Educational institutions need to be aware of the EU rules on State aid as they may be the recipients of it or the conduit for it. Institutions should therefore note that the European Commission has announced proposals to amend the Enabling Regulation adopted in 1998 and the Procedural Regulation adopted in 1999. These proposals form part of the EC’s State Aid Modernisation Initiative.

Changes to the Enabling Regulation

The changes will allow the EC to focus on larger, more complex, proposed State aid measures by adopting more block exemptions where the proposed State aid need not be notified to the EC for a specific clearance. The block exemptions will relate to instances where the proposed State  aid will have more  limited impact on the internal market and where the EC has experience of assessing State aid in relevant categories and can write compatibility rules.

The  following categories of block exemption are being considered:

  • culture and heritage conservation
  • making good damage caused by natural disasters
  • making good damage caused by certain adverse weather conditions in fisheries
  • forestry and the promotion of certain food products
  • conservation of marine biological resources
  • innovation
  • amateur sports
  • residents of remote regions for transport, when such aid has a social character
  • coordination of transport or reimbursement for the discharge of certain obligations inherent in the concept of a public service pursuant to Article 93 TFEU
  • certain broadband infrastructure

A number of these categories will be of particular interest to education institutions.

The EC aims for the amendments to the Enabling Regulation to be passed in 2013 and full consultation with Member States will then follow on the terms of block exemptions. This may take around a further year.  Block exemptions may not be brought forward for all categories in the first instance.

The proposed reforms are a welcome development and will give public bodies and State aid recipients greater clarity and transparency in terms of permitted State aid. The proposals will, however, give a clear indication in the relevant categories that if the proposed State aid is not expressly exempted under the block exemption  then any such support in these areas will need to be formally notified to and approved in advance of grant by the EC, unless it can be shown to involve no State aid, eg under the Market Economy Investor Principle.

In categories such as culture and heritage, innovation and amateur sports this may increase the risk of public support (outside of any new Block Exemptions) being required to be formally notified to the EC, whereas previously a risk assessed approach to the question of whether any State aid was present might  have been taken. Hence there will need to be a greater focus on ensuring that such support is State aid compliant.

Changes to the Procedural Regulation

These changes will support quicker decision making and ensure a focus on State aid that has the potential to have the most major impact on competition.  There are three main categories of changes proposed:

  1. Complaints handling.

To ensure complaints are focused, and to reduce the number of complaints that the EC is obliged to investigate, it is proposed that complainants will have to submit a certain amount of compulsory information to be listed in a complaint form and demonstrate how their interests would be affected by the granting of the State aid. If the information is not provided it will not be deemed a  complaint.

At the same time the Commission proposes to formalise the right of national courts to obtain information and ask for an opinion from the Commission on questions related to the application of  State aid rules. Along side this the EC  proposes to introduce the right for the Commission to make submissions to national courts in written or oral form where to do so  would be  in the public EU interest.

  1. Adoption of Market Information Tools

The EC proposes to expand the use of Market Information Tools from other competition control regimes to State aid. They will only be available when the EC has opened up the  formal investigation phase and will involve two types of requests:

  • simple requests for information, with no obligation to reply but financial sanctions if  incorrect or misleading information is given, and
  • a request following a  Commission decision, which will impose a deadline to reply. Again financial sanctions apply regarding  incorrect, incomplete, misleading or late replies and late replies.

Requests sent to other public bodies and other Member States and public authorities would not entail the imposition of fines.

  1. Sector Inquiries

The EC is also considering rules that will allow it to  conduct sector inquiries in two situations:

  • toobtain information for assessing cases where the EC has data linking the issue to a specific sector (eg the education sector) or aid instrument in several Member States;  and
  • where the EC consider that to obtain information on the application of commercial practices in a given sector will help the EC to  prepare informed guidelines for enforcing State aid in a way that reflects the markets.

Results of sector inquiries will be published and specific investigations may then follow. A sector inquiry will only be used however if other routes are not appropriate as they are time and money intensive.

These reforms will enable the EC to be more focused in relation to serious allegations of unlawful State aid and to carry out more in depth fact finding. It is likely that more proactive investigations will be seen, eg following a sector inquiry.  Where public support is widespread in a sector recipient entities should be aware of the higher risks of being asked to co-operate with the EC and the greater scrutiny of how public support is to be given. Likewise for the public bodies giving support the need to ensure they are compliant is rising with these proposed changes.