Download Block exempted aid

State Aid for
Regional Development & SMEs: An Assessment
Prof P. Nicolaides
Themes
 Amounts and ranking
 Where do MS appear to get it wrong?
 Difficulties with concepts/definitions
 A case study on SME definition
Total aid (excl rail), 2014
2014: EUR 101.2 billion
[0.72% of GDP]
2013: EUR 62.7 billion
[0.5% of GDP]
2012: EUR 66.7 billion
Aid objectives & changes in volume of support
Environment & energy: EUR 43.6 billion
Regional aid
In 2014 prices
2012
Total amount
of aid
Blockexempted aid
2013
2014
12,537.9
13,124.6
15,437.1
6,213.9
6,181.6
9,776.1
SME aid (including risk capital)
In 2014 prices
2012
Total amount
of aid
Blockexempted aid
2013
2014
4,283.2
3,682.0
3,856.2
1,904.6
1,643.2
1,606.9
Block exempted aid (2014)
Total
Amount (billion)
27.2
Regional
Environment/energy
Research
Employment
9.8
7.7
5.0
1.7
SME
1.6
ECA annual report on EU budget
 Source of irregularities:
• Public procurement
• State aid
 Types of irregularities in state aid:
• No incentive effect
• Ineligible costs
• Aid in excess of maximum ceilings
ECA special reports on financial instruments for SMEs
 Special report 19/2016: Implementing the EU budget through
financial instruments – lessons to be learnt from the 20072013 programme period
 Special report 8/2015: Is EU financial support adequately
addressing the needs of micro-entrepreneurs?
 Special report 7/2014: Has the ERDF successfully supported
the development of business incubators?
 Special report 2/2012: Financial instruments for SMEs cofinanced by the European Regional Development Fund
Cont.
 Main comments concern the following:
• Absence of well-defined policy objectives
• Low leveraging
• Aid not necessary
• Ineligible costs
• Non-compliance with maximum aid ceilings
Difficult issues concerning regional aid
 Incentive effect for ad-hoc aid to LE: what is “material”
increase? [Art 6]
 Must MS inform beneficiaries that aid is granted on basis of
GBER? [Art 9]
 What is “fundamental” change in production process?
 How to verify that an activity was not closed in previous 2 years
down or will not close down in next 2 years [Art 13]
 Is diversification into new activity = diversification into new
product?
Aid to large enterprises
Initial investment
GBER
RAG
2(49) setting-up of new establishment,
extension of capacity of existing
establishment, diversification of output
of establishment into products not
previously produced in the
establishment or fundamental change
in overall production process of an
existing establishment
20(h) setting-up of new establishment,
extension of capacity of existing
establishment, diversification of output
of establishment into products not
previously produced in the
establishment, or fundamental change
in overall production process of an
existing establishment
Initial investment 2(51) setting up of new establishment,
in favour of new or diversification of activity of
economic activity establishment, under condition that
new activity is not same activity as
activity previously performed
20(i) setting up of new establishment,
or diversification of activity of
establishment, under condition that
new activity is not same activity as
activity previously performed
Compatible aid
[Art 107(3)(c),
aid to large
enterprises]
15 granted for initial investments that
create new economic activities, or for
diversification of existing
establishments into new products or
new process innovations
Notifiable aid
[“c” areas]
Art 14 shall only be granted for initial
investment in favour of new economic
activity
24 granted to large undertaking to
diversify existing establishment into
new products
Difficult issues concerning SMEs
 What is “fundamental” change in production process?
 Definition of SME [especially in case of spin-off or JV with
large university where university has 51% share]
 Art 21(13): Risk finance shall be implemented via financial
intermediaries selected through open procedure
• Does it exclude direct granting of loans & guarantees? [Art
38 of Reg 1303/2013]
Case study: Linked SMEs through natural persons
 HaTeFo GmbH v Finanzamt Haldensleben, C-110/13
 Linked enterprises:
• majority share or voting rights
• right to appoint / remove board /management
• exercise of dominant influence through contract
 Enterprises which have such relationships through natural
persons acting jointly are also considered linked enterprises [if
they are active in same relevant market or adjacent market]
Cont.
 Absence of formal links does not mean enterprises are not
linked
 SME definition must be interpreted on basis of its aim
• Aim: Identify enterprises that suffer an economic handicap
due to their size
HaTeFo
Wife of A
A
Mother of A
B
25%
Managing
Director
C
63%
D
12%
HaTeFo
Managing
Director
50%
50%
Company X
It manages orders and represents HaTeFo
It carries out HaTeFo’s technical management, computer
management and research
Cont.
 ECJ: Links give those persons opportunity to work together in
order to exercise influence over commercial decisions of
enterprises concerned which precludes those enterprises
from being regarded as economically independent of one
another
 The two companies are single economic unit through a group
of natural persons acting jointly
Annex I: GBER provisions on regional development
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Art 13: Scope of regional aid
Art 14: Investment aid
Art 15: Operating aid
Art 16: Urban development aid
Annex II: GBER provisions on SMEs
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Art 17: Investment costs
Art 18: Consultancy costs
Art 19: Cost of participation in trade fairs
Art 20: Cooperation costs in ETC
Art 21: Risk finance aid
Art 22: Aid for start-ups
Art 23: Alternative trading platforms
Art 24: Scouting costs
Art 28: Innovation aid for SMEs