The European Commission has recently introduced a new simplified procedure for notifying state aid cases, together with a best practices code that sets out the Commission’s approach to dealing with investigations. State aid exists where an undertaking receives a selective benefit from state resources and where that benefit could potentially distort competition or have an effect on trade within the EU.
With certain exceptions contained in block exemption regulations, all state aid must be notified to the Commission for assessment to establish whether it is compatible with the EC Treaty. Aid cannot be granted unless it has been approved in this way. However, it currently takes on average six months for a state aid case to be approved, with the more complex cases requiring an in-depth investigation lasting on average 20 months.
Simplified procedure
The simplified procedure has been introduced by the Commission for certain types of notifications, with the intention of streamlining and speeding up the process. Broadly, the simplified procedure can be used for aid:
- that falls within the ‘standard assessment’ or ‘safe harbour’ sections of existing frameworks or guidelines, such as ad hoc regional aid;
- where there are at least three precedent Commission decisions from the past ten years; or
- where an existing aid scheme is being extended in budget or length.
Special circumstances, such as novel legal issues or substantial concerns raised by third parties, will make aid unsuitable for consideration under the new procedure and the Commission can revert to the normal procedure at any time.
Under the simplified procedure, the expected time frame for decisions is 20 working days from the date of notification. For complex cases, the notifying member state and the Commission will work together to agree an indicative, non-binding timeframe.
Under the new procedure, the notification will go through the following stages:
Pre-notification discussions
The Commission generally encourages pre-notification contact. However, under the simplified procedure, such contacts are mandatory. Exchanging information at this stage is compulsory as the simplified procedure relies on the member state giving sufficient information to the Commission to ensure that the notification is ‘right first time’.
Member states must submit a draft notification form and supporting information to the Commission. Discussions will be organised two weeks after the notification, with a focus on the key legal and economic issues, along with the scope of information to be submitted. It is intended that contacts will be primarily via phone calls and e-mails rather than face-to-face meetings. After these discussions, notifications have to be submitted to the Commission within two months.
Information requests
The Commission’s intention is that all its questions will have been covered during pre-notification discussions. Where additional information is required, the simplified procedure envisages that questions will be grouped together so that only one request is made. This contrasts with the current approach, where several information requests can be received. To avoid delays, the notification can be deemed as withdrawn if questions are not answered fully or if there is a delay.
Preliminary examination
One of the most controversial elements with member states is that a summary of the notification will be published on the Commission’s website. This is designed to increase transparency and allow interested parties to submit their comments within ten working days.
If the criteria for the simplified procedure are fulfilled, the Commission will publish a short-form decision. Alternatively, a formal investigation will be started with a decision being made within two to four months.
The simplified procedure has been modelled on that which has been in operation under the EC Merger Regulation.
Alongside the simplified procedure, the Commission has also adopted a best practices code. The code sets out the Commission’s intended approach to cases from start to finish. It incorporates guidelines on the pre-notification stage, mutually agreed planning of cases, the conduct of preliminary and full in-depth investigations into cases and the treatment of complaints. It is intended that the code will help to streamline and speed up cases that do not benefit from treatment under the simplified procedure.
These initiatives form part of the Commission’s State Aid Action Plan, a major process that has been in operation since 2005 with a view to achieving less and better-targeted state aid. The Commission’s aim is that state aid procedures will become more transparent, straightforward and streamlined.
Chris Bryant, senior associate, and Annabel Baxter, trainee solicitor, Berwin Leighton Paisner LLP.
