amending Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid

EXPLANATORY MEMORANDUM

On 2 May 2018 the Commission presented its proposal for the next Multiannual Financial Framework (MFF) (COM(2018) 321 final). Building on that, the Commission is proposing a number of horizontal and sectorial EU funding programmes, responding to new challenges whilst continuing successful established activities.

This proposal for an amendment of the EU's State aid Enabling Regulation (Council Regulation (EU) 2015/1588) aims to improve the interplay of those EU funding programmes with State aid rules. It will enable the Commission to make targeted modifications of current State aid rules so that national money – including from the European Structural and Investment Fund managed at national level – and EU funds managed centrally by the Commission can be combined as seamlessly as possible, without distorting competition in the EU's Single market.

The purpose of EU State aid rules is to ensure that public spending does not distort competition between companies in the EU's Single Market, based on three basic principles:

–Common interest: Public spending should serve general policy objectives such as stimulating investment, education and training, regional cohesion, research and development, improving digital, transport and energy networks and combatting pollution and climate change.

–Additionality: Public spending should fill a gap, not crowd-out or merely replace private investment.

–Cost-effectiveness: Public spending should not exceed what is needed to reach the policy objective.

EU funds managed centrally by the Commission that are not subject to any discretion by Member States (such as COSME, Horizon Europe or the Digital Europe Programme), are not State aid within the meaning of Article 107(1) Treaty on the Functioning of the European Union (TFEU).

However, where Member States provide additional national funding to a project, a financial instrument supported by a centrally managed EU fund or contribute resources over which they retain a certain degree of discretion to a centrally managed fund, State aid rules apply to the part of the funding under discretion by a Member State.

Similarly, Member States have greater control over EU money under shared management, as is the case for the European Structural and Investment Funds (ESIF), including the European Regional Development Fund (ERDF) as well as the European Agricultural Fund for Rural Development (EAFRD). This type of funding therefore represents State resources within the meaning of Article 107(1) TFEU and is subject to State aid control.

In this context, the right articulation between EU funds rules and State aid rules is important to guarantee the best possible impact of the MFF and to avoid unnecessary complexities. This is especially important for situations in which a project is funded both by EU funds managed centrally by the Commission as well as by funds under the control of Member States. To simplify the treatment of such situations for Member States, financial intermediaries and project developers EU funds rules and State aid rules should be consistent. That is why the Commission’s EU funds proposals incorporate certain key principles of State aid control, such as the need that State interventions are additional to private funding rather than crowding out such funding, which should be further developed and guide implementation. And it is also why, at the same time, the Commission is proposing to further simplify the relevant State aid rules.

Commission Regulation (EU) 2017/1084 of 14 June 2017 (General Block Exemption Regulation – GBER) plays a key role in this context. It declares certain categories of aid compatible with the internal market and enables Member States to directly implement aid measures without prior approval by the European Commission.

There are three areas in which modifications of the GBER could improve the interplay of EU funding programmes with State aid rules.

National financing combined with InvestEU Fund’s instruments

The Commission presented today its proposal for the new InvestEU Fund, a single set of rules for all financial instruments and budgetary guarantees in the next EU budget. The proposal ensures that the Commission plays a strong role in the selection of supported projects and schemes in accordance with a common EU interest, and that public support will complement private investment, will be transparent and that its effects will be evaluated. The design of the InvestEU Fund already incorporates key State aid principles. Once these principles are translated into sufficiently clear rules on the operations of the Fund, only limited additional State aid requirements are needed to protect competition in the Single Market, when Member State money is combined with EU money within the InvestEU fund. On that basis, the relevant State aid requirements could be laid down in the GBER, to accompany an InvestEU Fund Regulation and the InvestEU Fund’s Investment Guidelines that contains the necessary safeguards. Such a modification of the GBER could exempt Member State money that is channelled through the InvestEU Fund or supported by the InvestEU Fund from prior notification to the Commission under State aid rules, thereby ensuring a streamlined and efficient implementation of the InvestEU Fund.

Research, development and innovation

The Commission also presented today its proposal for Horizon Europe. Under that proposal, certain research projects by small and medium-sized enterprises (SMEs) can be awarded the ‘Seal of Excellence’ label. This requires that they are evaluated by the Commission as being “excellent” and that they are eligible under the strict requirements under EU rules for EU funding, with the only reason they cannot actually be funded being budget constraints of the EU fund. Such projects could be allowed to secure their whole funding from Member States (including from structural funds) without requiring the Commission’s prior approval. The design of the Commission's Horizon Europe proposal as regards 'Seal of Excellence' projects and the relatively limited size of financial support remove any competition concerns.

Similarly, RDI projects evaluated and selected in line with the rules applicable to Horizon Europe and jointly funded by Horizon Europe and Member States (including from structural funds), where at least three Member States participate, could be allowed to be implemented without an additional State aid assessment for the Member States' part of the funding. This would be possible because the rules for projects to qualify for support from Horizon Europe – as designed in the Commission's proposal – remove any competition concerns, in particular by requiring projects to meet common EU interest objectives and to address well-defined market failures.

European Territorial Cooperation