Frequently Asked Questions

A: Article 107 (1) sets out criteria, all of which must be met for a State aid to be present.

• the aid favors certain undertakings or the production of certain goods,
• the aid is provided by State or through State resources,
• the aid distorts or threatens to distort competition,
• the aid affects trade between Member States.

If it is absolutely certain one or more than one of these conditions is not met, you are not dealing with a State aid.

A: An undertaking is an entity which is engaged in commercial activity. This means that it puts goods or services on a given market. The important thing is what the entity does, not its status. Thus a charity, a not for profit company or a Government Department can all be undertakings if they are involved in commercial activities.

A: At national level the main legal act is the Government Emergency Ordinance no. 77/2014 on the national procedures in the State aid field, published in the Official Journal no. 893 of 09 December 2014, and approved by the Law no. 20 of 06 March 2015, published in the Official Journal no. 160 f 06 March 2015.

Romania applies directly the relevant legislation in the State aid field (Regulations, Communications etc.). Also, the jurisprudence of CEJ and CFI is directly applicable.

At Community level, the principal legislation is Articles 87 to 89 of the EC Treaty as updated. Article 36 – ex 42 for agriculture; Article 73 – ex 77 for transport; Article 86 (2) for SGEI (Services of General Economic Interest); Articles 4c and 95 ECSC European Coal and Steel Community.

The rules and their interpretation are developed by ECJ case law and Commission secondary legislation – Frameworks, Directives, Communications and Guidelines on how the Treaty articles apply to different forms of aid e.g. fiscal measures, and to different purposes for which aid is given. Some rules affect particular sectors e.g. there are special rules covering motor vehicles, shipbuilding, steel. Some rules cover aid for “horizontal” objectives i.e. not sectorally specific. Examples are aid for R&D, aid for SMEs, aid for training. The sectoral rules take precedence over the horizontal ones – they add restrictions.

A: Some basic myths to dispel:

Public funding and State aid are not one and the same, i.e. public funding is not necessarily a State aid. There being public funding is not enough to determine that this funding is a State aid.

The beneficiary can be public or private or a Public Private Partnership (PPP). For a State aid to exist, there has to be a benefit from State resources to an economic entity which is active in an activity traded within the EU. The entity need not itself carry out trade between Member States. The issue is whether the activity it is engaged in, is traded between Member States, e.g. insurance; construction; banking. There are few activities which are not traded between Member States these days and which do not affect competition. If the entity does not carry out an economic activity, there is no State aid as far as these rules are concerned.

A: Un-authorized State aid is illegal. These are the consequences for giving such aid:

• aid payments can be suspended;
• firms may have to repay the State with interest ;
• policies may have to be altered;
• legislation may need to be amended;
• recipients could be sued by a competitor for damages.

A: First of all you must remember that not all aid is illegal. If the aid has been notified to and approved by the Commission there is no reason why the undertaking should not benefit from it. You can check the DG Comp’s website to see whether the measure was assessed by the European Commission.

However if you consider that this aid is harming your commercial prospects then you must bring this to the attention of the Commission. The Commission is legally obliged to investigate all complaints. You should complain using the form available on this website on State aid Forms.

A: The Commission has as sole competence to decide and review what constitutes a State aid. This means that the Commission has the ultimate say in all State aid matters – subject to limited review by the European Court of Justice. Accordingly, the Commission (DG COMP) has considerable powers to monitor, control, and restrict the forms and levels of aid given by Member States to their industries.

They must decide cases to a timetable set out in a Council regulation agreed unanimously. The Commission has to take a decision within 2 months of a complete notification. However, in practice the timetable is longer. Allow at least 6 – 7 months. The Commission can start a further period of two months by asking for further information if they consider the notification is not “complete”. (The further period only starts once the Commission receives the answers.) At the end of the final two-month period, the Commission may decide to approve, OR to open a second-stage formal investigation which adds at least another 6 months to the process – possibly significantly more.

A: The Competition Council offers assistance in elaborating the notifications or the information submitted to the European Commission, works together with the State aid grantors in order to elaborate normative acts setting up schemes or individual State aid. Also, it ensures the dissenimation of the communitaire legislation and of the experience accumulted by the Competition Council’s experts in the State aid field, continuously monitoring the legal framework for granting State aid, as well as the fulfillment of its own decisions or of the decisions issued by the European Commission in this field.

A: Ignoring the rules is not the right approach for critical reasons.

Romania has to increase its credibility with the Commission and benefits from goodwill when it matters. The Commission shows goodwill often by setting up a pre-consultation mechanism in cases regarding Romania’s privatisation process. Also, they are open to informally discuss elements of the cases that can minimise delays due to the formal procedures.

We must still improve our own house. But too often the State aid issues are only considered at the last moment when a policy/programme structure has been agreed and Ministers already set on a policy course. State aid consideration needs to be built in right from the start.

A: Build State aid implications into your initial appraisal. Allow enough time for Commission clearance. Be aware of the risks of implementing unapproved aid. Try to fit any proposals to an existing approved aid or a block exemption. Seek advice early, even before starting to draft the measure.

A: If the Commission has doubts about the compatibility of an aid scheme which has either been notified to them or has been brought to their attention by a complainant they are obliged to open a full investigation under Article 108(2). This is a fairly lengthy procedure which can take up to 18 months in the case of notified aid and longer for un-notified aid.

The Commission will in the first instance write to the Member State outlining their doubts. The Member State will then have twenty working days to reply. The letter is then published in the Official Journal (OJ), with any confidential information removed, with a short summary in all the official languages. It can take several months for letters to appear in the OJ, as time is needed for translation. When the letter appears in the OJ third parties (including competitors and other Member States) can then submit comments – there is usually a one month deadline for such comments. The Member State sees all responses, although a correspondent can ask to remain anonymous. The Member State then has a further month to reply to Third Party comments. After this the Commission deliberates on all the information and may have bi-lateral meetings with the parties involved. At the end of the procedure the Commission will either decide that there is no aid involved, that the aid is compatible (possibly with conditions) or that it is incompatible. If incompatible aid has already been given this may result in the money having to be recovered. The procedure will then close.

A: The General Block ExemptionRegulation covers forms of State aid which are exempt from prior notification – so long as the conditions are met. The aid must comply with all the terms of the Regulation, which will include aid ceilings (the SMEs, training and employment block exemption regulations threshold). The number of block exempted measures is of 26.

The general block exemption regulations do not exempt very large sums – these require Commission approval. You have to provide summary information on the aid provided under block exemption terms and maintain records for ten years.

The GBER also contains a series of conditions which aim to ensure that the aid measures will indeed lead the beneficiary to undertake a project or activity which he would not have engaged in without the aid (incentive effect). This should allow third parties and other interested parties, like national judges, to have a better view whether aid has been granted and, if so, which conditions have to be fulfilled for the aid to be compatible.

An approved aid is State aid and must be cumulated with State aid from any other source, including Structural Funds and de minimis aid, used for the same purpose.

The fact that a State aid measure is not covered by the GBER does not imply that it is going to be prohibited by the Commission: measures falling outside the scope of the GBER will merely remain subject to the standard obligation of prior notification to the Commission. The objectives and effects on competition of such measures will be assessed, by the Commission, on the basis of guidelines, frameworks and other instruments.

A: The exceptions apply essentially to the following sectors: the fishery and aquaculture sectors (subject to their own specific block exemption), the agricultural sector, the coal sector, the shipbuilding sector, the steel sector and the synthetic fibres sector.

The GBER also excludes aid to undertakings which are subject to an outstanding order from the Commission to recover incompatible aid already granted. This is in line with the case-law of the Court of Justice (Deggendorf).

The GBER also completely excludes companies in difficulty from its scope of application. Indeed, according to the Commission’s policy, any aid provided to such a company has the character of rescue and restructuring aid. Such aid measures should thus, as a matter of principle, being examined exclusively under the Community guidelines on State aid for rescuing and restructuring firms in difficulty.

However, in order to facilitate Member States’ assessment regarding the question whether or not a beneficiary is to be considered as being in difficulty, the GBER provides for a simplified definition. This simplification applies purely for the purposes of the GBER and does not affect the interpretation to be given to the definition of “enterprises in difficulty”, when applying the rescue and restructuring guidelines.

A: Yes, provided that the aid is for different projects with distinct sets of eligible costs.

A: The de minimis aid is a support measure granted to any undertaking of any size, which does not exceed €200,000 over any period of three fiscal years (€100,000 for any undertakings active in the road transport sector). For cumulation purposes, only aid given under the de minimis regulation during the previous two fiscal years and the current fiscal year counts towards the ceiling.

De minimis aid is a volume ceiling, i.e. a total amount, rather than a percentage ceiling of project costs. This aid can be given by any public body so it is essential as part of the administrative arrangements for the de minimis regulation to ask the intended beneficiary to declare any de minimis aid from any source received in the last three years. You have to ensure compliance with the ceiling and other conditions and maintain records for ten years, but do not have to provide the summary information required for the block exemptions.

Before granting de minimis aid, officials must comply with all the administrative requirements of the regulation, including ensuring the cumulation rules are observed and having a monitoring system in place

De minimis aid cannot be given to enterprises in road haulage operations for the acquisition of road freight transport vehicles or to enterprises in the agriculture sector (with the exception of processing and marketing of agricultural products) or for directly export-related activities.

A: The grantor of the aid. If you are granting de minimis aid you must first ensure that the amount will not exceed the €200,000 limit over a three-year period when added to any other de minimis aid the intended recipient has already received from all sources during that period. You must ask the firm concerned to provide you with information in writing about any other de minimis aid received during that period. You must also ensure that if the company is receiving aid under a notified scheme or a block exemption scheme for the same costs, the de minimis aid will not take the notified or block exempted aid over the permitted aid intensity for that particular scheme.

A: The Commission considers that the Temporary framework represents the best measures to achieve the ultimate objective of facilitating companies’ access to finance, during the present world economic financial crisis, while avoiding unfair competitive advantages for particular companies.

The temporary aid measures pursue three objectives:

• first, to ensure sufficient bank lending to companies
• second, to allow companies with liquidity problems due to the crisis to benefit from temporary relief through a limited grant, and
• third, to encourage companies to continue investing for a sustainable future, including the development of green products.

The Commission expects the financial markets, and hence the provision of lending to businesses, to go back to normal in the foreseeable future. Therefore, the new measures addressing the exceptional circumstances in the financial markets are limited in time and expire in principle at the end of 2010.

A: The Commission Communication outlines a number of new measures as well as the temporary modification of some existing instruments.

As regards the new measures, the Commission has put in place the possibility for Member States to grant:

• a lump sum of aid up to €500,000 per company for the next two years, to relieve them from current difficulties;
• new aid for guarantees in the form of a reduction of the premium to be paid;
• new aid in the form of subsidized interest rates applicable to all types of loans;
• new aid in the form of an interest-rate reduction for investment loans related to products which significantly improve environmental protection.

Concerning the adaptation of existing guidelines, the following simplifications have been put in place:

• a temporary derogation from the 2006 risk capital Guidelines in order to increase the tranche of finance per target SME (from €1.5 million to €2.5 million) and a reduction of the minimum level of private participation (from 50% to 30%),
• simplification of the requirements of the export credit Communication to use the exemption that allows non-marketable risks to be covered by the state.

A: There are a number of companies which, although they have sound business plans and good prospects, find themselves cut off from financing due to the drying up of the lending market.

Therefore, companies which were not in difficulty on 1 July 2008 – that is before the start of the credit squeeze – will be able to receive support under the new measures. For those companies, whose difficulties date from before the credit squeeze and which, therefore, must address their structural problems, the Rescue and Restructuring Guidelines provide the best tool to ensure long-term viability.

A: Schemes yes, individual grants of aid within the schemes no. The Commission will ensure swift decisions if the notifications are complete and the conditions of the Framework are closely mirrored in the national scheme. They can notify a scheme, and once the scheme is approved, Member States can grant individual aid immediately without notification.

A: Yes, such adaptations would constitute important modifications of existing schemes and consequently a notification is required.

A: The measures can be combined with other compatible aid or Community funds as long as the maximum aid intensities contained in the relevant Guidelines or Block Exemptions Regulations are respected.

A: No. If a company has already received a de minimis aid of € 200,000, it can only receive a new aid limited to € 300,000.

A: Services of General Economic Interest (SGEI) are not defined in the Treaty; it is for individual Member States to define and there is no overarching EU definition. In general, they are services which the market does not provide or does not provide to the extent or at the quality which the State desires and are in the general (i.e. of all citizens) interest and not the interest of a particular sector. SGEIs tend to include such things as gas, electricity, telecoms, public service broadcasting and public transport but this is not an exhaustive list.

A: Funding of SGEI is in principle caught by the State aid rules which apply to state funding of economic activities. Article 86(2) is the normal means of approving aid to undertakings performing an SGEI. However if the support meets the exacting tests given in the Altmark judgement it will not be a State aid. These include whether there has been a tender for the aid and whether it is merely enough to cover the cost of performing the service with a reasonable profit. If it does not meet the terms of Altmark, then you can either take advantage of the Block Exemption or notify the aid under the terms of the SGEI Framework.

A: The first issue is to identify whether the SF itself is being used like a State aid. If yes, the issue is to identify which are the relevant aid rules – Regional aid? Training aid? R&D? – and hence what the State aid ceiling and other conditions are. Another issue is to ascertain whether there is any other public funding going towards the same project costs. If so, the manager has to ascertain whether that other public funding is notified and approved aid or block exemption aid. If not, the whole project will either have to be notified and approved before it can be used with the SF money for a State aid purpose, or comply with the terms of one of the block exemptions.

A: It depends what activities are being funded. Public funding of universities’ core teaching and research functions does not constitute State aid. However, where a university is carrying out an economic activity (for example, providing charged research and consultancy to businesses), aid will be involved unless there is clear separation and no cross subsidy between the university’s core public and economic functions. Case law is developing in this area and if in doubt you should contact the Competition Council’s State Aid Branch.