The EU wants to create a level playing field for all companies on the internal market. Therefore, one of the key elements of the European competition policy is the supervision on government and state aid to companies. Local and regional authorities that intend to grant aid, must make sure they observe the state aid rules.
Prohibition on state aid
The state aid rules are laid down in the Articles 107, 108 and 109 of the Treaty on the Functioning of the European Union (TFEU). In the event local and regional authorities intend to provide aid, it is of great importance that they observe these rules. In principle, state aid is forbidden (pursuant to Article 107(1) of the TFEU) because it may distort the fair competition on the European market. A number of cumulative criteria can be derived from the prohibition on state aid. A measure only constitutes state aid if all these conditions are met.
Examples of state aid
State aid can occur in various forms and is not limited to just the ‘classical’ type of subsidy. Also state aid measures in the form of guarantees, loans, venture capital, reduced rental or land sale under the market value may be examples of state aid.
Even though state aid is in principle forbidden and must be submitted to the European Commission for approval, there are various possibilities to grant state aid in a so-called ‘state-aid proof’ manner. The European Commission has, for instance, drafted a number of exemption regulations by virtue of which local and regional authorities are allowed to provide aid for purposes of certain policy objectives, without any formal notification procedure being needed.
The most significant exemption regulations are the General Block Exemption Regulation (GBER) and the Agricultural Block Exemption Regulation (ABER). More information on these exemptions (for local and regional authorities) can be found in Europa decentraal’s Notifications barometer. For lower state aid amounts, authorities can make use of the de minimis regulation.
Below, you will find a list of policy fields for which local and regional authorities are allowed to grant aid and for which they may possibly have to deal with state aid rules:
- Research, Development and Innovation (R&D&I)
- Environment and sustainability
- Spatial planning
- Nature conservation
Local and regional authorities
The European state aid rules are addressed to authorities. Local and regional authorities are responsible themselves for compliance with and the correct application of these rules. In the event local and regional authorities want to provide support, they must make sure this support is ‘state-aid proof’ and take account of the applicable conditions.
The European Commission is entitled to start an investigation as soon as it suspects that potentially incompatible aid has been granted. In the event the Commission’s investigation confirms that incompatible aid has indeed been granted, this aid funds must possible be claimed back. More information about this can be found under Risks.