Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) on the application of Articles 92 and 93 of the EC Treaty to certain categories of horizontal state aid` (98/C 129/16)

On 7 October 1997 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 6 February 1998. The rapporteur was Mr van Dijk.

At its 352nd plenary session (meeting of 25 February 1998) the Economic and Social Committee adopted the following opinion with 70 votes in favour and four abstentions.

1. Introduction

1.1. The EC Treaty regards state aid as being generally incompatible with the common market. Articles 92 and 93 of the EC Treaty are devoted to this subject, and Article 94 specifies how decisions are to be reached on the measures to be taken.

1.2. The Treaty considers the following forms of aid to be compatible with the common 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.

1.3. In addition, the following forms of state aid may be considered to be compatible:

a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment;

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

c) aid to stimulate certain economic activities or economic areas, where such aid does not adversely affect the common interest;

d) aid to promote culture and heritage conservation;

e) other aid agreed by the Council.

1.4. Article 93 specifies how the Commission is to check compliance with Article 92.

1.5. The Commission provides surveys of aid granted by Member States. In the initial surveys the Commission noted a drop in state aid. However, this was no longer the case in the fifth survey. However, it must be pointed out in this connection, as the Committee has already done in its opinion on the twenty-sixth competition policy report, that the high level of state aid for industry is due to the additional aid given to industry in the former East Germany. Aid for industry has stabilized around the ECU 43 million mark or ECU 1 400 per person employed in this sector. The Commission also concludes that regions in the richer Member States receive more aid than the cohesion countries. This is a matter of serious concern to the Commission ().

1.6. The Commission expects that the supervision of state aid will have to be intensified in the years ahead. EMU, EU enlargement and rising unemployment strengthen the case for stricter controls. In order to give itself enough time and scope to act, the Commission intends to make its controls more effective.

1.7. Assessment criteria have already been determined for specific categories of state aid, such as horizontal aid, regional aid, export credit insurance and export credits.

1.7.1. The Commission has also issued guidelines for horizontal aid, such as aid for R& D, small and medium-sized enterprises, environmental protection and energy saving. Member States can act on the basis of these guidelines. Between 1992 and 1994, Member States awarded on average ECU 12,5 billion in horizontal aid. This is roughly 30 % of all state aid ().

1.7.2. The Commission considers that this aid accounts for only a limited share of all aid. It intends to simplify the monitoring procedures, releasing more funds for assessing bigger and more distorting cases. Therefore, the Commission is proposing to grant a block exemption for certain categories of aid, which will then no longer have to be notified to it in advance.

1.7.3. However, there are two restrictions:

a) aid may not exceed a certain threshold, otherwise it will still have to be notified to the Commission in advance;

b) the Commission will continue to play a supervisory role, even with regard to the application of block exemptions.

1.7.4. The proposal merely defines the parameters. The actual figures and the objectives will be laid down in separate decisions.

2. Gist of the Commission proposal

2.1. The Commission aims in the near future to focus its efforts on more rigorous scrutiny of major cases of state aid which may seriously jeopardize competition, by simplifying and clarifying the existing rules.

2.2. This should take the form of an innovation in the monitoring of state aid, with block exemptions being granted - for the first time since the entry into force in 1958 of the Treaty of Rome - to a range of 'horizontal` aid measures, including aid for SMEs, R& D, environmental protection, education and training, employment and export credits. Essentially, the Commission takes the view that, as these aid measures generally meet the criteria laid down at Community level, the Member States should, in principle, no longer be required formally to notify it of their existence.

2.3. A first initiative towards the introduction of block exemptions was taken in November 1996, when the Commission submitted its orientations on the use of Article 94 of the EC Treaty to the Industry Council. Article 94 stipulates that 'the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament, may make any appropriate regulations for the application of Articles 92 and 93 and may in particular determine the conditions in which Article 93(3) shall apply and the categories of aid exempted from this procedure`.

2.4. The introduction of block exemptions will lead to the creation of clear legislative texts with direct effect. This will increase transparency and predictability of state aid control. It will thus improve the possibility for additional state aid screening at national level by national administrations, national courts and national auditors. Moreover, citizens will be able to complain to national courts - just as they can at present - when they suspect that aid granted without notification does not fulfil the conditions for exemption laid down in the block exemption regulations.

2.5. The proposed regulation provides for the establishment of an advisory committee, to be consulted before the publication and adoption of a draft Commission regulation. It also provides for the consultation of interested parties. The Commission will inform the advisory committee of the views of interested parties when it consults this committee before adopting a regulation.

3. ESC comments

3.1. The ESC approves the Commission proposal. It thinks that the proposed approach complies with the subsidiary principle and would simplify the procedure. It also takes the view that implementation of the proposals would lead to a more efficient and transparent control of state aid than if individual notification in advance was to be required. The resources saved in this way could be better used to vet other forms of state aid.

3.1.1. The Committee believes that transparency and control are vital factors for a more efficient control of state aid. The criteria and thresholds of block exemption regulations should be defined as clearly as possible, in order to reduce the risk of abuse. Furthermore, according to the Committee, the mechanisms for control set out in Article 4 are adequate provided the Commission ensures an appropriate dissemination of information to interested third parties.

3.2. The ESC notes that the proposal is merely procedural. The Commission is simply proposing that another procedure be applied: it has not made any substantive changes.

3.3. Since the ESC represents socio-economic interests in the EU, it thinks that it, too, should be consulted on the evaluation report.

3.4. The ESC is concerned to ensure that:

- sufficient resources are deployed to ensure that the regulation can be effectively and equitably enforced in all Member States;

- an interim evaluation is undertaken within three years after the new system is introduced;

- information derived from the Member State reporting systems is effectively disseminated.

3.5. The ESC notes that the key to the evaluation of the proposals will lie in the answers to two questions:

- have the new exemption and de minimis systems operated in an effective, efficient and equitable manner?

- has the Commission, as a result of the new systems, been able to concentrate its state aid expertise and authority more effectively on the key cases where state aid produce significant distortions of the single market?

3.5.1. If the answer to these questions is in the negative, the ESC would query whether it is necessary to enact these measures.

Brussels, 25 February 1998.

The President of the Economic and Social Committee

Tom JENKINS

() Report from the Commission - Fifth Survey on state aid in the European Union in the manufacturing and certain other sectors (COM(97) 170 final, p. 40).

() Own calculation based on the statistical annex to the fifth Survey, pages 62-73.