# EUR-Lex - 52011SA0015 - EN

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# 52011SA0015

**Special Report No 15/2011 ‘Do the Commission’s procedures ensure effective management of State aid control?’ **

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ACRONYMS AND ABBREVIATIONS

BPC : Best Practices Code

CP : "Cas présumé" (either complaint or ex officio investigation)

Ex officio (Latin) : By virtue of office or position; "by right of office": in State aid matters, it is used to refer to own-initiative investigations, when Competition DG takes the initiative to examine and/or decide to launch an investigation of an alleged unlawful aid

(G)BER : (General) Block Exemption Regulation

GDP : gross domestic product

MAP : Mutually agreed planning

PETRA : Pilot Experiment Time Reporting Application

PN : Pre-Notification

R & D(& I) : Research, Development (and Innovation)

REQ : Request for information

SAAP : State Aid Action Plan

SANI : State Aid Notification Interactive (software used to notify State aid)

SME : small and medium enterprises

SP : Simplified Procedure

TEC : Treaty establishing the European Community

TFEU : Treaty on the Functioning of the European Union

EXECUTIVE SUMMARY

I. EU Member States are required to notify all planned State aid measures to the Commission and to obtain the Commission’s approval before implementing these measures. State aid control in all sectors except agriculture and fisheries falls under the responsibility of the European Commission’s DG for Competition.

II. The Court considered whether the Commission’s procedures ensure effective management of State aid control, assessing in particular whether:

(i) the system of notifications, complaints and ex officio enquiries ensure that the Commission handles all relevant State aid cases;

(ii) the Commission has adequate management structures and procedures in place for effective handling of the State aid cases within the deadlines;

(iii) the Commission monitors the impact of its State aid control.

III. The Court’s findings relate to an audit made in the Commission and in eight Member States selected for the audit. The Court found that:

- the Commission has made efforts to ensure that all relevant State aid cases are handled but its systems do not guarantee that all aid is captured;

- the procedures for notified State aid take a long time;

- complaints continue to take a long time to resolve and the procedure is not transparent;

- the Commission reacted promptly to the financial crisis;

- the Commission does not assess the ex post impact of its State aid control in a comprehensive way.

IV. On the basis of these observations, the Court recommends the Commission:

- to review the allocation of resources devoted to State aid control, in order to be more proactive in raising Member States’ awareness of State aid rules, to step up its monitoring activities and to organise its ex officio enquiries in a more systematic and targeted way to detect illegal aid;

- to increase the transparency of its case-handling procedures, by more regularly informing the stakeholders of the progress of the case and opening formal investigation procedures more quickly;

- to shorten the duration of the procedures, e.g. by limiting the number of Requests for Information to Member States and dealing swiftly with unfounded complaints;

- to implement an enhanced system of time recording and management reporting to optimise the allocation of resources;

- to regularly assess the ex post impact of State aid control on companies, markets and the overall economy.

INTRODUCTION

1. The European Commission has overall responsibility to ensure effective State aid control. Competition DG has the lead responsibility for the management of EU competition policy. Agriculture and Rural Development DG and Maritime Affairs and Fisheries DG are responsible for State aid control in the areas of agriculture and fisheries. Competition DG is responsible for State aid control in all other economic sectors.

2. The legal basis for the Commission’s State aid control is given in Articles 107 to 108 TFEU (see paragraphs 3 and 8 and Annex). A Council regulation (the Procedural Regulation [1]) and a Commission regulation (the Implementing Regulation [2]) set out in detail how the Commission carries out its responsibilities. The Commission issues communications and guidelines which are intended to give further explanations of how the rules apply in practice.

3. Article 107(1) TFEU defines State aid as "any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States". Four cumulative criteria need to be met for an aid measure to constitute State aid:

involve a transfer of State resources;

entail an economic advantage for undertakings;

distort or threaten to distort competition by selectively favouring certain beneficiaries; and

have the potential to produce an effect on intra-Union trade.

Therefore, subsidies granted to individuals or general measures open to all enterprises do not generally constitute State aid. The aim of the Commission’s rules is to ensure that State aid granted by Member States is compatible with the internal market.

4. State aid is provided in different ways. The most common forms are grants and tax exemptions. Other instruments are soft loans, guarantees, tax deferrals and equity participation. State aid can be granted by national/federal, regional or local government, as well as government-controlled entities.

5. The Lisbon European Council in March 2000 set the objective of "less and better targeted State aid". State aid [3] to the industry and services sector (excluding railways, other transport, agriculture and fisheries) fluctuated around 0,5 % of EU-27 GDP until the outbreak of the financial crisis in the second half of 2008, but rose to 3,5 % of GDP or 410 billion euro in 2009, which is the highest level since the Commission started its State aid surveys in 1990 (see Figure 1). State aid granted to the financial sector in the context of the financial crisis represented 351,7 billion euro in 2009 or 2,98 % of EU-27 GDP, and is therefore responsible for most of the increase in State aid in 2008–09 [4].

FIGURE 1

STATE AID TO INDUSTRY AND SERVICES IN THE EU (AS % OF EU-27 GDP)

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Source: European Commission.

6. In 2005, the Commission presented a State Aid Action Plan (SAAP) [5] to make State aid rules better contribute to sustainable growth, competitiveness, social and regional cohesion and environmental protection. The SAAP was based on the following principles: less and better targeted aid; a refined economic approach; more effective procedures, better enforcement, higher predictability and enhanced transparency; and a shared responsibility between the Commission and Member States. The SAAP was gradually implemented between 2005 and 2009.

7. The SAAP in particular highlighted the need for better targeted enforcement and monitoring as regards State aid granted by Member States and stressed that private litigation before national courts could contribute to this aim by ensuring increased discipline in the field of State aid. In April 2009, the Commission issued a new Notice on State aid Enforcement by National Courts giving detailed guidance and raising awareness of its possible use as an alternative and a complement to enforcement through the European Commission. However, recourse to Court proceedings at national level is still not widespread [6].

8. Article 108 TFEU (see Annex) requires EU Member States to notify all planned State aid measures to the Commission and to obtain the Commission’s approval before implementing these measures (except for those measures that the Commission has exempted from notification) (see paragraphs 19 to 25). The Commission is the only authority which can declare a State aid measure compatible with the Treaty and has large discretionary powers in that respect.

9. The Commission can either decide that the measure does not constitute aid, decide to approve or launch a formal investigation. All decisions must be adopted within two months following the receipt of a complete notification [7]. Competitors or other interested parties who believe that a certain measure constitutes State aid can complain to the Commission. The Commission can also take the initiative to launch an investigation (ex officio) into certain alleged State aid measures.

10. Notifications and complaints are examined in two phases (see Figures 2 and 3). The first phase consists of a preliminary investigation to determine if the notified measure constitutes State aid, and if so, if it is compatible State aid [8]. Where the Commission, after a preliminary investigation, finds that doubts are raised as to the compatibility with the internal market, it shall decide to open a formal investigation procedure. During the entire procedure, the notifying Member State has the possibility to modify the notified measure(s) in order to make it compatible.

11. While the procedure during the first phase is essentially between the Commission and the Member State the second phase is more transparent, as the opening decision is published and all interested parties (including the aid beneficiaries and competitors) have the right to submit comments.

FIGURE 2

SIMPLIFIED OVERVIEW OF THE PROCEDURE FOR NOTIFIED AID

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FIGURE 3

SIMPLIFIED OVERVIEW OF A COMPLAINT PROCEDURE

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AUDIT SCOPE AND APPROACH

12. The overall objective was to assess whether the Commission’s procedures ensure effective management of State aid control. The main audit question was broken down into the following three sub-questions:

(a) Does the system of notifications, complaints and ex officio enquiries ensure that the Commission handles all relevant State aid cases?

(b) Does the Commission have adequate management structures and procedures in place for effective handling of the State aid cases within the deadlines?

(c) Does the Commission monitor the impact of its State aid control?

13. The audit focused on the organisation and the decision-making and monitoring processes of the Commission during the period 2008–10, but did not assess the validity of the decisions taken by the Commission. The audit scope covered the areas of State aid control for which Competition DG is responsible. These areas represented 96 % of all State aid granted in 2009 (excluding railways) [9] due to the specific large volume of aid granted to the financial sector.

14. The audit work at Commission level included:

the examination of a sample of 50 (pre-)notifications, 30 complaints, 40 monitoring cases and 10 recovery cases;

interviews with case handlers and case managers of 10 different units of Competition DG, with key staff of Competition DG’s horizontal units, as well as with the Commission’s Legal Service and the Secretariat-General;

review of key management documents;

analytical tests.

15. Although the Court has not audited the systems at Member State level, it has carried out information visits to 44 public and private sector stakeholders in eight Member States [10]. The opinions of these stakeholders were only used as an additional source of information if they were shared by a large number of them.

OBSERVATIONS

IDENTIFYING RELEVANT STATE AID CASES

16. The Treaty obliges Member States to notify all planned State aid measures to the Commission. The Court examined whether the current system of notifications, complaints and ex officio inquiries gives sufficient assurance that the Commission deals with all important State aid cases. Paragraphs 17 to 33 examine whether the Commission does enough to verify whether Member States fulfil their obligations under the State aid rules and to raise Member States’ awareness of their obligation to notify state aid.

INSUFFICIENT COMMISSION CHECKS TO ENSURE MEMBER STATES ARE COMPLYING WITH THEIR OBLIGATION TO NOTIFY STATE AID

THE COMMISSION HAS NOT MADE FULL USE OF PUBLICLY AVAILABLE INFORMATION

17. The Commission does not have a specific legal basis to require Member States to provide it with information to identify the main aid-granting authorities, the internal organisation at Member State level or the applicable notification and control procedures in Member States. Neither does it have a specific legal basis to make any sector or Member State enquiries to identify potentially unlawful State aid. However, the Commission has not made full use of the information that is publicly available with a view to assessing the risk of non-notification of aid. It therefore has not identified categories of aid measures for which the risk of non-notification is particularly high either because of the inherent risk of the measures or weaknesses in the control systems put in place by the Member State.

18. The risk of non-notification is particularly high for rescue and restructuring aid, tax measures and the sale of land below market price, which has led to several complaints. The risk is also higher for aid granted by regional and local government bodies, which only occasionally grant State aid and therefore have a limited knowledge of State aid rules.

MONITORING OF BLOCK-EXEMPTED MEASURES IS LIMITED

19. In 1998 the Council enabled the Commission to adopt so-called Block Exemption Regulations (BERs) for State aid [11]. With these regulations, the Commission can declare specific categories of State aid compatible with the Treaty if they fulfil certain conditions, thus exempting them from the requirement of prior notification and Commission approval.

20. The Commission has introduced block exemptions in several areas, including State aid for training, employment, R & D and environmental protection. In 2008 these block exemptions were grouped in one General Block Exemption Regulation (GBER) [12]. In line with the basic principles set out in the State aid Action Programme (SAAP) (see paragraph 6), the GBER significantly increased the scope of the BERs, both in terms of the types of aid and in terms of the maximum amounts involved. Since 2007, the number of block-exempted measures exceeds the number of notifications (see Figure 4).

FIGURE 4

THE TREND IN THE NUMBER OF NOTIFICATION AND BLOCK-EXEMPTION MEASURES

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Source: European Commission.

21. The Commission has recognised the increasing importance of ex post monitoring, as more and more measures are exempted from ex ante notification [13]. However, its monitoring activity is limited to a yearly desk review of 15 approved aid schemes plus 15 block-exempted measures, selected judgmentally. This can only give an impression of the respect of the conditions set by the GBER and by the Commission decisions approving aid schemes [14].

22. The Commission’s 2008 monitoring exercise found significant problems in 3 of the 30 cases examined. Furthermore the usefulness of this exercise was limited because the Commission was unable to check the individual grants under some of the selected schemes as no aid had yet been granted. It also had difficulties in obtaining the requested information from the Member States.

THE COMMISSION DOES NOT MONITOR WHETHER THE CEILING FOR DE MINIMIS AID IS COMPLIED WITH

23. The de minimis regulation [15] has introduced a ceiling of 200000 euro below which it is considered that aid does not affect trade between Member States or does not distort competition and is therefore not considered to constitute State aid. The Member States have welcomed and gradually increased the use of the de minimis aid rules, which allow aid measures to be implemented more quickly.

24. Member States, when granting de minimis aid, should inform the enterprise concerned of the de minimis character of the aid, request full information from the enterprise about other de minimis aid received during the last three years and carefully check that the ceiling will not be exceeded. Respect of the ceiling may also be ensured by means of a central register, but very few Member States have one.

25. Although Member States are required to record and compile all the information regarding the application of the de minimis Regulation and to provide this information to the Commission on written request, in practice the Commission does not monitor the respect of the conditions for granting de minimis aid. Several aid-grantors declared that the respect of the ceiling of de minimis aid is very difficult to check and that they have no clear idea if the ceiling is generally respected or not.

THE COMMISSION DOES NOT SYSTEMATICALLY TRY TO DETECT UNNOTIFIED AID MEASURES

26. The detection of State aid measures that should have been notified by Member States but were not, is mainly based on complaints and ex officio enquiries (see paragraph 9). The Commission only recently started to record ex officio cases separately from complaints. The number of ex officio cases (35 in 2009 and 18 in 2010) is much smaller than the number of complaints (around 400 in 2009).

27. Although some potential new State aid cases are picked up through a review of the press, resulting in ex officio cases, this has not become standard practice. Indeed, the Commission’s limited monitoring of aid schemes and block exemption measures (see paragraph 19 to 22) constitutes the only systematic ex officio activity currently being undertaken in the State aid area. The Commission itself has recognised that relying on complaints and litigation at national level is insufficient to ensure that Member States fully respect their obligation to notify State aid, and that any further steps to reduce the number of notifications should be compensated by other control mechanisms.

28. The complexity of the concept of State aid makes it difficult for Member States to decide whether a measure constitutes State aid and needs to be notified to the Commission. Identifying if certain tax measures are State aid or not is particularly difficult. This explains why about 5 % of the notifications are made for reasons of legal certainty only. [16] As the Court of Justice of the European Union interprets the concept of State aid in a wide way, the Commission considers it has little margin to decide that a measure does not constitute State aid.

29. If the Commission decides following a complaint or an ex officio enquiry, that the measure constitutes compatible aid, the absence of notification (or late notification) has no consequences for the Member State or for the beneficiaries. If the Commission decides that incompatible aid has been granted, the beneficiaries have to reimburse the aid with interest, as if they had received a loan (see paragraph 68).

30. The Commission does not check if the aid measures for which the notification was withdrawn, but which seemed prima facie to constitute State aid, were abandoned or implemented without Commission approval. In the latter case the measure would constitute unlawful State aid, for which the Commission could open an ex officio case. Likewise for notified aid measures for which the Commission issued a negative decision.

THE COMMISSION IS NOT PROACTIVE ENOUGH IN RAISING MEMBER STATES’ AWARENESS OF THEIR OBLIGATIONS TO NOTIFY STATE AID

THE NETWORK OF COUNTRY CONTACT POINTS CREATED BY THE COMMISSION MET WITH LITTLE SUCCESS

31. In 2006 Competition DG decided to create country contact points in the Commission. These officials (one for each country) are the first "entry point" into Competition DG. Their task is limited to providing informal, non-binding practical guidance to Member States outside the context of pending cases. However, most Member States’ aid-granting authorities have never contacted their country contact point, either because they were not aware of their existence or because they did not feel the need.

MOST STAKEHOLDERS WOULD WELCOME A MORE PROACTIVE ROLE OF THE COMMISSION

32. Stakeholders in seven of the eight Member States visited stated that they would welcome a more proactive role of the Commission in one or more of the following areas, which warrant further consideration by the Commission:

Awareness-raising among potential aid-grantors about the notification duty.

The promotion of best practices about the design of effective aid measures that are compliant with EU competition rules.

More guidance about exactly which information needs to be provided for different types of notification in order to allow the Commission to conclude that the notification is complete. The standardisation of the notification form in the electronic SANI system has only partly solved this problem.

The publication of a separate, regularly updated frequently asked questions (FAQ) section on the competition website of the European Commission.

A helpdesk function to provide information about the interpretation of guidelines.

ACCORDING TO SOME STAKEHOLDERS, THE COMMISSION’S GUIDELINES ARE TOO COMPLICATED

33. The Commission guidelines are generally welcomed by the stakeholders. Whilst these guidelines have increased the predictability of the Commission’s State aid decisions, some stakeholders consider them too complicated, insufficiently clear and leaving too much room for interpretation, causing legal uncertainty.

CASE HANDLING

34. The Procedural Regulation, the Best Practice Code (see Box 1) and Competition DG’s internal Manual of Procedures set the rules governing the handling of notifications, complaints and recovery cases. The Court examined whether the Commission has adequate management structures and procedures for effective handling of the State aid cases within the deadlines.

BOX 1

KEY FEATURES OF THE BEST PRACTICE CODE ADOPTED IN 2009

In cases which are particularly novel, technically complex, sensitive, or urgent, the Commission will offer mutually agreed planning to the notifying Member State.

The Commission will endeavour to group requests for information during the preliminary examination phase. In principle, there will therefore only be one comprehensive information request, normally to be sent within 4–6 weeks after the date of notification.

Publication of the decision to open the formal investigation procedure within two months.

Stricter enforcement of the time limits given to Member States and to interested parties to submit comments.

The Commission will use its best endeavours to investigate a complaint within an indicative time frame of 12 months from its receipt.

Member States and the complainants will systematically be kept informed of the closure or other processing of a complaint.

THE COMMISSION IS HAMPERED BY A LACK OF RELIABLE MANAGEMENT INFORMATION AND ORGANISATIONAL PROBLEMS

COMPETITION DG’S STATE AID PROCEDURES ARE GENERALLY CLEAR AND WELL RESPECTED

35. The Manual of Procedures is the main reference document on case-handling procedures and is available on Competition DG’s intranet. It is regularly updated and staff are informed about the updates by e-mails. It covers most of the main activities, providing clear guidance as well as standard templates. The manual is generally well respected by the case handlers, with few exceptions concerning the respect of procedural deadlines (see paragraph 48) and the uploading of documents in ISIS (see paragraph 41).

THE NUMBER, COMPLEXITY AND PRIORITISATION OF CASES POSE PROBLEMS

36. State aid cases require careful and detailed analysis of aid proposals which can be complicated and of considerable economic significance. In some cases they can involve matters as complex as large aeronautics projects or bank restructuring. On average, each officer acts as case handler for seven cases and as case assistant for seven others. The resources available for other activities such as ex officio enquiries, monitoring activities, initiatives to increase best-practice sharing among the Member States, etc. are consequently limited.

37. One of the goals of a reorganisation of Competition DG in 2007 was to increase the DG’s ability to make more efficient use of its resources through a more flexible allocation of human resources between units and directorates, making it possible to include in the case team a case handler or case assistant from a different unit. However, except during the initial stages of the financial crisis, the time spent by case handlers on cases managed by other units has remained limited to a few percent of their total working time.

38. Since December 2009 new State aid cases are divided into two priority categories on the basis of two main criteria, precedent value and enforcement priority:

Priority 1 cases are those regarded as essential to ensure effective State aid control;

Priority 2 cases are all the cases which are not priority 1.

39. Although the priority 1 cases get more resources and more management attention, they do not necessarily get solved quickly as they are likely to be the most complex cases. As the case handlers work on several cases simultaneously and have to respect legal deadlines for all notifications, they sometimes have to put aside a priority 1 case to work on a lower priority notification instead. Case handlers consider that they need further guidance on allocating their working time between the priority 2 cases which represent the majority of the workload [17].

40. In order to ensure an optimal allocation of resources, the management needs accurate information on the resources available and the workload on hand throughout the organisation. In 2009 Competition DG has accordingly introduced a time reporting pilot project, called PETRA. This tool allows case handlers to book their working time to the different cases they work on. Participation is voluntary and partial, which means that at present, the reports based on PETRA are only indicative and Competition DG still has no tool showing the full picture.

IN GENERAL THE CASE-HANDLING IT-SYSTEMS MEET USER REQUIREMENTS

41. ISIS is used to manage and monitor all State aid cases. It is a useful tool for storing the information needed for the decision-making purposes, as well as for monitoring deadlines and planning the work. A number of reports can be produced from the system, for example a backlog of cases, statistics on duration, etc. However, there are some weaknesses:

Until November 2010, the investigation of one notification or complaint was often split into several procedures (see Figures 2 and 3), each with a different identification number, making it impossible to assess the total duration of handling a notification or a complaint.

The associated procedures were not always clearly indicated in ISIS making it time-consuming and difficult to get a clear overview of the complete case.

In addition, for 30 % of the cases reviewed by the Court, some documents, such as minutes of meetings, e-mails, records of phone calls or conference calls, were missing from ISIS and/or they had not been registered in a timely manner.

NEW PROCEDURES FOR MANAGING NOTIFICATIONS HAVE NOT RESOLVED THE PROBLEM OF TIMELINESS AND CUMBERSOMENESS

42. In 2009, the Commission issued a "Simplification Package", consisting of a Simplified Procedure [18] (see paragraphs 59 to 60) and Best Practice Code (BPC) (see paragraph 34 and Box 1) for the conduct of State aid control procedures. The main objective of the BPC was "to provide guidance on the day-to-day conduct of State aid procedures, thereby fostering a spirit of better cooperation and mutual understanding between the Commission, Member State authorities and the legal and business community."

43. As foreseen in the BPC, the Commission has also encouraged Member States to enter as early as possible into pre-notification contacts outside the Simplified Procedure. Pre-notification contacts aim to improve the quality of the notifications by clarifying the remaining questions or the information which the Commission needs to take a decision. Even if some aid grantors question its usefulness, the number of pre-notification cases has increased considerably in 2009–10 (see Figure 5).

THE PRELIMINARY INVESTIGATION OF MANY NOTIFICATIONS TAKES A LONG TIME

44. The information provided by the Member State in the notification should be sufficiently exhaustive to enable the Commission to decide without the need for further information. If the notification is incomplete, Competition DG sends a request for complementary information, asking the Member State to reply within 20 working days. The Member State has the right to ask for an extension of this time limit.

FIGURE 5

THE TREND IN THE NUMBER OF PRE-NOTIFICATIONS AND NOTIFICATIONS

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Source: European Commission.

45. The average time to take a decision increased between 2005 and 2008. [19] In 2007–08, for 40 % of the notifications it took six or more months to make a decision. This percentage dropped significantly in 2009, but this is partly explained by the financial crisis cases which have been handled particularly fast due to their urgent nature.

46. The duration of the preliminary investigation is mainly determined by three elements:

the number of requests for information (REQ) sent by the Commission to the Member State;

the time taken by the Member State to reply to the REQ;

the time taken by the Commission to either take a decision or send another REQ (maximum two months).

For one third of the notifications in the sample the Commission sends two or more requests for information

47. As stated in the Manual of Procedures, the case team should endeavour to group requests for information during the preliminary investigation phase. In principle, there should be only one comprehensive information request during the preliminary investigation phase, normally to be sent within 4–6 weeks after the date of notification. One further request can be made in exceptional, duly justified cases. However, in 28 % of the cases sampled where the Commission has formally asked for further information, three or more REQs were sent.

Requests for information are often sent close to the legal deadline

48. The REQs were sent by the Commission on average 50 days following the notification or the latest submission of information from the Member State. As many REQs need to be translated and case handlers are managing the deadlines of several cases simultaneously, some REQs are only sent just before the 2-month deadline expires. In 4 of the 43 notified cases reviewed, the legal two-month deadline for the Commission to send a request for information or to make a decision (either to approve the aid or to launch a formal investigation) has been exceeded.

Member States frequently do not reply within the deadline set by the Commission

49. The large volume and the complexity and detail of the questions sent by the Commission make it challenging for the Member State to reply within 20 working days. The administrative structure of a Member State can also cause further delays in replying to the Commission. For example, those with a decentralised administration have a reporting structure which involves several levels of authority through which the replies must be channelled.

50. Based on the sample of notifications reviewed by the Court, the average time taken for the Member State to provide the information was 33 working days. For 40 % of the notified cases in the sample, the Member States did not provide the requested information on time, neither within the 20 working days nor within the revised timetable agreed with the Commission.

THE FORMAL INVESTIGATION PROCEDURE IS ALSO LENGTHY

51. The Commission is obliged to open a formal investigation procedure whenever it has serious difficulties or doubts in determining the compatibility of the aid with the internal market and/or difficulties of a procedural nature in obtaining the necessary information. For more than half of the cases notified in 2005–08 it took more than six months to take a decision to open a formal procedure [20].

52. The Commission should as far as possible endeavour to adopt a decision for notified cases within 18 months from the opening of the formal investigation procedure [21]. The number of cases exceeding the recommended duration of 18 months is 38 % (9/24) for formal investigation procedures launched in 2005, 13 % (4/31) in 2006, 33 % (9/27) in 2007 and 18 % (3/17) in 2008. When also taking into account the preliminary investigation, the total duration between the notification and the Commission decision in these cases exceeded 2 years.

53. Stakeholders in all Member States visited said that the case handling procedures take too long. Most problematic are individual aid projects, especially those which the Commission submits to an in-depth economic assessment (see paragraphs 55 to 56). This can have negative effects for the Member States such as delaying national legislation or the risk of losing potential investors. There are often changes in the composition of the Commission case teams which may further delay procedures.

THE USE OF MUTUALLY AGREED PLANNING HAS BEEN LIMITED SO FAR

54. In September 2009, the Best Practices Code introduced Mutually Agreed Planning (MAP). The Member State and the Commission can mutually agree on the priority treatment of the case, on the information to be provided by the Member State, on the likely form and the duration of the assessment made by the Commission. In return for the Member State’s efforts in providing all the necessary information in a timely manner, the Commission will endeavour to respect the mutually agreed time frame when investigating the case. No indications of MAP were found for any of the cases reviewed during the audit.

THE NEW REFINED ECONOMIC APPROACH IS INSUFFICIENTLY CLEAR TO THE STAKEHOLDERS

55. The new architecture set out in the 2005 SAAP (see paragraph 6) is based on a "3-stream system": block exemption, standard assessment and detailed assessment. In principle, State aid measures notified to the Commission are to be scrutinised applying a standard assessment. Detailed assessment applies to a small number of specific cases (e.g. certain large investment projects).

56. Such detailed assessment may include a refined economic ana lysis [22], designed to provide the Commission with a robust ana lysis of the likely economic impact of a State aid. This focuses on a "balancing test". "The assessment of the compatibility of an aid is fundamentally about balancing its negative effects with its positive effects in terms of a contribution to the achievement of well-defined objectives of common interest." [23]

57. These new arrangements have, however, raised concerns among stakeholders, who have varied views on the effectiveness of the Commission’s refined economic approach. Some believed that it only prolongs the approval procedure and creates more uncertainty, whilst others found it a positive way to examine the real impact of the proposed measure and were disappointed that the Commission did not use it more.

58. The Commission carried out a public consultation on this issue in 2009 and published the results of this exercise in early 2011. However, the Commission has not yet responded to the concerns about the refined economic approach expressed in this consultation. Successful operation of the state aid regime requires a high degree of mutual understanding between the Commission and stakeholders in Member States.

THE SIMPLIFIED PROCEDURE INTRODUCED IN 2009 WAS LITTLE USED SO FAR

59. A Simplified Procedure (SP) was introduced "to examine within an accelerated timeframe certain types of State support measures which only require the Commission to verify that the measure is in accordance with existing rules and practices without exercising any discretionary powers". This may prove to be a useful initiative but it is difficult to judge its effectiveness as it has been little used so far.

60. In 2010, the SP was used for 21 cases. This is less than 4 % of the total number of notifications received. Its limited use can be ascribed to the following factors:

The Commission reserves the right to revert to the normal procedure if one of the safeguards/exclusions foreseen in the Notice on Simplified Procedure applies;

Member States are reluctant to use SP because, unlike for normal notifications, a summary of the notification is published on the Commission website, which gives the possibility for interested parties to submit observations;

The strict conditions for application of the SP;

The SP only applies to straightforward notified cases, which are usually approved within six months in the normal procedure anyway;

The SP must be preceded by compulsory pre-notification (PN) contacts.

COMPLAINTS CONTINUE TO TAKE A LONG TIME TO RESOLVE AND THE PROCEDURE IS NOT TRANSPARENT

61. Competitors or other interested parties who believe that a certain measure constitutes State aid can complain to the Commission. A complaint form is available on the European Commission’s website and can either be filled in online or sent by post, making it relatively easy to lodge a complaint. Several complaints fall outside the remit of Competition DG’s competence and are either closed after a limited examination of the complaint or transferred to another DG such as Taxation and Customs Union DG. Some complaints received and handled by Competition DG are not motivated by concerns about potential distortion of competition, but by e.g. environmental concerns.

62. Both the number of complaints received and the stock of pending complaints have risen steadily during the period 2006–10 (see Figure 6). Half were pending for more than one year [24], almost a quarter for more than two years and a few even for more than five years. The backlog is particularly important in the area of transport. These cases were taken over by Competition DG from Energy and Transport DG in early 2010 following the reorganisation of the Commissioners’ portfolios.

63. There are no legally binding deadlines for complaint handling whereas for notifications strict deadlines apply. Nevertheless, Article 10 of the Procedural Regulation obliges the Commission to examine the complaints "without delay".

64. Non-priority complaints are often dealt with at times when the responsible case handler does not have more urgent work. As a result, both the preliminary and the formal investigation can take a long time. Ten cases [25] out of the 30 complaints reviewed by the Court were not decided or closed within two years. In several cases no action was taken for more than a year. Half of all CP cases are not decided within one year [26] and the majority of formal investigation procedures also take more than one year. Complainants have the possibility to bring the case to the Court of Justice of the European Union for failure to act (Article 265 TFEU), but only in a few cases have they done so.

FIGURE 6

INCREASING NUMBER OF COMPLAINTS

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Source: European Commission.

65. In six cases in the Court’s sample of 30 complaints, the Commission did not forward the complaint within two months to the Member State with a request for information. In 11 cases, the Member State and/or the complainant were not informed about the progress of the case for more than one year. In six cases the Member State and/or the complainant was not informed about the closure of the case, causing legal uncertainty as Member States do not know if they are allowed to continue granting the aid or not.

66. The late opening or lack of opening of the formal investigation procedure also reduces the transparency of the procedure as third parties are only informed about the case and get the opportunity to comment after the publication in the Official Journal of the decision to open a formal investigation procedure (two to six months after the decision has been taken). Publication is often delayed by the requirement to translate the decision in all official EU languages and by the need to produce a non-confidential version of the decision.

67. The Commission tries to close unfounded complaint cases without an official Commission decision taken by the College. If the Commission is of the opinion that there are insufficient elements to support the existence of unlawful aid, a letter is sent to the complainant. The complainant may on that basis decide not to pursue his complaint, which will then be deemed to have been withdrawn. Only for a minority of complaints has such a letter been sent within 12 months after the complaint was lodged.

ENFORCEMENT OF RECOVERY DECISIONS

68. Recovery of unlawful State aid has not been conceived as penalty, but as a means to restore the situation previous to the granting of the illegal and unlawful aid’. [27] This objective is obtained once the aid (plus interest) is repaid by the recipient who enjoyed an advantage over its competitors on the market. The Member State must take all necessary measures to recover the aid from the beneficiary in accordance with its national procedures.

69. Effective enforcement of State aid recovery decisions is essential for the credibility of the Commission’s State aid policy, and it is considered as a priority under the State Aid Action Plan (SAAP) (see paragraph 6).

THE COMMISSION HAS HALVED THE NUMBER OF ACTIVE PENDING RECOVERY CASES SINCE 2005

70. Since 2003, recovery decisions have been followed up by a specialised team. The Commission managed to reduce the number of active pending recovery cases from a high of 94 at the end of 2005 to 41 at the end of 2010 (see Figure 7).

71. The number of pending recovery cases continued its downward trend in 2008–10, albeit at a slower pace. This is due to the "provisional closure" of 13 recovery cases [28].

FIGURE 7

THE TREND IN THE NUMBER OF PENDING RECOVERY CASES

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Source: European Commission.

ENFORCEMENT OF MANY RECOVERY DECISIONS TAKES TOO LONG

72. Few Commission recovery decisions are executed within the four months deadline set by the Commission. Most recovery decisions are referred to the Court of Justice either by the Member State and/or the beneficiary (action for annulment) and/or by the Commission (action for non-compliance with Commission decision). Since 2005, the Commission has filed a Court action against several Member States which failed to implement a recovery decision. Since 2009, the Commission has also launched six infringement procedures [29] against Member States who have not taken the necessary measures to comply with the judgment of the Court of Justice, asking it to impose a fine or penalty.

73. Some old recovery cases are pending for 10 to 20 years because of the lengthy procedures before both national courts (Member State versus beneficiary) and Court of Justice of the European Union (Commission versus Member State). The average age of the 41 pending recovery cases in July 2010 was almost five years. Fourteen of them are pending for 10 or more years. Several other provisionally closed cases are also more than 10 years old. The Commission’s enforcement objective, to close or bring to Court the recovery cases within two years, was met in 2008–10 in only about half of the cases. The trend has improved during this period (from 28 % in the first half of 2008 to 57 % in the second half of 2010).

74. Another reason for the lengthy recovery procedures is the difficulty to identify all beneficiaries of aid schemes and the exact amount of the aid to be recovered. The Commission is not legally required to fix the exact amount to be recovered, but usually specifies the method to be used by Member States to calculate the amounts to be recovered. Some Member States would welcome more help from the Commission in establishing the amount to be recovered.

PROMPT REACTION BY THE COMMISSION TO THE FINANCIAL CRISIS

THE APPROVAL PROCEDURE WAS RAPID

75. Urgent crisis cases have been handled much faster than non-crisis cases by relying on less formal correspondence with the Member States and more informal exchange of information by phone calls and e-mails. Many Member States also accepted to receive correspondence and decisions in English (language waiver) in order to speed up the procedure and beneficiaries were involved more closely in the procedure. Several cases were solved within days.

76. While the additional workload was initially absorbed through overtime, Competition DG managed to more than double the number of case handlers dealing with aid to the financial sector in 2009 by creating a Financial Crisis Task Force.

THE COMMISSION ISSUED SPECIFIC GUIDANCE FOR CRISIS-RELATED AID MEASURES

77. In response to the urgency of the situation, the Commission quickly adopted specific guidance on State aid to the financial sector [30], complementing the existing Rescue and Restructuring Guidelines [31]. This guidance was welcomed by Member States, but there was also some criticism concerning the room for interpretation of certain conditions.

78. The Commission’s rapid response and pragmatic attitude contributed to avoiding the bankruptcy of any major financial institution headquartered in the EU. The system of provisional approval of the aid for a period of six months, made it possible to give aid quickly and legally, retaining the possibility to examine the case in more detail later.

THE COMMISSION SOUGHT TO PRESERVE A LEVEL PLAYING FIELD

79. To prevent financial institutions from using the aid to strengthen their market position to the detriment of competitors, the Commission had to look into the conditions under which the aid was provided to the banks. In certain cases, this led to the divestment of certain activities and/or ending certain practices (for instance a price-leadership ban). Member States and aid beneficiaries are required to submit periodic (mostly quarterly or biannual) implementation reports.

80. Competition DG’s Financial Crisis Task Force closely follows up the decisions in the main rescue and restructuring cases of financial institutions. In some of these cases, slow or inadequate implementation of the conditions or the commitments given was noted, but these anomalies were brought to the attention of the Member State concerned and followed up by Competition DG’s services.

THE UPTAKE OF THE TEMPORARY FRAMEWORK INTENDED TO FACILITATE AID TO THE REAL ECONOMY WAS LIMITED

81. As part of the European Economic Recovery Plan, on 19 January 2009 the Commission approved a Temporary Framework (TF) [32] (see Box 2) to give Member States additional possibilities to address the effects of the credit squeeze on the real economy and to maintain continuity in the companies’ access to finance. With the exception of the possibility to grant limited amounts of up to 500000 euro as compatible aid [33], which was welcomed by most Member States, and aid in the form of guarantees, the uptake of the TF was limited.

82. Most possibilities provided by the TF were only used by a minority of Member States and moreover Member States granted in 2009 only 2,7 % of the approved volume of the TF schemes. One of the reasons was that the duration of the TF was too short (less than two years, until the end of December 2010) to allow Member States to elaborate, approve and implement aid measures under the TF.

83. On 1 December 2010, the Commission prolonged the TF until 31 December 2011, but with stricter conditions and a gradual phasing-out. Since 1 January 2011, every bank requiring State support (in the form of capital or impaired asset measures) has to submit a restructuring plan to the Commission.

BOX 2

THE TEMPORARY FRAMEWORK

As announced in its European Economic Recovery Plan, the Commission introduced a number of temporary measures to allow Member States to address the exceptional difficulties of companies to obtain finance. The TF allows Member States to grant, under certain conditions and until the end of 2010:

(a) Grants of limited amounts of up to 500000 euro per company over a period of three years;

(b) State guarantees for loans at a reduced premium;

(c) Subsidised loans, in particular for the production of green products;

(d) Risk capital aid to 2,5 million euro per SME per year.

MONITORING BY THE COMMISSION

84. The Commission publishes each year a State aid Scoreboard assessing the progress made towards reaching the Lisbon objectives of less and more targeted State aid and also assesses the impact of its State aid control on an ad hoc basis. Paragraphs 85 to 95 assess whether the data collected by the Commission is reliable and exhaustive, as well as whether the impact assessment carried out by the Commission is sufficient.

THE STATE AID DATA PROVIDED BY THE MEMBER STATES IS INCOMPLETE AND INSUFFICIENTLY RELIABLE

THERE ARE PROBLEMS IN OBTAINING STATE AID DATA FROM MEMBER STATES

85. In the first quarter of the year, the Commission sends a spreadsheet to the Member States, for completion with the figures of the actual State aid expenditure for each of the listed measures granted during the previous year. The data received from the Member States are of varying quality and the Scoreboard team (see paragraph 90) spends a lot of time checking the data and adding missing amounts. Most stakeholders consider the current Scoreboard procedure as very resource-intensive.

86. Several stakeholders reported problems in obtaining data from regional and local public authorities, as in most Member States the State aid coordination body in the national or federal Ministry does not have any control or supervisory authority over regional or local governments. As a result, the State aid data provided by the Member States and used by the Commission is likely to be incomplete, but the Commission’s State aid Scoreboard does not contain any reservations.

87. Many Member States are late in providing the data, but only one infringement procedure has been launched for not respecting the deadline so far [34]. One of the main problems is that the central State aid coordination unit (if any) does not have an efficient centralised system making it possible to directly produce the data requested by the Commission, but has to obtain it from a large number of aid-granting authorities.

SEVERAL TYPES OF AID ARE EXCLUDED FROM THE STATE AID STATISTICS

88. The Scoreboard covers State aid as defined under Article 107(1) TFEU granted by Member States during the reported year (see paragraphs 3 to 4). This definition is narrower than the definition used by most Member States in their national reports.

89. Aid to the railways sector is excluded, even though more and more national railway markets have been opened up to competition. As one of the most important aid-receiving sectors is excluded, the State aid data provided to and published by the Commission cannot be considered complete. The Autumn 2010 State Aid Scoreboard for the first time mentions that aid to railways is reported by Member States to amount to 33,1 billion euro or 0,3 % of EU-27 GDP in 2009, but it does not include aid to railways in its totals for lack of comparable data [35].

THE CALCULATION METHOD FOR SOME TYPES OF AID IS QUESTIONABLE

90. After having received the spreadsheets completed by the Member States, the Scoreboard team of Competition DG carries out a series of checks to detect potential anomalies, including a comparison of the data provided by the Member States with the approved budget and previous years’ amounts.

91. However, Member States encounter difficulties in providing the Commission with reliable budget estimates in the SANI notification. In many cases it is unknown how successful the measure will be. Some aid-grantors systematically input the expected expenditure for the first year only, instead of the budget for the entire period as requested by the Commission.

92. The method used by the Commission to calculate the value of some types of aid, in particular aid to the financial sector, is somewhat arbitrary. For tax measures, Member States often provide budget estimates as it is not feasible to calculate the real amount because of the complexity of the legal framework and the large number of beneficiaries.

SOME CHANGES IN THE DEFINITION OF STATE AID HAMPER THE COMPARABILITY OF THE STATISTICS OVER TIME

93. The comparability of the data between different years suffers from changes in the legislation and in the presentation of the figures. For example, the growing importance of and the increases in the ceiling [36] for de minimis aid, introduced a downward bias in the evolution of the State aid figures reported by Member States, making comparison between successive years more difficult.

THE NUMBER OF EX ANTE EVALUATIONS HAS BEEN LIMITED AND THE COMMISSION DOES NOT HAVE AN EX POST EVALUATION FUNCTION

94. The Commission’s guidelines require an ex ante impact assessment "for the most important Commission initiatives and those which will have the most far-reaching impacts". By the end of 2010, a number were in the pipeline and two had been finalised [37].

95. An Evaluation Unit was created as part of the 2007 reorganisation of Competition DG but dissolved one year later without having done any significant work in the domain of State aid. In 2010 Competition DG launched a project to develop an "ex post assessment" function to evaluate the actual impact of Competition DG’s existing policies in the relevant markets and to learn from past experiences. By the end of 2010 the ex post assessment function was not yet operational.

CONCLUSIONS AND RECOMMENDATIONS

THE COMMISSION HAS INSUFFICIENT ASSURANCE THAT IT DEALS WITH ALL RELEVANT STATE AID CASES

96. Most Member States’ systems do not provide sufficient assurance that the duty to notify State aid is respected. Although the Commission has taken some steps to enhance the cooperation with Member States regarding their notification obligation, these have not been sufficient. There are some occasional ex officio enquiries, but the Commission does not do enough to detect cases that should have been notified, mainly relying on complaints by third parties. Legally it cannot systematically review Member States’ procedures to ensure their reliability and its monitoring activities are limited. As a result, there is a risk of State aid going undetected.

RECOMMENDATION 1

The Commission should review the allocation and use of the resources devoted to its management of State aid, with a view to:

(a) adopting a more proactive stance in its relationship with Member States and making more efforts to raise awareness about State aid rules by spreading best practices and giving more practical guidance;

(b) stepping up its monitoring activities, both in terms of sample size and of scope;

(c) organising its ex officio enquiries in a more systematic and targeted way to detect illegal aid.

STATE AID PROCEDURES, IN PARTICULAR FOR COMPLAINTS, STILL TAKE A LONG TIME AND LACK TRANSPARENCY

97. Although many of the operational elements of the case handling are well managed and the financial crisis cases were handled quickly, the approval procedure for many notified State aid measures remains lengthy. Complaint handling is particularly problematic. The combination of an increasing number of complaints, lengthy procedures and the low priority given to many complaints, has led to a growing backlog.

98. The long duration of the Commission’s investigation procedures and the lack of information given to stakeholders about the progress during the course of the procedure lead to legal uncertainty.

RECOMMENDATION 2

(a) With a view to increasing transparency and speeding up the decision process, the Commission should make a binding commitment to close the preliminary investigation by either taking a decision or opening a formal investigation procedure within one year after having received the initial notification.

(b) The Commission should minimise the number of Requests for Information sent to Member States and limit them to those strictly needed for its decision-making.

(c) In order to provide more legal certainty to all stakeholders, the Commission should deal swiftly with unfounded complaints.

(d) The Commission should periodically inform the complainant, the Member State and the beneficiary about the progress (or lack of progress) of each case and about the outcome of the investigation.

(e) The Commission should consider whether there are any lessons it could learn from its handling of the financial crisis to improve its normal working methods.

(f) The Commission should implement an enhanced system of time recording and management reporting to effectively monitor the time spent on each of the cases and the workload of each case handler so as to optimise the use of resources.

THE COMMISSION DOES NOT ASSESS THE EX POST IMPACT OF ITS STATE AID CONTROL IN A COMPREHENSIVE WAY

99. The Commission’s attempts to monitor State aid control are hampered by unreliable data. Its main reporting tool, the bi-annual State aid Scoreboard, has several shortcomings: lack of completeness, insufficient reliability and comparability, as well as late availability of the data.

100. In addition, except for a few ad hoc studies, the Commission has not yet assessed the ex post impact of its State aid control activities on Europe’s economy.

RECOMMENDATION 3

(a) The Commission should improve the efficiency and reliability of its data gathering process.

(b) The Commission should regularly assess the ex post impact of State aid and of State aid control on companies, markets and the overall economy.

This Report was adopted by Chamber IV, headed by Mr Igors LUDBORŽS, Member of the Court of Auditors, in Luxembourg at its meeting of 25 October 2011.

For the Court of Auditors

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Vítor Manuel da Silva Caldeira

President

[1] Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (now Article 108 TFEU) (OJ L 83, 27.3.1999, p. 1).

[2] Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 (OJ L 140, 30.4.2004, p. 1).

[3] As defined by Article 107(1) TFEU; see also paragraphs 88 to 89 for the types of aid that are excluded from the Commission’s statistics.

[4] Source: COM(2010) 701 final of 1 December 2010 — State Aid Scoreboard Report on State aid granted by the EU Member States — Autumn 2010 Update.

[5] COM(2005) 107 final of 7 June 2005 — State aid action plan — Less and better targeted State aid: a roadmap for State aid reform 2005–09 (Consultation document).

[6] Several stakeholders expressed difficulties about the use of private enforcement of State aid rules as it is difficult for competitors to gather information about the alleged incompatible aid and it is more costly than a complaint to the Commission.

[7] See Article 4.5 of the Procedural Regulation. The notification will be considered as complete if, within two months from its receipt, or from the receipt of any additional information requested, the Commission does not request any further information. If the Commission asks for further information (by sending a request for information (REQ)), a new two-month period starts when the Member State submits the information requested.

[8] Article 4.2 to 4 of the Procedural Regulation.

[9] COM(2010) 701 final.

[10] Denmark, Germany, France, Italy, Cyprus, Hungary, Slovenia and the United Kingdom.

[11] Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (OJ L 142, 14.5.1998, p. 1).

[12] Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Article 87 and 88 of the Treaty (General block exemption Regulation) (OJ L 214, 9.8.2008, p. 3).

[13] See European Commission, Report on Competition Policy 2009 (http://ec.europa.eu/competition/publications/annual_report/2009/en.pdf).

[14] As a comparison, in 2009, almost 1000 block exemption measures were notified to the Commission ex post and more than 200 schemes were notified ex ante.

[15] Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Article 87 and 88 of the Treaty to de minimis aid (OJ L 379, 28.12.2006, p. 5).

[16] When the Member State believes that a planned measure does not constitute State aid, but is not fully sure and would like the Commission to decide on it.

[17] According to Competition DG indicators for State aid, less than 6 % of the new State aid cases in Q2 2010 are Priority 1 whereas 82 % are Priority 2.

[18] Notice from the Commission on a simplified procedure for treatment of certain types of State Aid (OJ C 136, 16.6.2009, p. 3).

[19] Source: Competition DG, State aid indicators, section IV.10.b. Competition DG’s timeliness indicators reports the duration between the opening and the closure of decided cases by year of opening and are therefore overly flattering for recent years as still undecided cases, which have by definition long durations, are excluded.

[20] Concerning the years 2008 and 2009 the figures are inconclusive as there are still several undecided cases.

[21] Article 7(6) of the Procedural Regulation

[22] The staff working paper "Common principles for an economic assessment of the compatibility of State aid under Article 87.3 EC-Treaty", 6 May 2009 explains the methodology used by the Commission in examining cases submitted to a refined economic analysis (http://ec.europa.eu/competition/state_aid/reform/reform.html).

[23] Paragraph 9 of the Common principles for an economic assessment of the compatibility of State aid under Article 87.3 EC-Treaty.

[24] Compared to 192 on 1.1.2008, 233 on 1.1.2009 and 270 on 30.10.2010, showing a continuous increase.

[25] This number can still increase as some cases are still pending.

[26] Source: Commission Indicators for State aid. These statistics actually underestimate the time needed to examine a complaint, as some CP cases are closed either by transferring the case to another DG or by opening a formal investigation procedure. In both scenarios the closure of the CP case is not the end of the procedure from the point of view of the complainant.

[27] COM(2010) 282 final of 3 June 2010 — Report from the Commission — Report on Competition Policy 2009, SEC(2010) 666.

[28] Since July 2008, the Commission provisionally closes ‘recovery cases for which the Member State has adopted all the necessary measures available in its national system, but recovery cannot be considered as fully executed. Provisionally closed recovery cases can be reopened, in particular when the judgment on which the provisional closure was based is overruled.

[29] Some of those procedures include more than one Court case.

[30] Communications from the Commission on:

- The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis (OJ C 270, 25.10.2008, p. 8);

- The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition (OJ C 10, 15.1.2009, p. 2);

- The treatment of impaired asset in the Community banking sector (OJ C 72, 26.3.2009, p. 1);

- The return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules (OJ C 195, 19.8.2009, p. 9).

[31] Communication from the Commission — Community Guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 244, 1.10.2004, p. 2).

[32] Temporary Community framework for State aid measures to support access to finance in the current financial and economic crisis (OJ C 83, 7.4.2009, p. 1); as further amended by (OJ C 261, 31.10.2009, p. 2), and (OJ C 303, 15.12.2009, p. 6).

[33] Which is not included in the statistics as de minimis aid is considered not to be aid according to the definition of Article 107(1) TFEU.

[34] Set by the Implementing Regulation No 794/2004.

[35] COM(2010) 701 final.

[36] Initially set at 100000 euro Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid (OJ L 10,13.1.2001, p. 30), increased to 200000 euro as from 2007 (by Commission Regulation (EC) No 1998/2006, see above). De minimis aid is considered not to constitute State aid and most Member States do not collect any data on it.

[37] Commission staff working document — Impact assessment accompanying the Communication from the Commission on the application of State aid rules to public service broadcasting, SEC(2009) 893 and Summary SEC(2009) 892.

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ANNEX

KEY RULES GOVERNING THE COMMISSION’S STATE AID CONTROL

ARTICLE 107 TFEU (EX ARTICLE 87 TEC)

1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

2. The following shall be compatible with the internal market:

(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;

(b) aid to make good the damage caused by natural disasters or exceptional occurrences;

(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.

3. The following may be considered to be compatible with the internal market:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;

(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

(d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;

(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

ARTICLE 108 TFEU (EX ARTICLE 88 TEC)

1. The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market.

2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market having regard to Article 107, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.

If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 258 and 259, refer the matter to the Court of Justice of the European Union direct.

On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the internal market, in derogation from the provisions of Article 107 or from the regulations provided for in Article 109, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known.

If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case.

3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article 107, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.

4. The Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to Article 109, determined may be exempted from the procedure provided for by paragraph 3 of this Article.

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