The new European Commission Notice on the notion of State aid

In accordance with the Treaty on the Functioning of the European Union, State aid is forbidden unless it can be authorized by the European Commission because it meets objectives of general interest such as protecting the environment or regional development, or correcting market failures such as the access of SMEs to financing.

Public intervention may be qualified as State aid when it meets all of the following four conditions:

• the intervention entails an abnormal economic advantage, in whatever form, in favour of a company exercising an economic activity;
• it has been decided by the State in a broad sense and is funded by public resources;
• it favours certain companies or activities to the detriment of others; and
• it distorts or threatens to distort competition and affects trade between Member States.

The European Commission and the Court of Justice of the EU have interpreted each of the four conditions detailed above.

The Commission has consolidated its practice and the European jurisprudence in its Notice on the notion of State aid, which was adopted on 19 May 2016. This Notice constitutes a useful pragmatic document for public authorities when they have to assess public measures that might constitute State aid. Interesting clarifications have been given on public investments for the construction or upgrade of infrastructure.

The Notice details the concept of non-economic infrastructures for which financing does not qualify as State aid (roads, railway infrastructures, inland waterways, water supply and waste water networks).

Economic infrastructures such as energy, broadband, airports and ports may, however, fall under State aid rules. If State aid is used to finance those infrastructures, it doesn’t necessarily imply that the aid is transferred to its operator and users. It would not be the case if they pay a market price. The market price will be determined in the context of the organization of a competitive, transparent, non-discriminatory and unconditional tender.

The Notice is also useful for informing public authorities on local infrastructures or local services that fall outside the scope of State aid rules.

Finally, the Commission reiterates that certain cultural activities that are not commercial but provided for free or against a minimum fee do not fall under State aid rules.

The text of the Notice is available at: http://ec.europa.eu/competition/state_aid/modernisation/notice_of_aid_en.pdf