On 19 May 2016, the European Commission published its Notice on the notion of State aid as referred to in Article 107(1) TFEU ("Notice"). This guidance can be used to determine whether public spending falls within or outside the scope of EU State aid control.

The Notice is the last part of the Commission's State aid Modernisation initiative. This initiative is aimed at providing more legal certainty about the complex EU State aid regime. The Notice helps Member States and companies identify public investments that qualify as State aid. It clarifies the different constituent elements of the notion of State aid, i.e. the existence of an undertaking, the imputability of the measure to the State, its financing through State resources, the granting of an advantage, the selectivity of the measure and its effect on competition and trade between Member States. In addition, the Notice zooms in on certain sectors to provide  detailed guidance.

If public investment amounts to State aid it has to be notified to and approved by the Commission, unless it falls within the ambit of an exemption regulation. An example of such a regulation is the Commission's General Block Exemption Regulation. The Commission can deem State aid compatible with the internal market, in which case the public investment can be carried out by the Member State after approval of the Commission. The Commission can also declare the State measure incompatible with the internal market in which case it may not be granted.

In comparison to the draft Notice that was published in 2014, the Commission added the following sectors:

  • chapter 7 contains specific clarification on State measures concerning infrastructure. For example,  funding of infrastructure will not qualify as State aid if the infrastructure does not directly compete with other infrastructure of the same kind. This is typically the case forgeneral infrastructure such as roads, railways, inland waterways and waste water networks. By contrast, specific infrastructure, for instance airports or ports, is often in competition with similar infrastructure;
  • paragraph 2.6 discusses culture and heritage conservation, including nature conservation. It clarifies that public investment in this area is not State aid if the cultural institution or activity is open to the general public and a monetary contribution from visitors only covers a fraction of the true costs. However, if the activities are predominantly financed by visitor or user fees or by other commercial means (e.g. commercial exhibitions) then the State aid rules apply. This is also the case if the institution carries out other activities which are of economic nature that benefit from the public investment.
  • paragraph 5.4.3 elaborates on when a tax ruling gives a company or a group of companies a selective advantage. The Commission has been investigating tax rulings from a State aid perspective since 2013. The Commission decided for instance that a tax ruling between Starbucks and the Netherlands should be considered as illegal State aid [see our November 2015 newsletter].

The Notice contains detailed and useful guidance for both States and companies.