Under Portuguese law, financing is to be granted by the Portuguese authorities and devoted to the building of a specific unit, which will be constructed on land owned by a private operator on its campus. All amounts will fund construction-related expenses. The total construction costs amounted to EUR 3,046,976, out of which EUR 1,897,833, or approximately 62% of the total sum, will be provided by the European Regional Development Fund. The difference is borne by the institute that will run the unit.

The Portuguese authorities notified the financing to the Commission in order to ensure that this would not be considered to be a State aid under Article 107(1) of the Treaty.

In its decision, the Commission recalled that, in order to qualify as State aid, the following cumulative conditions have to be met: (i) the measure has to be granted out of State resources, (ii) it has to confer a selective advantage on undertakings, and (iii) it has to distort or threaten to distort competition, and to affect intra-EU trade.

Before analyzing the first two elements, the Commission examined “whether any aid to the Piaget Institute is liable to affect trade between Member States” [our emphasis]. Based on the limited number of beds (only 50), the low expected turnover of patients (since medium-term and long-term treatments are foreseen) and the very low coverage of such services in that region, the Commission considered that “the Unit’s limited capacity will almost certainly be entirely taken up with the provision of services to residents of the area”.

This aspect, along with the fact that the construction of that unit responds to a need identified by the Portuguese authorities and does not preclude the establishment of other facilities in the area, led the Commission to consider that the public funding of the construction of the unit is not liable to affect trade between Member States.

In this decision, the Commission took a mainly pragmatic view of the project. In 2002, the Commission had adopted a similar position concerning Irish tax allowances for the construction of hospitals. This recent decision is nevertheless of high interest as the Commission is more and more reluctant to admit the lack of effect on trade between Member States.