The recent developments in State Aid Rules represent an important step in ensuring Ireland, and the EU in general, maintain the ability and flexibility to promote cohesion between regions and encourage sustainable, smart and inclusive growth. Marco Hickey discusses.

State Aid schemes in Ireland are operated by many Government departments and agencies, and they arise in the main from provisions in the National Development Plan, or from specific pieces of legislation.

Introduction

State Aids are generally contrary to the Treaty on the Functioning of the European Union unless there is prior EU Commission approval or an exemption which has been given by the Commission or the European Council. As part of the process of modernising and simplifying State Aid procedures, the Commission has declared that specific categories of State Aid are compatible with the Treaty if they fulfil certain conditions, thus exempting them from the requirement of prior notification and Commission approval. This means that Member States can grant aid that meets the conditions laid down without the formal notification procedure and only have to submit information sheets on the implemented aid.

The General Block Exemption Regulation (GBER)

On 21 May 2014, the Commission adopted a new State Aid GBER which sets out the categories of aid and the conditions under which aid measures can benefit from such an exemption. In particular, the criteria of the GBER determine the eligible beneficiaries, the maximum proportion of the eligible costs of a project that can benefit from State Aid and eligible expenses. Due to the simplification of the process, three-quarters of today's aid measures and about two-thirds of total aid amounts granted by Member States could be covered by the new GBER in the future.

Aid for SMEs

SMEs can benefit from any category of aid covered by the GBER. In addition, the section on aid to SMEs, designed specifically for SMEs, covers investment aid, aid for consultancy services and aid for participation in fairs. There is also a new category for aid for cooperation costs incurred by SMEs participating in European territorial cooperation projects. On the basis of these provisions, SMEs can benefit from public support of up to €7.5 million.

To allow Member States to boost access to finance for SMEs, the revised GBER now covers a much wider range of companies, irrespective of their geographical location, including not only SMEs from seed/start up and expansion stages, but also SMEs in later growth stages. To better align with market practices and adapt the funding to the needs of eligible SMEs, the limit of annual funding tranches of €1.5 million has been replaced by an overall limit of funding of €15 million per company. The range of possible instruments and funding architectures has also been widened to include equity, quasi-equity, loans and guarantees.

Aid for Research, Development and Innovation

The GBER acknowledges that targeted aid for research, development and innovation can play a significant role in economic growth. The notification thresholds have been doubled for research and development projects. The conditions for support for prototypes and pilot projects have been simplified and streamlined. New categories of exempted aid cover innovation clusters, research infrastructures and aid for process and innovation. Finally, the provisions on innovation for SMEs have been simplified.

Ireland’s Regional Aid Map

In other State Aid news, the Minister for Jobs, Enterprise and Innovation, Richard Bruton, published the new Regional Aid Map on 25 April 2014. This map provides details of areas of the country in which the State can, under EU rules, provide investment aid to businesses in order to support new investment and employment.

The current Regional Aid Guidelines, which govern the level of State Aid which may be granted by Government Departments and development Agencies as regional aid, expire at the end of June 2014.

Regional aid in Ireland is given in the form of capital grants for initial investment in fixed capital for new establishments or extensions and employment grants linked to initial investment. It is also provided under schemes for tourism grants, marine tourism, urban and rural renewal and other tax-based development schemes.

Ireland's Regional Aid Map for 2014-2020 will cover 51.28% of the country's population, a slight rise on the current coverage of 50%. The compromise agreed with the Commission will allow Member States to provide investment aid to large enterprises for ‘new economic activities and diversification of existing enterprises into new products or new process innovation’.

Conclusion

The updated Regional Aid Guidelines and the General Block Exemption Regulation represent an important step in ensuring Ireland, and the EU in general, maintain the ability and flexibility to promote cohesion between regions and encourage  sustainable, smart and inclusive growth.