 December 2019, but became undertakings in difficulties during the pandemic, are eligible for State aid under the temporary rules (while under normal circumstances, such undertakings in difficulty would be excluded from most categories of State aid).
To ensure consistency across EU State aid rules, the prolongation of the General Block Exemption Regulation adopted on 27 July 2020 introduced an exception to the general rule that excludes any undertakings in difficulty from receiving block exempted aid. This exception was applicable to companies that became undertakings in difficulty in the period from 1 January 2020 until 30 June 2021.
Since the coronavirus pandemic is, however, still ongoing, and given that the Temporary Framework in the meantime has been prolonged until 31 December 2021, the current amendment prolongs until 31 December 2021 the exception allowing undertakings in difficulty to receive aid block exempted under the General Block Exemption Regulation.
This means that, following the amendment, undertakings that were not in difficulty on 31 December 2019 but became undertakings in difficulty during the period from 1 January 2020 to 31 December 2021 are exceptionally eligible for aid under the General Block Exemption Regulation.
What are the next steps?
The amending Regulation will enter into force on the third day after its publication in the Official Journal of the European Union. The amending Regulation is available here.
Compliments of the European Commission