New rules of procedure in EU State aid investigations will enter into force very soon. The European Commission will, for the first time, have the opportunity to request information from entities other than the EU Member State concerned, such as public and private companies that are not subject of a State aid investigation themselves. Companies will be obliged to respond to the information request and fines might be imposed for failing to respond on time or providing incorrect, misleading or incomplete information. Other major changes include a more restrictive approach in dealing with complaints and the European Commission now being able to conduct inquiries across various EU Member States into a particular sector.

On 23 July 2013, the Council of the European Union adopted changes to the Procedural Regulation, which specifies the rules of procedure in EU State aid investigations. All companies in the European Union—including those not benefitting from State aid themselves—should be aware of the changes, especially as the text will soon enter into force and fines will be imposed for non-compliance. The most significant policy changes are outlined below and relate to, amongst other things, the European Commission’s (Commission) information gathering powers and the formal requirements for complaints to the Commission.

Information Gathering in Individual EU State Aid Investigations

In the European Union, public authorities are prohibited from granting State aid to public or private companies, unless the aid has been approved by the Commission, which has exclusive competence to authorise it. The Commission can initiate an investigation following a notification by the EU Member State granting the aid, on its own initiative or following a complaint.

The revised Procedural Regulation significantly widens the Commission’s ability to gather information in EU State aid investigations. In the past, the EU Member State concerned was the only source of information, i.e., the Commission did not have the power to request information from any other entity than the relevant EU Member State, not even from the beneficiary of the aid. The Commission had to rely on the information provided by the EU Member State involved and any publicly available information.

The revised Procedural Regulation foresees for the first time the possibility for the Commission, after the opening of a formal investigation procedure, to request information from third parties such as other EU Member States, public and private companies and trade associations. The Commission will only require the approval by the EU Member State concerned for information requests directed at the aid beneficiary. Other than this restriction, the EU Member State has no way of objecting to the gathering of information from third parties.

Companies and trade associations will be obliged to respond to the Commission’s information requests comprehensively. The Commission may impose fines of up to 1 per cent of the total turnover in the preceding business year where companies or trade associations supply incorrect or misleading information. Failure to provide information can be fined with periodic penalty payments of up to 5 per cent of the company or association’s average daily turnover in the preceding business year for each working day of delay.

It can be expected that the consequences of the Commission’s new information gathering rights will be manifold. The Commission will no longer be dependent on the information provided by the EU Member State concerned for the assessment of the measure under investigation. At the same time, EU Member States “lose control” over State aid procedures insofar as they can no longer control the selection of information provided to the Commission. Public and private companies may be confronted with the administrative burden of responding to information requests or fines for failure to respond completely and correctly, even if they do not benefit from State aid themselves. In addition, it is important to note that these companies might be required to submit information that indicates they received illegal State aid themselves, which might potentially prompt the Commission to start a separate State aid investigation against the companies concerned.

The Commission can make use of its new information gathering powers as soon as the changes to the Procedural Regulation enter into force, which will be 20 days after their publication in the Official Journal of the European Union.

Sector Inquiries

The revised Procedural Regulation allows the Commission to conduct an inquiry across various EU Member States into a particular sector. Such sector inquiries, which are already possible under antitrust law, are supposed to assist the Commission in assessing individual cases and formulating sector-specific guidelines.

On one hand, the introduction of this tool will be appreciated by public authorities and public and private companies. Previously, in some sectors, the Commission had to open numerous investigation procedures to gather the information necessary to adopt sector-specific guidelines for, e.g., the aviation sector. This approach, which will no longer be necessary under the revised Procedural Regulation, created enormous difficulties for the companies concerned. On the other hand, the Commission now has the option to open formal investigation procedures on the basis of the information received in the sector inquiry. Furthermore, sector inquiries may burden companies that are not benefitting from State aid themselves.

More Restrictive Approach in Dealing with Complaints

The Commission is currently obliged to adopt a formal decision on all cases initiated by complaints received in any form whatsoever, even if the complaint is not well-founded from a factual or legal point of view. In order to reduce the number of unfounded State aid complaints, and thereby the administrative burden for the Commission, the revised Procedural Regulation introduces a compulsory complaints form.

Complainants are now required to submit a certain amount of mandatory information. Exactly what information is required and how concrete it needs to be will be revealed when the Commission publishes the complaint form. If complainants fail to provide the mandatory information, or the facts do not provide sufficient grounds to show the existence of unlawful aid, the Commission can more easily reject the complaint and will no longer be under an obligation to adopt a formal decision.

A Missed Opportunity

Despite the significant changes introduced by the revised Procedural Regulation, it may be seen as a missed opportunity to formalise the role of the aid beneficiary in EU State aid investigations. Only the EU Member State concerned continues to have procedural rights in State aid investigations. For aid beneficiaries, it can be highly unsatisfactory to be the object of the investigation without having any procedural rights, especially as the beneficiary will—in the case of a negative decision—be required to repay any illegal State aid.

Katharina Dietz