Most of us who practise in the field of State aid can probably think of many cases where we have been asked – often at the last minute or even later – to advise on whether a fairly modest grant to a small enterprise is caught by the State aid rules, and if so what can be done about it. As this association pointed out in our submission to the Government’s current review of EU competences in the area of State aid (available on this website), one of the less attractive features of the regime is its potential to catch small grants which – in the real world – are unlikely to have any real impact on competition or to have any cross-border impact, and which would also plainly be cleared by the Commission were it ever to look at them.
So as advisers we end up having to say to clients: yes, it may well be State aid; no, there is not much that can be done about it unless you really want to go through the notification process; and that the pragmatic (though unsatisfactory) way forward is to cross your fingers, rely on a (sometimes rather dodgy) argument that there is no conceivable impact on cross-border trade, and hope no-one notices.
The de minimis regulation is an important route out of this problem: if it applies, then a firm and principled view can be taken that there is no notifiable State aid, and everyone can sleep soundly at night. So the latest version of this regulation – which entered into force on 1 January 2014 – is a document State aid lawyers will need to have readily to hand.
The new regulation (Commission Regulation 1407/2013, OJ L352/1, 24.12.2013: http://ec.europa.eu/competition/state_aid/legislation/de_minimis_regulation_en.pdf) offers incremental change rather than revolution. The basic structure is the same as in its predecessor. So: –
- the maximum limit remains €200,000 over three years to a single undertaking;
- that maximum limit is a cumulative limit (so that if two grants of aid together exceed the threshold, the regulation does not apply);
- it remains limited to “transparent” aid (i.e. where is it possible precisely to calculate the gross grant equivalent);
- the grantor, before it grants the aid, must inform the recipient undertaking of the gross grant equivalent, refer to the regulation, and obtain a declaration from the undertaking as to any other aid it has received under the regulation in the current and previous two fiscal years; and
- export-related aid, and aid conditional on the use of domestic goods, are excluded.
But there are some significant changes: –
- undertakings in difficulty are no longer excluded from the scope of the regulation;
- the lower limit for road transport undertakings (€100,000 over three years) now applies only to road freight transport;
- “single undertaking” is now defined by reference to majority shareholdings, and dominant influence based on contract or provisions in memoranda and articles of association, rather than by reference to the somewhat imprecise definition of the term in general competition law – this will make the €200,000 limit per undertaking easier to apply; and
- loans will fall under the regulation (even if their gross grant equivalent calculated on the basis of pertaining interest rates exceeds the general limit) if they are at least 50% secured and the loan is no more than €1m over 5 years or €500,000 over 10 years.
These incremental improvements to the de minimis regulation are clearly worthwhile in terms of clarity, though they do not greatly extend the scope of the regulation. The most obvious way of extending its scope would have been to raise the limit of €200,000 over three years: but it is clear that the Commission has set its face against that (referring, in its impact assessment, to the risk that “competition and trade can be distorted by the aggregate effects of de minimis aid in sectors with many smaller undertakings“).
So there will remain many cases when the de minimis regulation does not assist in dealing with the State issues to which even modest grants can give rise. The best advice to those having to deal with such cases is to come to the seminar we shall shortly be organising on the application of the State aid rules to grants to small and medium-sized enterprises: details will be posted here soon!