Commission notice on the notion of State Aid 2016

Is it useful?

Yes. Although the Notice is guidance and, as it makes clear, is subject to how the courts exercise their discretion, it is an excellent summary of many key State aid issues commonly met by those advising in this area, as well as a guide to the Commission's current thinking.

Is the final Notice any different?

Yes. It has been substantially updated and contains more references to relevant decisions. Some of the key areas updated are outlined below.

1. Infrastructure. Section 7 explains in detail the Commission's view on the application of the aid rules to infrastructure and how this has developed over time. This is helpful in putting the issues in context and setting out the broad underlying principles. It continues by summarising how the rules apply to different types of infrastructure, for example, airports, ports and broadband, and explaining that aid can occur at various levels, for example, the owner, the operator and the end user.

2. Market economy operator principle. More detail has been added about what this is and how it can be demonstrated. For example, by way of a competitive tender that complies with the EU procurement directives. Although this principle was previously recognised in broad terms, it is helpful to see it here.

3. Land sales. Tucked away on the last page of the Notice is a paragraph which revokes the 1997 Commission Guidance on State aid elements in sales of land and buildings by public authorities. The main principles have instead been incorporated into the Notice. For example, in paragraph 100, where it is explained that an independent expert valuation before sale negotiations is in principle a satisfactory way of calculating market value.

4. Cross subsidies. More has been made of the risk of cross subsidising an economic activity if a non-economic activity is supported. For example, in relation to infrastructure (paragraph 206) and where a public service that is a legal monopoly could potentially do so for another service provided by it (paragraph 188). Separate accounting procedures must be used to prevent this happening.

5. Effect on trade. This section has also been expanded, and now provides more examples of when there might not be an effect on trade between Member States. This is traditionally a difficult area to give advice on, and so having further guidance should prove helpful.

6. Culture and heritage conservation. Greater detail is included about what falls within these categories, and what factors can be taken into account when deciding how the rules will be applied, for example, what might be considered non-economic activity.

7. Tax. This section has also been substantially expanded, and refers to various recent high profile cases, for example, concerning Starbucks. As a result, the Commission Notice on the application of the State aid rules to measures relating to direct business taxation has also been repealed.

This is intended to be a summary of the main changes in the Notice. However, if you would like to discuss it or any other State aid questions you may have, please get in touch with David Owens, Edward Reynolds or Emily Heard.

Footnotes

European Commission's 2014 draft Notice on the notion of State aid 

Court of Appeal judgment concerning the Ricoh Arena