State aid procedures have often been criticised for their long duration and lack of predictability. Currently, 6 months are needed on average for the European Commission (the Commission) to adopt decisions based on a preliminary investigation of notified measures; and around 20 months if the Commission opens a formal investigation. Such time-frames and the lack of predictability regarding the likely timing of decisions are considered unsatisfactory for modern businesses. The Commission has therefore been committed to simplifying, streamlining and thereby accelerating the conduct of State aid procedures.
On 29 April 2009, the Commission published the State aid ‘Simplification Package’, which comprises the final versions of the ‘Best Practices Code’ and ‘Simplified Procedure Notice’. These measures are the result of a consultation process undertaken by the Commission in December 2008. Commissioner Neelie Kroes, commenting on the new rules, said these “will benefit business by facilitating faster State aid decisions notably through earlier and better cooperation between Member States and the Commission”.
This briefing reviews the main practical implications of the final version of each of these two measures in more detail.
The Best Practices Code
The normal State aid approval procedure should include the following stages:
The Commission encourages pre-notification contacts in every case, but strongly recommends this where the case presents particularly novel or specific features. These contacts should preferably be carried out by e-mail or conference call. All contacts at this stage are confidential and without prejudice to the process following notification.
The Commission is willing to provide informal guidance whenever this is requested by a Member State.
The Member State should provide all information the Commission will need to review the State aid proposal at the latest two weeks before the date of the pre-notification contact. The contacts themselves should last no longer than two months and be followed by a complete notification.
The Commission recommends involving the intended beneficiaries of the aid at the prenotification phase. This is a welcome acknowledgment as currently State aid recipients have no formal role in the proceedings, albeit they will need to be involved to ensure that the conduct of the proceedings is tailored to their business case.
At the end of the pre-notification phase, the Commission will try to provide an informal, nonbinding, preliminary assessment.
This phase is decisive in determining whether a case prima facie qualifies for the simplified procedure.
PRELIMINARY EXAMINATION OF NOTIFIED MEASURES
The Commission will send a comprehensive information request 4-6 weeks after notification. It may then raise subsequent questions based on points raised by the Member State’s answers. The Commission will only issue one reminder requesting that the information be provided. If
Member States do not respond within the deadline, the notification will be deemed withdrawn. Member States can request that an initial investigation be suspended and a new project prepared. If a complete and compatible project is not submitted at the end of the suspension, the notification will be deemed withdrawn or a formal investigation procedure will be opened. In this case, the Commission will resume the procedure from the point at which it was halted before deciding whether to open a formal investigation or deem the notification to be withdrawn.
FORMAL INVESTIGATION PROCEDURE
The Commission will endeavour to publish its decision to open an investigation within 2 months, subject to confidentiality concerns. Third parties will be given a strict one month period to comment.
Member States will also be required to submit information subject to strict deadlines and will only be given one extension, save in exceptional circumstances. If not respected, the Commission will take a decision based on the information already available to it.
The Commission will try to adopt a final decision within 18 months of opening the investigation and within 4 months of the submission of the last information provided by the Member State (or expiry of the last deadline).
Please see Figure 1: Best Practices Code, for an overview of the timing under the Best Practices Code.
The Simplified Procedure Notice
The Simplified Procedure aims at allowing the Commission to handle straightforward State aid cases within a timeframe of one month after notification. Since such a tight deadline implies active cooperation between the concerned Member State and the Commission, the conditions for applying this procedure have been laid down in a separate Notice.
The Simplified Procedure is based on a joint commitment of the Commission and the Member States. On the one hand, pre-notification contacts are to be an essential requirement to ensure the quality and completeness of notifications. The Commission will not apply the simplified procedure where the notification form is not complete or contains misleading information. On the other hand, the Commission will endeavour to adopt decisions on straightforward cases within a timeframe of one month upon receipt of a complete notification.
APPLICATION OF THE SIMPLIFIED PROCEDURE NOTICE
The Simplified Procedure will only be available for certain types of State aid measures. The question of whether a State aid measure can be dealt with using the Simplified Procedure Notice is decided at the pre-notification stage; therefore the Simplified Procedure Notice is only available before the aid scheme has been implemented.
The three types of measures concerned are:
- Measures falling within the “standard assessment” sections of existing frameworks or guidelines
Aid measures that fall within existing so-called “safe harbour” sections, but not covered by the General Block Exemption Regulation, will be subject to the simplified procedure provided all the conditions set out in the relevant sections are met.
- Measures corresponding to well-established Commission decision-making practice
If the proposed State aid measure presents the same features as a measure approved in at least three earlier Commission decisions, which in turn were adopted by the Commission within the last ten years, they can be dealt with under the Simplified Procedure Notice. This will be the case provided the measure meets all the conditions which governed the preceding decisions (for example, the aid’s objectives, set-up, beneficiaries). Such previous measures include aid measures in favour of the publishing industry, shipbuilding, etc.
- Measures which correspond to the extension of an existing state aid scheme
Extensions of existing aid schemes can be dealt with using the Simplified Procedure, in accordance with article 4 of Regulation 794/2004 which covers certain alterations to existing aid (increases in budget over 20%; prolongation by up to 6 years; tightening of the criteria for the application of a scheme; reduction of aid intensity). Member States are invited to use the notification form annexed to Regulation 794/2004
The Simplified Procedure will not normally be available where the proposed aid measure presents novel legal issues, serious third party concerns, special circumstances or if the notified aid could benefit an undertaking subject to an outstanding recovery order in relation to unlawful aid. In this case, the Commission will apply the normal procedure, subject to the Best Practices Code.
- Pre-notification Contacts
This is the stage when the Commission decides whether the measure can be treated under the Notice. Within 5 days of the last communication during the pre-notification stage, the Commission will indicate its decision to the Member State.
The Member State must notify the aid measure no later than two months after the Commission communication confirming the application of the Simplified Procedure Notice.
- Publication of a Summary
The Commission will post a summary of the notification in a standard format (set out in the Notice) on its website and an indication as to the application of the simplified procedure. Interested parties will have to submit observations within 10 working days.
- Short Form Decision
The Commission will have two options to choose from: no aid or no objections and will communicate its decision within 20 working days from the date of the notification.
Please see Figure 2: Simplified Procedure Notice, for an overview of the timing under the Simplified Procedure.
Although they share common objectives of increasing predictability, transparency and efficiency of the State aid procedures, the Best Practices Code and the Simplified Procedure are two different but complementary instruments. The Best Practices Code pursues improvements in different situations including: pre-notifications, treatment of notifications, formal investigation procedures, and treatment of complaints. The Simplified Procedure applies only to the notification of very specific and straightforward cases.
It is hoped that the duration of State aid investigations will be reduced if the Code is adhered to in practice and use is made of the Simplified Procedure. The Commission expects that the preliminary investigation phase could be reduced to one month under the Simplified Procedure, and to between two and four months for remaining cases. The entire investigation of a case, including both its preliminary and formal investigation, could be completed within eighteen months.
However, the actual impact of these measures will depend on cooperation between the Commission and Member States. The Best Practices Code and Simplified Procedure do not bind either the Commission or the Member States. The timeframes in the Code are purely indicative, and the arrangements foreseen for pre-notifications will apply on a voluntary basis. Similarly, for the Simplified Procedure, Member States are not obliged to apply for an accelerated treatment. If they decide to do so, swift assessment within shortened timeframes depends on optimal cooperation in the pre-notification stage.
The new procedures are not intended to apply to measures notified by Member States in the context of the current financial and economic crisis. Special procedures to treat these cases as a matter of urgency have been put in place specifically in these circumstances. The current crisis has put increasing demands on the State aid framework both in terms of the need for a pragmatic solution and also the need for a decision in ‘real time’ (sometimes less than 24 hours). The State aid framework has been a little over-legalistic on some occasions in the past and the Commission is now trying to be more sensitive and innovative in thinking through exactly what can and can’t be done within the law.
All in all, the existence of the new procedures at least offers some hope wider measures falling within their scope may still be approved in a more realistic timeframe. The great value of this is that it potentially lowers the bar in terms of just how State aid is to be controlled and offers a window, perhaps to imaginative public authorities or Member States, considering other schemes as well.