Proposal for a Council Regulation (EC) on the application of Article 92 and 93 of the EC Treaty to certain categories of horizontal state aid
Date: 1997-07-15
Institutions: European Commission
Subjects: State aid, advisory committee (EU), competition, control of State aid, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.07.1997 
COM(97)396  final 

97/ 0203 (CNS) 

Proposal for a 

COUNCIL REGULATION (EC) 

ON THE APPLICATION OF 

ARTICLE 92  AND 93  OF THE EC  TREATY TO CERTAIN CATEGORIES OF 
HORIZONTAL  STATE AID 

(presented by the Commission) 

COMMUNICATION  BY THE  COMMISSION 

Proposal  for  a Council  Regulation  on  the application  of 
Article  92  and  93  of the  EC Treaty  to certain  categories  of horizontal  state  aid 

1. 

STATE  AID  CONTROL  IN A  CHANGING  ENVIRONMENT 

The  Commission  is  facing  a  number  of  new  challenges  in  its  state  aid  control  policy  that 
require  changes  in  approach  and  method  in  order  to  create  a  more  efficient  state  aid 
control.  Globalisation  and  technological  development  already  call  for  continued  structural 
adjustment  in the  European  Union.  Additional  pressures  come  from  the  completion  of  the 
Single Market,  Economic  and  Monetary  Union,  enlargement  and  aid to  employment. 

The  Single  Market  has  led  to  an  increase  in  trade  between  Member  States.  The  exposure 
to  wider  competition  has  made  enterprises  increasingly  aware  of  the  distorting  effect  of 
state  aid  received  by  their  competitors.  The  completion  of  the  Single  Market  leaves  the 
granting  of  state  aid  as  one  of  the  few  remaining  tools  for  governments  which  wish  to 
protect  their  national  industries  from  cross-border  competition.  An  increasingly  effective 
and  strict  state  aid  control  is therefore  required  to  complement  the  fundamental  freedoms, 
in particular  the  free  movement  of goods,  the  freedom  to  provide  services  and  the  right  of 
establishment,  since  state  aid  can  be  used  to  replace  barriers  to  trade  that  have  been 
dismantled  in the  Single Market  integration  process. 

The Fifth  Survey  on  state  aid  in the Member  States  covering  the  period  1992-1994,  shows 
a tendency  towards  stability  in the global  volume  of aid  to  industry  with  an  annual  average 
of 43  billion  ECU.  This  is 4%  of the  value  added  in industry  or  more  than  1.400  ECU  per 
person  employed  in  that  sector.  This  stable,  but  high,  level  of  state  aid  is  a  preoccupying 
trend  which  risks  endangering  the  efficient  functioning  of  the  Single  Market.  Moreover, 
the  Fifth  Survey  shows  a  growing  disparity  in  the  level  of  aid  between  the  cohesion 
countries  and  the  richer  central  regions.  This  clearly  goes  against  the  objective  of 
economic  and  social  cohesion. 

In  its  state  aid  control  the  Commission  is  already  now  sensing  the  effects  of  the  budget 
discipline  of  the  Member  States  created  by  the  convergence  criteria  of  Economic  and 
Monetary  Union.  The  convergence  criteria  are  encouraging  Member  States  to  reduce  the 
volume  of  state  aid.  However,  in  some  cases,  it  may  tempt  them  to  have  recourse  to 
mechanisms  which  might  appear  to  be  budgetary  neutral  such  as  direct  transfers  of  funds 
between  enterprises  in the  form  of parafiscal  taxes,  purchase  obligations  at  imposed  prices 
and  the  provision  of  state  guarantees  for  companies'  borrowings.  These  mechanisms 
might  contain  State  aid  and  create  a  problem  of  transparency  rendering  state  aid  control 
more  difficult. 

Economic  and  Monetary  Union  will  lead  to  a  strengthened  integration  of  the  countries 
inside  the  Economic  and  Monetary  Union  and  to  increased  competition  due  to  the 
elimination  of  exchange  rate  uncertainties,  increased  transparency  and  lower  transaction 
costs.  This  levelling-out  of the  playing  field  is likely  to  render  companies  more  vulnerable, 
if  one  or  more  competitors  benefit  from  state  aid.  Increased  competition  and  improved 
competitiveness  inside  EMU  might  tempt  the  non-participating  Member  States  ('pre-ins') 
to  devalue their  currencies  in order  to  restore  or  even  improve  the  competitive  situation  of 
their  enterprises.  However,  Art.  109m  clearly  states  that  the  'pre-ins'  also  shall  treat  their 
exchange-rate  policy  as  a  matter  of  common  interest.  Furthermore,  the  danger  of  such 
competitive  devaluations  can  be  reduced  to  a  large  extent  by  the  establishment  of  a  new-
Exchange  Rate  Mechanism,  as  envisaged  by  the  European  Council  in  Dublin  on  13-14 

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December  1996, and by reinforced  convergence programmes1. If a substantial  realignment 
is decided  it  must  be justified  by the fundamentals.  Therefore,  state  aid that  counters  ihe 
effects  of such  realignments  is in no way justified  and  could  lead  to  a subsidies  race.  The 
reinforcement  of state aid policy and control is thus essential. 

The enlargement  of the  Union  with  new  Member  States will  also  increase  the  number  of 
state  aid  cases  to  be  dealt  with  by  the  Commission  and  further  enhance  the  need  for  an 
efficient  state aid control. 

The  recession  which  hit  the  European  economy  in  the  past  years  and  the  continuing 
increase  in  levels  of  unemployment  prompt  Member  States  to  use  state  aid  as  an 
instrument  to  combat  unemployment.  However,  such  aid  often  merely  shifts  the  problem 
to  another  factory,  another  sector,  another  area,  another  country.  In  this  situation,  the 
Commission  must  ensure  a  level  competitive  playing  field  throughout  Europe.  The 
absence  of effective  and  fair  competition  not  only  results  in a  loss  of  competitiveness  for 
all  Community  industry,  but  -  in  a  medium-  to  long-term  perspective  -  also  in  a  loss  of 
jobs throughout  the European  Union.  Therefore,  effective  state aid control  is increasingly 
important. 

2. 

ACTION  ENVISAGED  BY THE  COMMISSION 

In  reply  to  these  new  challenges,  the  Commission  is  determined  to  implement  a  more 
efficient  policy  of  state  aid  control.  Over  the  years  the  Commission  has  devoted  much 
effort  to  develop  an efficient,  coherent  and  more  transparent  state  aid  control  as  regards 
both  procedures  and  substance.  For  this  purpose  the  Commission  has  developed  and 
published  comprehensive  guidelines  and  communications  spelling  out  Commission 
policies. 

However,  the results of the Fifth  Survey suggest that the Commission  should  undertake a 
further  determined  effort  in order to  achieve a significant  reduction  of the  overall  level  of 
aid  disbursed  in  the  Member  States.  To  support  this  effort,  the  Commission  will 
implement a new orientation in its state aid control focused  around : 

-  concentration  of  the  control  on  the  "essentials"  by  simplifying  and  clarifying  existing 

rules, 

-  stricter control of the most important aid cases, 
- 

re-examination of the regional aid rules. 

While  the  re-examination  of  the  regional  aid  rules  is  already  taking  place  in  another 
context,  the  Commission  considers that  the use  of Article  94 to  adopt  group  exemptions 
would provide an efficient  tool to further  the first two of these aims. 

3. 

GROUP  EXEMPTIONS 

A  first  initiative  towards  the  introduction  of  group  exemptions  was  taken  in  November 
1996, when the Commission  submitted  its orientations2 on the use of Article 94 of the EC 

See  the  Commission's  communication  of  16.10.1996  "Reinforced  convergence  procedures  and  a  new  exchange  rate 
mechanism in stage three of EMU", COM(96)498. 

SEC(96)1752of2.10.1996 

Treaty  to  the  Industry  Council.  The  Council  encouraged  the  Commission  to  make 
proposals.  Article 94  provides.  "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". 

The  Commission  has  identified  certain  horizontal  aid,  regional  aid,  export  credit  insurance 
and  export  credits,  including  those  for  tied  aid  as  appropriate  areas  for  the  use  of  group 
exemptions.  Horizontal  aid  which  is  subject  to  Community  guidelines,  such  as  aid  to 
research  and  development,  small  and  medium-sized  enterprises,  environmental  protection 
and  energy  saving,  is usually granted  by Member  States  in full  accordance  with  the  criteria 
published  by  the  Commission.  Moreover,  the  Fifth  Survey  shows  that  this  aid  remains 
limited  in  volume.  A  simplification  of  surveillance  procedures  in  these  areas  can  thus  be 
envisaged.  It  would  allow  the  Commission  to  free  resources  for  the  assessment  of  the 
bigger  and  most  distorting  cases. 

The  Commission  has also  identified  certain  aid  within  particular  sectors  which  are  local  in 
scope  and  of  negligible  importance  as  appropriate  areas  for  the  use  of  group  exemptions. 
These  sectors will be dealt with  in a separate  proposal  from  the  Commission. 

3.1.  Efficiency  benefits  provided  for  by group  exemptions 

Group  exemptions would  allow the  Commission  to  declare  categories  of aid  compatible  with 
the  common  market  and  exempt  Member  States  from  the  obligation  to  notify.  This  would 
render  the  Commission's  state  aid  control  more  efficient  by  alleviating  the  Commission  from 
the task  of examining notifications  of both  aid  schemes  and  individual  aid  in a situation  where 
the  Commission  is receiving  a large  number  of  notified  plans  to  grant  or  alter  aid  that  are 
compatible with the common market because they fulfill  criteria for compatibility established by 
the Commission. 

The  adoption  of group  exemptions  alleviating  Member  States  from  the  notification  obligation 
in Article 93(3) of the EC Treaty in relation to such aid seems therefore justified. 

3.2. 

Increased  transparency  permitting decentralization  of state aid  control 

The  introduction  of  group  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  are  able 
to complain to national courts when they suspect that  aid granted  without  notification  does not 
fulfill  the conditions for exemption  laid down  in the group exemption  regulations. 

3.3.  The  Commission  as an  independent  arbiter 

The  Commission  has  long  experience  in  state  aid  control.  It  has  developed  a  consistent 
practice  in  respect  of  assessing  the  compatibility  of  aid  and  it  also  has  a  long-standing 
it  has  published.  The 
experience  of  Member  States  respecting  the  criteria  which 
Commission  has  now  reached  a  level  of  expertise  which  allows  it  to  draft  group 
exemptions  declaring  aid  compatible  without 
to  be  notified.  The 
Commission  will  remain  as  an  "independent  arbiter"  in the  control  of  state  aid,  as  it  is  the 
Commission  which  will  continue  to  set  the  precise  criteria  for  the  compatibility  of  the  aid 

the  aid  having 

with the common market. Given the special competence granted to the Commission by the 
Treaty  for  deciding  on  the  compatibility  of  state  aid  and  the  experience  it  acquired  in 
exercising this competence, this seems the most appropriate solution. 

3.4.  Control safeguards 

It is important  to  note that  such a simplification  would  not weaken  the control  on  state aid. 
Firstly, the Commission will set thresholds excluding aid exceeding certain amounts from the 
scope of application of the group exemptions. Member States would thus be required to notify 
large aid projects individually. Secondly, the Commission will institute a monitoring mechanism 
that  will  allow  it  to  have  full  knowledge  of  the  Member  States'  application  of  the  group 
exemptions. As Member States will be required to record  and store information  and as the 
Commission  can  ask  specific  questions  concerning  the  application  of  group  exemption 
regulations, it will be able to  continue to treat  effectively  complaints by competitors. The 
result  of the  introduction  of group  exemptions into the  state aid control  system would  be a 
system that: 

-  for  the  group  exempted  aid:  more  efficient  control  without  making  the  conditions  of 

compatibility less rigorous than at present, 

-  for other aid: a stricter and more efficient  control. 

3.5.  The maintenance of guidelines and  frameworks 

The  Commission  intends  to  maintain  the  existence  of  guidelines  and frameworks both  in 
respect of aid where group exemptions are not foreseen and, where appropriate, for aid which 
falls  within  areas  covered  by  the  enabling  Regulation,  but  which  will  not  be  exempt from 
notification  by a group  exemption.  This may for  example be the case, if the aid  exceeds the 
thresholds  set  in  the  group  exemptions  (Article  l(3)(a))  or  is  directly  excluded  from  the 
Regulation  (Article  l(3)(b)).  In  these  cases  the  Commission  has to  undertake  an  individual 
examination of such aid following  notification.  Frameworks and guidelines therefore  continue 
to  have  a  role  to  play  as  indicator  of  the  Commission's  position  towards  such  aid.  The 
Commission will see to it that such guidelines and frameworks are drafted  in a manner which 
will make them complementary to the Commission group exemption Regulations, in order to 
have a coherent set of rules. 

4. 

THE  SCOPE AND CONTENT  OF THE ENABLING  REGULATION 

The  Commission  is  proposing  the  adoption  of  a  Regulation  that  will  provide  the  legal 
basis  and  the  framework  for  the  adoption  of  individual  Commission  group  exemption 
Regulations.  The  proposal  will  not  affect  the  institutional  balance  established  by  the 
Treaty  in the field of state aid  and  hence the  competence  of the  Commission to  establish 
compatibility  of  state  aid  with  the  Common  Market.  The  proposal  will  add  a  new 
instrument  allowing the Commission to establish ex ante the compatibility of state aid that 
fulfil  the conditions that  it will have defined  in the exemption  regulations.  The  Regulation 
defines  the  categories  of  aid  for  which  the  Commission  is  empowered  to  adopt  group 
exemptions.  The Commission  is concentrating  its proposal  on those  categories  of aid  for 
which  there  exist  a  long-Standing  experience  and  a  consistent  practice  in  respect  of 
assessing the compatibility of the aid. 

There  will  continue  to  exist  an  obligation  to  notify  all  aid  falling  outside  the  scope  of 
application of the group exemptions. 

The  Regulation  defines  the  parameters  which  the  Commission  must  use  in  defining  an 
exempted  category  as  well  as  other  conditions  that  the  Commission  may  attach  to  the 
group exemption.  It also defines the procedures for the adoption  of group exemptions. 

As it appears from  the parameters listed below, the envisaged  group  exemptions  will have 
an approach  and content  along the lines of the existing practice. The Commission will use 
its considerable experience expressed  in the existing guidelines and  communications when 
drafting  the group exemptions and translate the existing rules and acquired experience into 
an appropriate legal form. 

4.1.  Categories  of aid 

4.1.1.  A id which is subject to guidelines and communications 

The  Regulation  proposes  to  cover  categories  of aid  for  which  the  Commission  has  a long 
standing  experience  in  assessing  the  compatibility  with  the  common  market  as expressed  in 
Commission guidelines and frameworks. Thus the Commission should be empowered to adopt 
Commission Regulations in respect of aid to: 

-  Small- and Medium-sized  Enterprises3, 
-  Research and Development4, 
-  environmental  protection5, 
-  employment and training6, 
-  aid  respecting  the  map  approved  by  the  Commission7  for  each  Member  State  to 

implement regional aid. 

4. L 2.  De minimis aid 

The  proposed  Regulation  provides  that  the  Commission  may  also  adopt  a  Regulation 
exempting aid below a certain threshold from the notification  obligation8. 

4.1.3.  Export aid and export credit 

The  proposed  Regulation  also  provides  for  Commission  Regulations  exempting  the 
following  categories from  the notification  obligation: 

-  export  credit  insurance  covering  non-marketable  risk  in  so  far  as  they  have  been 

harmonised by EC law9, 

See  as  an  example  lor  the  present  rules:  Community  guidelines  on  state  aid  for  small  and  medium  sized  enterprises. 
OJ No C 213 of  19 August  1992, p. 2, as amended in 1996, OJ No C 68 of 6 March  1996, p. 9. 

See  as  an  example  for  the  present  rules:  Community  framework  for  state  aid  for  research  and  development,  OJ  C  45, 
17.02.1996 

See  as  an  example  for  the  present  rules:  Community  guidelines  on  state  aid  for  environmental  protection,  OJ No C  72, 
10.3.1994, p. 3. 

6 

7 

8. 

See as an example for the present rules: Guidelines on aid to employment, OJ C 334,12.12.1995, p. 4. 

The Commission is presently drafting new guidelines for regional aid which are expected to be adopted during 1997. 

See as an example for the present rules: Commission notice on the de minimis rule for state aid, OJ C68,6.3.1996, p. 9. 

5 

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-  export  credit,  including  those  for  tied  aid,  in so far  as they  are  subject  to  precise  rules 

established  in agreements of which the Community is a party10. 

4.2.  Exemption  techniques 

The  proposed  Regulation  establishes  conditions  and  thresholds  that  must  be  specified  in 
every Commission group exemption Regulation. These relate to: 

the admissible purposes of the aid, 

- 
-  categories of beneficiaries, 
- 

thresholds expressed either in terms of aid intensities in relation to a set of eligible costs or 
in terms of maximum aid amounts 

-  conditions of monitoring. 

These conditions  and thresholds  will be defined  on the basis of the  experience  with  those 
used in the existing guidelines and  frameworks. 

The  proposed  regulation  will  also  allow  the  Commission  to  attach  other  additional 
conditions and thresholds which the Commission  can specify  in an exempting  Regulation, 
such as: 

-  attach further  conditions for the compatibility of aid exempted under such Regulation, 
-  set thresholds for the notification  of individual awards of aid, 
-  exclude certain sectors from the scope of application of such Regulation, 
-  attach conditions to the cumulation of aid. 

4.3.  Monitoring of aid exempted from  notification 

The use  of group  exemptions  will  not  mean  a weakening  of the  control  of aid  exempted 
from  notification.  The Commission remains an independent  arbiter  safeguarding  the  rights 
of complainants  and  other  interested  parties.  In  order  for  the  Commission  to  accomplish 
its duty to  satisfy  itself that  Member  States  are not giving  aid which  is incompatible  with 
the  common  market,  it  will introduce  detailed  reporting  requirements  in the  Commission 
Regulations regarding the application of the group exemptions. 

Firstly,  Member  States are required  to facilitate  this task  of monitoring  the  application  of 
the group  exemptions by establishing  an efficient  system to record  and  store  on a running 
basis  relevant  information  regarding  the  application  of the  group  exemptions,  i.  e.  when 
exempted  aid  schemes  are  established  and  when  aid  is  given  to  a  recipient.  The 
Commission will, if required,  assist Member  States to  establish  such a system with  a view 
to overcoming technical  difficulties  and  to  establishing  a system which  is compatible  EU-
wide. 

J 

Legislation already exist in this field: Council  Directive 70/509/EEC (OJ L 254, of 23.11.1970, p.  1) on the adoption of  a common  credit 
insurance policy for medium- and long-term transactions with public buyers, as amended by the Council  Decision  of  1 January  1973  (OJ 
L  2,  1.1.1973,  p.l)  adjusting  the  documents  concerning  the  accession  of the  new  Member  Suites  to  the  EC;  and  Council  Directive 
70/150/EEC  (OJ  I,  254,  of  23.11.1970,  p.  1)  on  the  adoption  of  a  common  credit  insurance  policy  for  medium-  and  long-term 
transactions with private buyers  as amended by tlie aforementioned  Council  Decision of  1  January  ! 973.  Ihe Commission  is working  on 
a  proposa!  for  a  Council  directive  on  harmonisation  of  the  main  provisions  concerning  export  credit  insurance  !or  transauions  wiU'i 
medium- and long term cover which will replace the aforementioned  directives and decision. 

! 0 

The Community  is a party to the OECD  Arrangement  on guidelines for Oilieially supported  export credits ("the  Consensus  ;. 

6 

Secondly,  Member  States  shall  supply  the  Commission  with  information  regarding  the 
application  of the group  exemptions  in a computerised  form  in a format  according  to  the 
1  1>(--  i V m m n ' C u ' ii 
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reporting).  The  level  of  information  currently  required  seems  adequate  to  enable  the 
Commission to  exercise  its control.  Moreover,  the  obvious  advantage  of harmonising  the 
reporting  requirements  is  that  the  Member  States'  workload  will  be  kept  to  a  minimal 
level. 

llic  j ^ i nl  n o U i l ^ a l i o ii  a nd 

t h at  ali  caU^  C/.lol  » c  £. 

Thirdly,  Member  States  will  in  order  to  ensure  an  adequate  level  of  transparency  be 
required  to  publish  relevant  information  regarding  their  application  of  the  group 
exemptions  in  their  national  Official  Journal.  The  Commission  considers  that  the 
publication  in  a  manner  corresponding  to  the  "cartouche",  which  is  presently  being 
published  in  the  Official  Journal  of  the  European  Union,  C-series,  would  suffice. 
Moreover,  any  interested  party  should  be  able  to  obtain  any  additional  information 
regarding the application  of the group  exemptions from  the authority  which  is responsible 
for  the recording  of the  information. 

Fourthly,  the  Commission  will  store  the  information  supplied  by  Member  States  in  a 
database.  This database  shall be available to  all Member  States which  shall have access to 
the information  contained  therein.  In addition to facilitate  the Commission's  control of the 
application of the group  exemptions, this information  can be used  as the basis for  a yearly 
debate and evaluation to be held by the Advisory Committee set up under this Regulation. 

Fifthly,  Member  States  must  provide,  at  the  Commission's  request,  at  any  time,  any 
information  on  aid  exempted  under  the group  exemptions  in order  to  allow  it to  exercise 
an additional  control  and  if required  to  allow verification  that  the group  exemptions  have 
been correctly  applied. 

4.4.  Procedures for the adoption of Commission group exemption  Regulations 

The proposed  Regulation lays down a procedure to be respected by the Commission when 
adopting  specific  Commission  regulations  exempting  categories  of  aid.  The  proposed 
Regulation  provides  for  the  establishment  of  an  Advisory  Committee  to  be  consulted 
before  publishing  a  draft  Commission  Regulation  and  before  the  adoption  of  such  a 
Regulation.  A similar  procedure  exists for  the  competition  rules applicable to  enterprises" 
on the basis of Article 87 of the Treaty and Regulation No  17. The proposed  Regulation also 
provides  for  the  hearing  of  interested  parties.  The  Commission  will  inform  the  Advisory 
Committee of the views of interested parties when the Commission consults it before adopting 
a Commission Regulation. 

Regulation  No  19/65/EEC of the Council  of 2 March  1965 on application  of Article 85(3) of the Treaty to certain  categories 
of agreements and concerted practices, OJ No 36 of 6 March  1965, page 533. 

The  creation  of  the  Advisory  Committee  will  not  mean  the  abandonment  of  the 
multilateral  meetings  on  state  aid.  They  will  continue  to  play  their  usual  role 
complementing  the  tasks  of  the  Advisory  Committee.  The  Commission  will  continue  its 
practice,  developed  in multilateral  meetings,  to  discuss  in detail  any  proposal  being  made 
and  to  take  account  of  Member  States  comments  to  the  greatest  extent  possible  and  to 
continue  to  work  on  a  consensual  basis  wheneve:  possible.  It  is  only  in  respect  of  the 
specific  tasks  assigned  to  the  Advisory  Committee  under  Article.  9  (i.e.  consultations 
before  publishing  and  adopting  a  Commission  Regulation  and  the  discussion  and 
evaluation  of the information  submitted  by Member  States  according  to  Article  4)  that  it 
will  have  a  specific  task  to  fulfil  and  where  the  multilateral  meetings  will  not  be  directly 
involved. 

The Commission will likewise continue to be prepared,  upon  request  by a Member  State, 
for bilateral discussions. 

5. 

PROPOSAL 

The Commission  proposes  that  the  Council  adopts  the  attached  Regulation  which  would 
empower  the  Commission  to  adopt  such  Regulations  en  the  lines  set  out  above.  This 
enabling regulation follows the standard  lines of such regulations and accordingly does not 
call for any further  specific comments. 

PROPOSAL FOR A COUNCIL REGULATION (EC)  ON THE APPLICATION OF 
ARTICLE 92  AND 93  OF THE EC TREATY TO CERTAIN CATEGORIES OF 
HORIZONTAL STATE AID 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 94 
thereof, 

Having regard to the proposal from the Commission, 

Having consulted the European Parliament, 

Having regard to the opinion of the Economic and Social Committee, 

(1)  Whereas, pursuant to Article 94 of the Treaty, the Council 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)  Whereas,  under  the  EC  Treaty,  the  appreciation  of  compatibility  of  aid  with  the 

common market essentially rests with the Commission; 

(3)  Whereas the Commission has applied Article 92 and 93 in numerous decisions and has 
also  stated  its  policy  in  a  number  of  communications;  whereas,  in  the  light  of  the 
Commission's considerable experience in applying Articles 92 and 93 and the general 
texts  issued  by the  Commission  in furtherance  of those  provisions,  it  is appropriate, 
with  a  view  to  ensuring  an  effective  and  efficient  supervision  and  simplifying 
administration,  that  the  Commission  should  be  enabled  to  declare  by  means  of 
Regulations in areas where the Commission has sufficient  experience to define general 
compatibility  criteria,  that  certain  categories  of aid  are  compatible with  the  common 
market pursuant to one or more of the provisions of Article 92(2) and (3) of the Treaty 
and are exempted from the procedure provided for in Article 93(3); 

(4)  Whereas group  exemptions  regulations will increase transparency  and  legal  certainty 
and can be directly applied by national courts, without prejudice to Articles 5 and 177 
of the Treaty; 

(5)  Whereas it is appropriate that the Commission, when it adopts Regulations exempting 
categories of aid from the obligation to notify  in Article 93(3), specifies the purpose of 
the  aid,  the  categories  of  beneficiaries  and  thresholds  limiting  the  exempted  aid  to 
certain  maximum  aid  intensities  in  relation  to  a  set  of  eligible  costs  or  maximum 
amounts of aid, in order to  ensure the compatibility with  the common  market  of aid 
covered by this Regulation; 

(6)  Whereas  it  is  appropriate  to  enable  the  Commission,  when  it  adopts  Regulations 
exempting  categories  of  aid from the  obligation  to  notify  in Article  93(3), to  attach 
further  detailed  conditions  in  order  to  ensure  the  compatibility  with  the  common 
market of aid covered by this Regulation; 

i 

(7)  Whereas  it  may  be  appropriate  to  set  thresholds  or  other  appropriate  conditions 
requiring the notification  of individual awards of aid in order to allow the Commission 
to  examine  indmduallv  the  eifevt  of  iTtiam  :w<i  on  oomprtihon  auA  uaAc  IT-IWC-.-M 
Member States and its compatibility with the common market, 

(8)  Whereas the Commission, having regard to the development and the functioning  of the 
common market,  should be enabled to establish by means of a Regulation  that  certain 
aid does not fulfil  all the criteria  of Article 92(1) and  is therefore  exempted  from  the 
notification  procedure  in  Article  93(3),  provided  that  aid  granted  to  the  same 
undertaking over a given period of time does not exceed a certain fixed amount; 

(9)  Whereas it is necessary to exclude most categories of aid contingent, in law or in fact, 
whether  solely or as one of several other  conditions, upon  export  performance,  since 
such  aid,  insofar  as  it  is  not  subject  to  harmonisation  directives  or  international 
agreements,  is  likely  to  affect  trade  between  Member  States  and  to  distort  or 
threaten to distort competition within the common market to an extent  contrary  to 
the common interest; 

(10)  Whereas in accordance with Article 93(1) the Commission  is under  an obligation,  in 
co-operation  with  Member  States,  to  keep  under  constant  review  all  systems  of 
existing aid; whereas for this purpose and in order to ensure the largest possible degree 
of transparency and adequate control it is appropriate that the Commission ensures the 
establishment  of  a  reliable  system  of  recording  and  storing  information  about  the 
application of the Commission regulations to which all Member States have access and 
that  it  receives  all  necessary  information  from  the  Member  States  on  the 
implementation of aid exempted from notification to fulfil  this obligation, which may be 
debated  and  evaluated  together  with  Member  States  in  the  Advisory  Committee; 
whereas for  this purpose it is also appropriate that the Commission  may require such 
information to be supplied as is necessary to ensure the efficiency  of such review; 

(11)  Whereas the control of the granting of aid involves factual,  legal and  economic issues 
of  a  very  complex  nature  and  great  variety  in  a  constantly  evolving  environment; 
whereas the Commission should therefore  regularly review the categories of aid which 
should  be  exempted  from  notification;  whereas  the  Commission  should  be  able  to 
repeal or amend Commission Regulations adopted  pursuant  to  this Regulation  where 
circumstances have changed with respect to any of the facts which were basic to their 
adoption  or  where  the  progressive  development  or  the  functioning  of  the  common 
market requires so; 

(12)  Whereas the Commission, in close and constant liaison with the Member States, should 
be able to define precisely the scope of these regulations and the conditions attached to 
them; whereas, in order to provide for co-operation between the Commission and the 
competent  authorities  of the Member  States,  it  is appropriate  to  create  an  Advisory 
Committee  on  State Aid to  be consulted  before  the Commission  adopts  Regulations 
pursuant to this Regulation, 

HAS ADOPTED THIS REGULATION: 

A 

Article!. 

Group exemptions 

The  Commission  may,  by  means  of  Regulations  adopted  in  accordance  with  the 
1. 
procedures laid down in Article 9 of this regulation and in accordance with Article 92 of the 
Treaty,  declare that  the following  categories  of aid are compatible with  the  common  market 
and not subject to the notification requirements of Article 93(3): 

(a) 

categories of aid in favour  of: 

(i) 
(ii) 
(iii) 
(iv) 

small and medium-sized  enterprises; 
research and development; 
environmental  protection; 
employment and training; 

(b) 

(c) 

(d) 

2. 

(a) 
(b) 
(c) 

(d) 

3. 

(a) 
(b) 
(c) 
(d) 

aid  respecting  the  map  approved  by  the  Commission  for  each  Member  State  to 
implement regional aid, 

export  credit  insurance  covering non-marketable  risk  in so far  as it  is  harmonised 
by EC law, 

export  credits,  including those for  tied  aid,  in so far  as they are subject  to  precise 
rules established in agreements to which the Community is a party. 

The Commission Regulations referred  to in paragraph  1 shall in particular  specify  for 
each category of aid : 

the purpose of the aid, 
the categories of beneficiaries, 
thresholds expressed either in terms of aid intensities in relation to a set of eligible costs 
or in terms of maximum aid amounts, 
conditions of monitoring as specified in Article 4. 

In addition, the Commission Regulations referred to in paragraph  1  may, in particular: 

set thresholds or other conditions for the notification of individual awards of aid, 
exclude certain sectors from the scope of application of such Regulation, 
attach conditions to the cumulation of aid, 
attach further conditions for the compatibility of aid exempted under such Regulation. 

Article 2. 

De minimis 

The  Commission  may,  by  means  of  a  Regulation  adopted  in  accordance  with  the 
1. 
procedures  laid  down  in  Article  9  of  this  Regulation,  decide  that,  having  regard  to  the 
development  and  the  functioning  of the  common  market,  certain  aid  does  not  fulfil  all  the 
criteria  of Article 92(1) and is therefore  exempted from the notification  procedure  in Article 

4* 

93(3),  provided that aid granted to the same undertaking over a given period of time does not 
exceed a certain fixed amount. 

Member  States  shall  upon  the  request  of  the  Commission  supply  at  any  time  any 

2. 
additional information relating to aid exempted under paragraph 1. 

Article 3. 

Export aid 

Save for the export credit insurance and export  credits referred  to  in Article  1(1) (c)  and (d), 
the exemptions foreseen by this Regulation shall not apply to  aid contingent,  in law or in fact, 
whether solely or as one of several other conditions, upon export performance. 

Article4. 

Monitoring 

When  adopting  regulations  in  application  of  Article  1,  the  Commission  shall  impose 
1. 
detailed  rules  upon  Member  States  regarding  the  monitoring  of  the  aid  exempted  from 
notification  according  to  those  regulations.  The  monitoring  shall  as  a  minimum  consist  of  a 
requirement to Member States to: 

record  and  store  on  a  running  basis  all  relevant  information  regarding  the 

a) 
application of the group  exemptions, 

at  least  once  every  year  supply  the  Commission  with  information  regarding  the 
b) 
application  of  the  group  exemption  in  a  computerised  form  and  in  accordance  with  the 
Commission's specific requirements. 

2. 
Member  States  shall  on  a  running  basis  publish  a  summary  of  the  information 
required under paragraph  1(a) in their national Official  Journal and shall upon request  give 
any interested  party access  to  relevant  information  regarding  the  application  of the  group 
exemptions. 

The  Commission  shall  make  access  to  the  information  mentioned  under  paragraph 

3. 
1(b) available to  all Member States. 

Member  States  shall  upon  the  request  of  the  Commission  supply  at  any  time  any 

4. 
additional information relating to aid exempted under Article 1. 

Once a year, the Commission and the Member  States shall debate and evaluate  in the 

5. 
Advisory Committee the information mentioned under paragraph 1(b). 

Articles. 

Period of validity and amendment of Regulations 

1. 

Regulations adopted pursuant to Article  1  and 2 shall apply for a specific period. 

2. 
They may be repealed or amended where circumstances have changed with respect to 
any of the facts which were basic to their adoption or where the progressive  development  or 
the functioning of the common market so requires. 

n 

Articleô. 

Evaluation Report 

Not  later  than five years after  the  entry  into force  of this Regulation,  the  Commission  shall 
submit a report on its functioning to the European Parliament and the Council. 

Article 7. 

Hearing of Interested Parties 

Where  the  Commission  proposes  to  adopt  a  Regulation,  it  shall  publish  a  draft  thereof  to 
enable all persons and  organisations concerned  to submit their comments within  a reasonable 
time limit to be fixed by the Commission, but in no case less than one month. 

Articled. 

Advisory Committee 

A committee of an advisory nature shall be constituted,  hereafter  the Advisory Committee on 
State Aid. It shall be composed of the representatives of the Member States and chaired by the 
representative of the Commission. 

Article9. 

Consultation of Advisory Committee 

1. 

(a) 

(b) 

The Commission shall consult the Advisory Committee on State aid: 

before publishing a draft  Regulation and 

before adopting a Regulation. 

2. 
The  representative  of  the  Commission  shall  submit  to  the  committee  a  draft  of  the 
measures to be taken. The committee shall deliver its opinion on the draft,  within a time limit 
which the  chairman  may  lay  down  according  to  the  urgency  of  the  matter,  if necessary  by 
taking a vote. 

The opinion shall be recorded in the minutes; in addition, each Member State shall have 

3. 
the right to ask to have its position recorded in the minutes. 

The  Commission  shall  take  the  utmost  account  of  the  opinion  delivered  by  the 
4. 
committee.  It  shall inform  the committee  on the manner in which  its opinion has been taken 
into account. 

Article JO. 

Final Provisions 

This  Regulation  shall  enter  into  force  on  the  day  following  its  publication  in  the Official 
Journal of the European Communities. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

Al 

ISSN 0254-1475 

COM(97) 3%  final 

DOCUMENTS 

EN 

01  06 

Catalogue number  :  CB-CO-97-396-EN-C 

ISBN  92-78-23260-2 

Office  for Official  Publications of the European  Communities 

L-2985 Luxembourg