Community framework for state aid for research and development and innovation
Date: 2006-12-30
Institutions: European Commission
Subjects: State aid, competition, control of State aid, economic growth, innovation, research and development, technological change

30.12.2006

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I

(Information)

COMMISSION

COMMUNITY FRAMEWORK FOR STATE AID FOR RESEARCH AND DEVELOPMENT AND
INNOVATION

(2006/C 323/01)

1.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1. Objectives of State aid for Research and Development and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2. State aid policy and R&D&I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3. The balancing test and its application to aid to Research and Development and Innovation . . . . . . . . . . . . . . .

1.3.1. The State Aid Action Plan: less and better targeted aid, balancing test for the assessment of aid . . . . .

1.3.2. The objective of common interest addressed by the framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3.3. Appropriate instrument

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3.4. Incentive effect and necessity of aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3.5. Proportionality of the aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3.6. Negative effects of the aid to R&D&I must be limited so that the overall balance is positive . . . . . . . .

1.4.

Implementing the balancing test: legal presumptions and need for more specific assessment . . . . . . . . . . . . . . .

1.5. Motivation for specific measures covered by this framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

Scope of application and definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1. Scope of application of the framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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3.

State aid within the meaning of Article 87(1) of the EC Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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3.1. Research organisations and innovation intermediaries as recipients of State aid in the meaning of Arti-
cle 87(1) of the EC Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1.1. Public funding of non-economic activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1.2. Public funding of economic activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2.

Indirect State aid in the meaning of Article 87(1) of the EC Treaty to undertakings through publicly funded
research organisations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2.1. Research on behalf of undertakings (Contract research or research services) . . . . . . . . . . . . . . . . . . . . . . . . .

3.2.2. Collaboration of undertakings and research organisations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.

5.

Compatibility of aid under Article 87(3)(b) of the EC Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compatibility of aid under Article 87(3) (c) of the EC Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1. Aid for R&D projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1.1. Research categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1.2. Basic aid intensities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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5.1.3. Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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5.1.4. Eligible costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1.5. Repayable advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1.6. Fiscal measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1.7. Matching clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.2. Aid for technical feasibility studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.3. Aid for industrial property rights costs for SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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5.4. Aid for young innovative enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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5.5. Aid for process and organisational innovation in services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.6. Aid for innovation advisory services and for innovation support services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.7. Aid for the loan of highly qualified personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.8. Aid for innovation clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7.

Incentive effect and necessity of aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compatibility of aid subject to a detailed assessment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.1. Measures subject to a detailed assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.2. Methodology of the detailed assessment: R&D&I criteria for economic assessment of certain individual cases

7.3.

Positive effects of the aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.3.1. Existence of a market failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.3.2. Appropriate Instrument

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.3.3. Incentive effect and necessity of aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.3.4. Proportionality of the aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.4. Analysis of the distortion of competition and trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.4.1. Distorting dynamic incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.4.2. Creating market power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.4.3. Maintaining inefficient market structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.5. Balancing and decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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8.

9.

Cumulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special rules for agriculture and Fisheries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

Final provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1. Reporting and monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1.1. Annual reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1.2. Access to full text of schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1.3. Information sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.2. Appropriate Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.3. Entry into force, validity and revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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1.

INTRODUCTION

1.1.

Objectives of State aid for Research and

Development and Innovation

Commission lays down rules which it will apply in the
assessment of aid notified to it, thereby exercising its discretion
and increasing legal certainty and transparency of its decision-
making.

Promoting Research and Development and Innovation (herein-
after: R&D&I) is an important objective of common interest.
Article 163 of the EC Treaty stipulates that ‘The Community shall
have the objective of strengthening the scientific and technolo-
gical bases of Community industry and encouraging it to become
more competitive at international level, while promoting all the
research activities deemed necessary …’. Articles 164 to 173 of
the EC Treaty determine the activities to be carried out in this
respect and the scope and implementation of the multi-annual
framework programme.

When meeting in Barcelona in March 2002,
the European
Council adopted a clear goal for the future development of
research spending. It agreed that overall spending on Research
and Development
(hereinafter: R&D) and innovation in the
Community should be increased with the aim of approaching
3 % of gross domestic product by 2010. It further clarified that
two-thirds of this new investment should come from the private
sector. To reach this objective, research investment should grow
at an average rate of 8 % every year, shared between a 6 %
growth rate for public expenditure (1) and a 9 % yearly growth
rate for private investment (2).

through State aid to enhance economic
The objective is
efficiency (3) and thereby, contribute to sustainable growth and
jobs. Therefore, State aid for R&D&I shall be compatible if the aid
can be expected to lead to additional R&D&I and if the distortion
of competition is not considered to be contrary to the common
interest, which the Commission equates for the purposes of this
framework with economic efficiency. The aim of this framework
is to ensure this objective and in particular, to make it easier for
Member States to better target the aid to the relevant market
failures (4).

Article 87(1) of the EC Treaty lays down the principle that State
aid is prohibited. In certain cases, however, such aid may be
compatible with the common market on the basis of Article 87
(2) and (3). Aid for R&D&I will primarily be justified on the basis
framework the
of Article 87(3)(b) and 87(3)(c).

In this

(1)

It must be kept in mind that only a part of the public expenditure on
R&D will qualify as State aid.

(3)

(2) Cf. ‘Investing in research: an action plan for Europe’; Communication
from the Commission to the Council, the European Parliament, the
European Economic and Social Committee and the Committee of
the Regions, COM(2003)226 final, p. 7.
In economics, the term ‘efficiency’ (or ‘economic efficiency’) refers to
the extent to which total welfare is optimised in a particular market
or in the economy at large. Additional R&D&I increases economic
efficiency by shifting market demand towards new or improved
products, processes or services, which is equivalent to a decrease in
the quality adjusted price of these goods.

(4) A ‘market failure’ is said to exist when the market, if left to its own
devices, does not lead to an economically efficient outcome. It is in
those circumstances that state intervention, including state aid, has
the potential to improve the market outcome in terms of prices,
output and use of resources.

1.2.

State aid policy and R&D&I

to be optimal

In the context of the Lisbon strategy the level of R&D&I is
the economy in the
considered not
Community, implying that an increase in the level of R&D&I
would lead to higher growth in the Community. The Commis-
sion considers that the existing rules for State aid to R&D have to
be modernised and enhanced to meet this challenge.

for

Innovation is

First, the Commission, in this framework, expands the existing
supporting
possibilities of aid to R&D to new activities
innovation.
related to a process connecting
knowledge and technology with the exploitation of market
opportunities for new or
improved products, services and
business processes compared to those already available on the
common market, and encompassing a certain degree of risk. For
the purpose of State aid rules,
the Commission considers
however that State aid for innovation should be authorised not
on the basis of an abstract definition of innovation but only to
the extent that it relates to precise activities, which clearly address
the market failures that are hampering innovation and for which
the benefits of State aid are likely to outweigh any possible harm
to competition and trade

Second, the Commission aims at supporting a better adminis-
tration of State aid to R&D&I. It intends to extend the scope of
the block-exemption for R&D, which is currently limited to aid to
small and medium-sized enterprises (hereafter: SMEs) (5). A
future general block exemption regulation (hereafter: BER) will
cover the less problematic aid measures in the area of R&D&I.
This framework will continue to apply for all measures notified
to the Commission whether because the measure is not covered
by the BER, because of an obligation in the BER to notify aid
individually, or because the Member State decides to notify a
measure which could in principle have been exempted under the
BER, as well as for the assessment of all non-notified aid.

Third, in order to better focus the Commission’s scrutiny, this
framework provides,
for the assessment of measures falling
within its scope, not only rules on the compatibility of certain
aid measure (Chapter 5 below) but also, due to the increased risk
of certain aid measures distorting competition and trade,
additional elements concerning the analysis of the incentive
effect and necessity of aid (Chapter 6 below) and an additional
methodology to be applied in case of detailed assessment
(Chapter 7 below).

(5) State Aid Action Plan. Less and better targeted State aid: a roadmap
for State aid reform 2005-2009. COM(2005) 107 final — SEC
(2005) 795; adopted on 7 June 2005.

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In this context the Commission underlines that competitive
markets should in principle, on their own,
lead to the most
efficient outcome in terms of R&D&I. However, this may not
always be the case in the field of R&D&I and government
intervention might then improve the outcome. Undertakings will
invest more in research only to the extent that they can draw
concrete commercial benefits from the results and are aware of
the possibilities to do so. There are many reasons for low levels
of R&D&I, which are partly due to structural barriers, and partly
to the presence of market failures. Structural barriers should
preferably be handled by structural measures (6), whereas State
aid may play a role in counter-weighing inefficiencies due to
market failures. Furthermore, empirical evidence indicates that
for State aid to be efficient it must be accompanied by favourable
framework conditions, such as adequate intellectual property
right systems, a competitive environment with research and
innovation-friendly regulations and supportive financial markets.

the same time a crucial

However, State aid also distorts competition, and strong
competition is at
the
market-driven stimulation of investment in R&D&I. Therefore,
State aid measures must be carefully designed in order to limit
the distortions. Otherwise, State aid can become counter-
productive and reduce the overall level of R&D&I and economic
growth.

factor

for

The main concern related to R&D&I aid to undertakings is that
rival undertakings’ dynamic incentives to invest are distorted and
possibly reduced. When an undertaking receives aid,
this
generally strengthens its position on the market and reduces
the return on investment for other undertakings. When the
reduction is significant enough, it is possible that rivals will cut
back on their R&D&I activity. In addition, when the aid results in
a soft budget constraint for the beneficiary, it may also reduce
the incentive to innovate at
the beneficiary.
Furthermore, the aid can support inefficient undertakings or
enable the beneficiary to enhance exclusionary practices or
market power.

the level of

1.3.

The balancing test and its application to aid to

Research and Development and Innovation

1.3.1. The State Aid Action Plan: less and better targeted aid,

balancing test for the assessment of aid

In the State Aid Action Plan (7), the Commission announced that
‘to best contribute to the re-launched Lisbon Strategy for growth
and jobs, the Commission will, when relevant, strengthen its
economic approach to State aid analysis. An economic approach
is an instrument to better focus and target certain State aid
towards the objectives of the re-launched Lisbon Strategy’.

In assessing whether an aid measure can be deemed compatible
with the common market, the Commission balances the positive
impact of the aid measure in reaching an objective of common
interest against its potentially negative side effects by distortion
of trade and competition. The State Aid Action Plan, building on
existing practice, has formalised this balancing exercise in what
has been termed a ‘balancing test’ (8). It operates in three steps to
decide upon the approval of a State aid measure; the first two
steps are addressing the positive effects of State aid and the third
is addressing the negative effects and resulting balancing of the
positive and negative effects:

(1)

(2)

Is the aid measure aimed at a well-defined objective of
(eg growth, employment, cohesion,
common interest
environment)?

Is the aid well designed to deliver the objective of common
interest i.e. does the proposed aid address the market failure
or other objective?

(i)

Is State aid an appropriate policy instrument?

(ii)

Is there an incentive effect, i.e. does the aid change the
behaviour of firms?

(iii)

Is the aid measure proportional, i.e. could the same
change in behaviour be obtained with less aid?

(3) Are the distortions of competition and effect on trade

limited, so that the overall balance is positive?

This balancing test is applicable to the design of State aid rules as
well as for the assessment of cases.

For a block exemption regulation, the State aid is compatible if
the conditions laid down are fulfilled. The same applies in general
to most cases addressed in this framework. However, for the
individual aid measures which may have a high distortive
potential due to high aid amounts, the Commission will make an
overall assessment of the positive and negative effects of the aid
based on the proportionality principle.

1.3.2. The objective of common interest addressed by the

framework

This framework addresses the objective of common interest of
promoting Research and Development and Innovation. It aims at
enhancing economic efficiency by tackling well defined market
failures, which prevent the economy in the Community from
reaching the optimal level of R&D&I.

(6)

Including: university education, research programmes and public
research facilities, IPR rules favouring innovation, attractive frame-
work conditions for undertakings to do R&D&I
(7) State aid Action Plan (footnote), paragraph 21.

(8) Cf. State Aid Action Plan (footnote 5), paragraph 11 and 20, as
elaborated in more detail already in the Communication on
Innovation, COM(2005) 436 final of 21 September 2005.

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To establish rules ensuring that aid measures achieve this
objective, it is, first of all, necessary to identify the market failures
hampering R&D&I. R&D&I
takes place through a series of
activities, which are upstream to a number of product markets,
and which exploit available R&D&I capabilities to develop new
or improved products (9) and processes in these product markets,
thus fostering growth in the economy. However, given the
available R&D&I capabilities, market failures may prevent the
market
from reaching the optimal output and lead to an
inefficient outcome for the following reasons:

left

— Positive externalities/knowledge spill-overs: R&D&I
often generate benefits for society in the form of knowledge
spill-overs. However,
to the market, a number of
projects may have an unattractive rate of return from a
private perspective, even though the projects would be
beneficial for society because profit seeking undertakings
neglect the external effects of their actions when deciding
how much R&D&I they should undertake. Consequently,
projects in the common interest may not be pursued unless
the government intervenes.

interact, and thus deliver R&D&I may be impaired.
Problems may arise for various reasons, including difficul-
ties in coordinating R&D and finding adequate partners.

1.3.3. Appropriate instrument

for example regulation,

It is important to keep in mind that there may be other, better
in the
placed instruments to increase the level of R&D&I
economy,
increase in funding of
universities, general tax measures in favour of R&D&I (10). The
appropriateness of a policy instrument in a given situation is
normally linked to the main reasons behind the problem.
Reducing market barriers may be more appropriate than State
aid to deal with the difficulty of a new entrant to appropriate
R&D&I results. Increased investment in universities may be more
appropriate to deal with a lack of qualified R&D&I personnel
than granting State aid to R&D&I projects. Member States should
therefore choose State aid when it is an appropriate instrument
on the basis of the problem they are trying to address. This
means it is necessary to clearly identify the market failure they
intend to target with the aid measure.

1.3.4. Incentive effect and necessity of aid

it

like

research,

fundamental

— Public good/knowledge spill-overs: For the creation of
is
general knowledge,
impossible to prevent others from using the knowledge
(public good), whereas more specific knowledge related to
production can be protected, for example through patents
allowing the inventor a higher return on their invention. To
find the appropriate policy to support R&D&I,
is
important
to distinguish between creation of general
knowledge and knowledge that can be protected. Under-
takings tend to free ride on the general knowledge created
by others, which makes undertakings unwilling to create
the knowledge themselves. In fact, the market may not only
be inefficient but completely absent.
If more general
knowledge was produced, the whole society could benefit
from the knowledge spill-overs throughout the economy.
For this purpose, governments may have to support the
creation of knowledge by undertakings.
In the case of
fundamental research,
they may have to pay fully for
companies’ efforts to conduct fundamental research.

it

— Imperfect and asymmetric information: R&D&I are
characterised by a high degree of risk and uncertainty. Due
to imperfect and/or asymmetric information, private
investors may be reluctant to finance valuable projects;
highly-qualified personnel may be unaware of recruitment
possibilities in innovative undertakings. As a result, the
allocation of human resources and financial resources may
not be adequate in these markets and valuable projects for
the economy may not be carried out.

State aid for R&D&I must lead to the recipient of aid changing its
behaviour so that it increases its level of R&D&I activity and
R&D&I projects or activities take place which would not
otherwise be carried out, or which would be carried out in a
more restricted manner. The Commission considers that as a
result of aid, R&D&I activity should be increased in size, scope,
amount
identified by
counterfactual analysis, comparing the levels of intended activity
with aid and without aid. Member States must
clearly
demonstrate how they intend to ensure that the incentive effect
is present.

Incentive effect

spent or

speed.

is

1.3.5. Proportionality of the aid

Aid is considered to be proportional only if the same result could
not be reached with a less distortive aid measure. In particular,
the amount and intensity of the aid must be limited to the
minimum needed for the aided R&D&I activity to take place.

1.3.6. Negative effects of the aid to R&D&I must be limited so

that the overall balance is positive

The possible distortions of competition resulting from State aid
for R&D&I can be categorised as:

— disrupting the dynamic incentives of undertakings and

crowding out;

— Coordination and network failures. The ability of
undertakings to coordinate with each other or at least

— supporting inefficient production;

(9) This includes services.

(10) See the Notice on the application of the State aid rules to measures
relating to direct business taxation; OJ C 384, 10.12.1998, p. 3.

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— exclusionary practices and enhancing market power;

— effects on the localisation of economic activities across

Member States;

— effects on trade flows within the internal market.

The negative effects are normally higher for higher aid amounts
and for aid granted to activities which are close to commercia-
lisation of the product or the service. Therefore aid intensities
should generally be lower for activities linked to development
and innovation than for research related activities. Furthermore,
in the definition of eligible costs it is important to ensure that
costs that can be considered to cover routine company activities
are not eligible for aid. Also, characteristics of the beneficiary and
the relevant markets have an influence on the level of distortion.
Such aspects will be taken into account in more detail for the
cases which will undergo a detailed assessment.

1.4.

Implementing the balancing test: legal

presumptions and need for more specific assessment

This framework will be used for the assessment of aid for
research and development and innovation which is notified to
the Commission. The Commission’s compatibility assessment
will be conducted on the basis of the balancing test presented in
Chapter 1. Accordingly, a measure will only be approved if,
considering each of the elements in the balancing test, this leads
to an overall positive evaluation. However, the Commission’s
assessment may differ in the way this evaluation is conducted, as
in each case the risks for competition and trade associated with
certain types of measures may differ. Without prejudice to
Articles 4 to 7 of Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (11), the Commission applies different
legal presumptions according to the type of State aid measure
notified.

All notified aid will be assessed first under the provisions in
Chapter 5. In that chapter, the Commission has identified a series
of measures for which it considers a priori that State aid targeting
these measures will address a specific market failure hampering
R&D&I. The Commission has furthermore elaborated a series of
conditions and parameters, which aim at ensuring that State aid
targeting these measures actually presents an incentive effect, is
proportionate and has a limited negative impact on competition
and trade. Chapter 5 thus contains parameters in respect of the
aided activity, aid intensities and conditions attached to
compatibility. In principle, only measures which fulfil the criteria
specified in Chapter 5 are eligible for compatibility under
Article 87(3)(c) of the EC Treaty on the basis of this framework.

In Chapter 6, the Commission presents more specifically how it
will assess the necessity and incentive effect of the aid.

In Chapter 7, the Commission presents more specifically in
which cases and how it will conduct a detailed assessment.

(11) OJ L 83, 27.3.1999, p. 1.

This translates into different levels of assessment described in
more detail below. For the first level, the Commission considers
that it is in principle sufficient that the measures concerned are
in line with the conditions described in Chapter 5, provided that
the conditions in Chapter 6 to presume the incentive effect are
fulfilled. For all other measures, the Commission considers that
additional scrutiny is necessary, because of higher risks for
competition and trade, due to the activity, aid amount, or type of
beneficiary. The additional scrutiny will generally consist in
further and more detailed factual analysis of the case in line with
the provisions set out in Chapter 6 in respect of necessity and
incentive effect or in Chapter 7, in respect of the assessment for
aid exceeding the threshold set in section 7.1. of this framework.
As a result of this additional scrutiny, the Commission may
incompatible with the common
approve the aid, declare it
market or declare that it is compatible with the common market
subject to conditions.

Firstly, the Commission considers that for certain aid measures,
fulfilling the provisions set out in Chapters 5 and 6 will generally
be sufficient for securing compatibility, as it is presumed that for
such a measure the result of the application of the balancing test
would be positive. Whether a measure falls into this category
depends upon the type of beneficiary, the activity aided and the
amount of aid granted. The Commission considers that the
following measures will be declared compatible on the basis of
Chapters 5 and 6 if
the conditions and
parameters mentioned in Chapter 5 and (ii) the aid is only
granted after the aid application has been made to the national
authorities:

they fulfil all

(i)

— project aid and feasibility studies where the aid beneficiary
is an SME and where the aid amount
is below EUR
7,5 million per SME for a project (project aid plus aid for
feasibility study);

— aid for industrial property rights costs for SMEs;

— aid for young innovative enterprises;

— aid for innovation advisory services; aid for innovation

support services;

— aid for the loan of highly qualified personnel.

For the measures listed above, Chapter 6 clarifies that
incentive effect is presumed to be present if
mentioned above in (ii) is fulfilled.

the
the condition

this

framework,

the additional

Second, for notified aid below the thresholds set in section 7.1.
of
in a
demonstration of the incentive effect and necessity as set out
in Chapter 6. Such measures will
therefore be declared
compatible on the basis of Chapter 5 and Chapter 6 only if (i)
the conditions and parameters mentioned in
they fulfil all

scrutiny consists

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Chapter 5 and (ii) the incentive effect and necessity have been
demonstrated in accordance with Chapter 6.

Third, for notified aid above the thresholds set in section 7.1. of
this framework, the additional scrutiny consists in a detailed
assessment according to Chapter 7. These measures will therefore
be declared compatible on the basis of Chapters 5, 6 and 7 only
if (i) they fulfil all the conditions and parameters mentioned in
Chapter 5 and (ii) the balancing test pursuant to Chapter 7 results
in an overall positive evaluation.

1.5.

Motivation for specific measures covered by this

framework

Applying these criteria to R&D&I, the Commission has identified
a series of measures for which State aid may, under specific
conditions, be compatible with Article 87(3) (c) of the EC Treaty.

Aid for projects covering fundamental and industrial research and
experimental development is mainly targeted at the market failure
related to positive externalities (knowledge spillovers), including
public goods. The Commission considers it useful to maintain
different categories of R&D&I activities regardless of the fact that
the activities may follow an interactive model of innovation
rather than a linear model. Different aid intensities reflect
different sizes of market failures and how close the activity is to
commercialisation. Furthermore, compared to the previous State
aid rules in this field, certain innovation activities have been
included in experimental development. In addition, the bonus
system has been simplified. Due to expected larger implications
of market failures and expected higher positive externalities,
bonuses appear
justified for SMEs, collaboration by and
collaboration with SMEs, cross-border collaboration as well as
public-private partnerships (collaborations of undertakings with
public research organisations).

Aid for technical feasibility studies related to R&D&I projects aims at
related to imperfect and
failure
overcoming the market
asymmetric information. These studies are considered to be
further away from the market
itself, and
therefore relatively high aid intensities can be accepted.

than the project

failure related to positive externalities

Aid for industrial property rights costs for SMEs is targeted at the
market
(knowledge
spillovers). The aim is to increase the possibilities for SMEs to
sufficiently appropriate returns,
thereby giving them greater
incentive to undertake R&D&I.

Aid for young innovative enterprises has been introduced to deal
with the market failures linked with imperfect and asymmetric
information, which harm these undertakings in a particularly
acute way, damaging their ability to receive appropriate funding
for innovative ventures.

Aid for process and organisational innovation in services targets the
market failures linked to imperfect information and positive
externalities. It is meant to tackle the problem that innovation in
services activities may not fit in the R&D categories. Innovation
from interactions with
in service activities often results
customers and confrontation with the market, rather than from

the exploitation and use of existing scientific, technological or
business knowledge. Furthermore, innovation in service activities
tends to be based on new processes and organisation rather than
technological development. To that extent, process and organisa-
tional innovation in services is not properly covered by R&D
project aid and requires an additional and specific aid measure to
address the market failures that hamper it.

Aid for advisory services and innovation support services, provided by
innovation intermediaries, targets market failures linked with
insufficient information dissemination, externalities and lack of
coordination. State aid is an appropriate solution to change the
incentives for SMEs to buy such services and to increase the
supply and demand of the services provided by innovation
intermediaries.

Aid for the loan of highly qualified personnel addresses the market
failure linked with imperfect information in the labour market in
the Community. Highly qualified personnel in the Community
are more likely to be hired by large undertakings, because they
tend to perceive large undertakings as offering better working
conditions, and more secure and more attractive careers. By
contrast, SMEs could benefit from important knowledge transfer
and from increased innovation capabilities, if they were able to
recruit highly qualified personnel to conduct R&D&I activities.
Creating bridges between large undertakings or universities and
SMEs may also contribute to addressing coordination market
failures, and supporting clustering.

Aid for innovation clusters aims at tackling market failures linked
with coordination problems hampering the development of
clusters, or limiting the interaction and knowledge flows within
clusters. State aid could contribute in two ways to this problem:
first by supporting the investment
in open and shared
infrastructures for innovation clusters, and secondly by support-
ing cluster animation, so that collaboration, networking and
learning is enhanced.

2.

SCOPE OF APPLICATION AND DEFINITIONS

2.1.

Scope of application of the framework

This framework applies to State aid for research and develop-
ment and innovation. It will be applied in accordance with other
Community policies on State aid, other provisions of the Treaties
founding the European Communities and legislation adopted
pursuant to those Treaties.

According to general Treaty principles, State aid cannot be
approved if the aid measure is discriminatory to an extent not
justified by its State aid character. With regard to R&D&I,
it
should in particular be underlined that the Commission will not
approve an aid measure which excludes the possibility of
exploitation of R&D&I results in other Member States.

Public authorities may commission R&D from companies or buy
the results of R&D from them. If such R&D is not procured at
market price, this will normally involve State aid within the
meaning of Article 87(1) of the EC Treaty. If, on the other hand,

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these contracts are awarded according to market conditions, an
indication for which may be that a tender procedure in
accordance with the applicable directives on public procurement,
in particular Directive 2004/17/EC of the European Parliament
and of
the Council of 31 March 2004 coordinating the
procurement procedures of entities operating in the water,
energy, transport and postal services sectors (12) and Directive
2004/18/EC of the European Parliament and of the Council of
31 March 2004 on the coordination of procedures for the award
of public works contracts, public supply contracts and public
service contracts (13) has been carried out, the Commission will
normally consider that no State aid within the meaning of
Article 87(1) of the EC Treaty is involved.

framework applies

to aid to support

research and
This
development and innovation in all sectors governed by the EC
Treaty. It also applies to those sectors which are subject to
specific Community rules on State aid, unless such rules provide
otherwise. (14)

framework applies

This
in the
environmental field (15), as there are many synergies to exploit
between innovation for quality and performance and innovation
to optimise energy use, waste and safety.

to State aid for R&D&I

research and development (16),

Following the entry into force of Commission Regulation (EC)
No 364/2004 of 25 February 2004 amending Regulation (EC)
No 70/2001 as regards the extension of its scope to include aid
for
research and
development to SMEs is exempt from the notification require-
ment under the conditions stipulated in Commission Regulation
(EC) No 70/2001 of 12 January 2001 on the application of
Articles 87 and 88 of the EC Treaty to State aid to small and
medium-sized enterprises (17). Member States, however, remain
free to notify such aid. If they decide to do so, this framework
will continue to be used for the assessment of such notified aid.

aid for

While personnel costs are eligible in several of the measures
covered by this framework and a measure on aid for the loan of
highly qualified personnel has been introduced, general employ-
ment and training aid for researchers continue to fall under the
specific State aid instruments for employment and training aid,
currently Commission Regulation (EC) No 68/2001 of 12 January
2001 on the application of Articles 87 and 88 of the EC Treaty
to training aid (18) and Commission Regulation (EC) No 2204/
2002 of 12 December 2002 on the application of Articles 87
and 88 of the EC Treaty to State aid for employment (19).

(12) OJ L 134, 30.4.2004, p. 1.
(13) OJ L 134, 30.4.2004, p. 114.
(14) For example, Article 3 of Regulation (EEC) No 1107/70 of the
Council of 4 June 1970 on the granting of aids for transport by rail,
road and inland waterway provides special rules for the compatibility
of State aid to R&D in the sector of transport by rail, road and inland
waterway.

(15) See current Community guidelines on State aid for environmental
protection, OJ C 37, 3.2.2001, p. 3, point 7. In addition, in the
the environmental guidelines,
context of
the
Commission will consider
the opportunity to integrate new
measures that can also cover eco-innovation.

the revision of

(16) OJ L 63, 28.2.2004, p. 22.
(17) OJ L 10, 13.1.2001, p. 33. Regulation as amended by Regulation (EC)

No 364/2004.

(18) OJ L 10, 13.1.2001, p. 20. Regulation as amended by Regulation (EC)

No 363/2004, (OJ L 63, 28.2.2004, p. 20).

(19) OJ L 337, 13.12.2002, p. 3.

Aid for research and development and innovation for under-
takings in difficulty within the meaning of the Community
Guidelines on State aid for rescue and restructuring undertakings
in difficulty (20) is excluded from the scope of this framework.

2.2.

Definitions

For the purpose of this framework the following definitions
apply:

(a)

‘small and medium-sized enterprises’, or ‘SMEs’, ‘small
enterprises’ and ‘medium-sized enterprises’ means such
undertakings within the meaning of Regulation (EC) No 70/
2001, or any regulation replacing that regulation;

(b)

‘large enterprises’ means undertakings not coming under
the definition of small and medium-sized enterprises;

(c)

(d)

‘aid intensity’ means the gross aid amount expressed as a
percentage of the project’s eligible costs. All figures used
shall be taken before any deduction of tax or other charge.
Where aid is awarded in a form other than a grant, the aid
amount shall be the grant equivalent of the aid. Aid payable
in several instalments shall be discounted to its value at the
moment of granting. The interest rate to be used for
discounting purposes and for calculating the aid amount in
a soft loan shall be the reference rate applicable at the time
of grant. The aid intensity is calculated per beneficiary;

its

legal

irrespective of

research institute,

‘research organisation’ means an entity, such as university
or
status
(organised under public or private law) or way of financing,
whose primary goal is to conduct fundamental research,
industrial research or experimental development and to
disseminate their results by way of teaching, publication or
technology transfer; all profits are reinvested in these
activities, the dissemination of their results or teaching;
undertakings that can exert influence upon such an entity,
in the quality of, for example, shareholders or members,
shall enjoy no preferential access to the research capacities
of such an entity or to the research results generated by it;

(e)

‘fundamental research’ means experimental or theoretical
work undertaken primarily to acquire new knowledge of
the underlying foundations of phenomena and observable
facts, without any direct practical application or use in
view;

(20) Currently OJ C 244, 1.10.2004, p. 2.

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(f)

(g)

(h)

(i)

‘industrial research’ means the planned research or critical
investigation aimed at the acquisition of new knowledge
and skills for developing new products, processes or
services or for bringing about a significant improvement
in existing products, processes or services. It comprises the
creation of components of complex systems, which is
necessary for the industrial research, notably for generic
technology validation, to the exclusion of prototypes as
covered by point(g);

‘experimental development’ means the acquiring, com-
bining, shaping and using of existing scientific, technolo-
gical, business and other relevant knowledge and skills for
the purpose of producing plans and arrangements or
designs for new, altered or improved products, processes or
services. These may also include,
for example, other
activities aiming at
the conceptual definition, planning
and documentation of new products, processes and
services. The activities may comprise producing drafts,
drawings, plans and other documentation, provided that
they are not intended for commercial use.

The development of commercially usable prototypes and
pilot projects is also included where the prototype is
necessarily the final commercial product and where it is too
to be used only for
expensive
demonstration and validation purposes.
In case of a
subsequent commercial use of demonstration or pilot
projects, any revenue generated from such use must be
deducted from the eligible costs.

to produce

for

it

The experimental production and testing of products,
processes and services are also eligible, provided that these
cannot be used or transformed to be used in industrial
applications or commercially.

Experimental development does not include the routine or
periodic changes made to products, production lines,
manufacturing processes,
existing services and other
operations in progress, even if such changes may represent
improvements;

‘repayable advance’ means a loan for a project which is
paid in one or more instalments and the conditions for the
reimbursement of which depend on the outcome of the
R&D&I project,

changes

‘process innovation’ (21) means the implementation of a
new or significantly improved production or delivery
method (including significant
in techniques,
equipment and/or software). Minor changes or improve-
ments, an increase in production or service capabilities
through the addition of manufacturing or logistical systems
which are very similar to those already in use, ceasing to
use a process, simple capital replacement or extension,
changes resulting purely from changes in factor prices,
customisation, regular seasonal and other cyclical changes,
trading of new or significantly improved products are not
considered innovations;

(21) Cf. definition in the OSLO manual, Guidelines for Collecting and
Interpreting Innovation Data, 3rd Edition, Organisation for
Economic Co-operation and Development, 2005, page 49.

(j)

(k)

‘organisational innovation’ (22) means the implementa-
tion of a new organisational method in the undertaking’s
business practices, workplace organisation or external
relations. Changes in business practices, workplace organi-
sation or external relations that are based on organisational
methods already in use in the undertaking, changes in
management strategy, mergers and acquisitions, ceasing to
use a process, simple capital replacement or extension,
changes resulting purely from changes in factor prices,
customisation, regular seasonal and other cyclical changes,
trading of new or significantly improved products are not
considered innovations;

‘highly qualified personnel’ means researchers, engineers,
designers and marketing managers with tertiary education
relevant professional
degree and at
experience. Doctoral
relevant
professional experience;

training may count as

least 5 years of

(l)

‘secondment’ means temporary employment of personnel
by a beneficiary during a period of time, after which the
personnel has the right to return to its previous employer;

(m)

innovative

‘innovation clusters’ means groupings of
independent
undertakings — innovative start-ups, small, medium and
large undertakings as well as research organisations —
operating in a particular sector and region and designed to
stimulate
activity by promoting intensive
interactions, sharing of facilities and exchange of knowledge
and expertise and by contributing effectively to technology
transfer, networking and information dissemination among
the undertakings in the cluster. Preferably, the Member State
should intend to create a proper balance of SMEs and large
undertakings in the cluster, to achieve a certain critical
mass, notably through specialisation in a certain area of
R&D&I and taking into account existing clusters in the
Member State and at Community-level.

3.

STATE AID WITHIN THE MEANING OF ARTICLE 87(1)

OF THE EC TREATY

Generally, any funding meeting the criteria of 87(1) of the EC
Treaty will be considered to be State aid. For the sake of
providing further guidance, situations typically arising in the field
of Research, Development and Innovation activities are con-
sidered below.

3.1.

Research organisations and innovation

intermediaries as recipients of State aid within the meaning
of Article 87(1) of the EC Treaty

The question whether research organisations are recipients of
State aid must be answered in accordance with general State aid
principles.

(22) Cf. definition in the OSLO manual, page 51.

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In line with Article 87(1) of the EC Treaty and the case-law of the
Court, public financing of R&D&I activities by research
organisations will qualify as State aid,
if all conditions of
Article 87(1) of the EC Treaty are fulfilled. In accordance with the
case-law, this requires inter alia that the research organisation
qualifies as an undertaking within the meaning of Article 87(1)
of the EC Treaty. This does not depend upon its legal status
(organized under public or private law) or economic nature (i.e.
profit making or not). What is decisive for its qualification as an
undertaking is whether the research organisation carries out an
economic activity, which is an activity consisting of offering
goods and/or services on a given market (23). Accordingly, any
public funding of economic activities falls under Article 87(1) of
the EC Treaty, should all other conditions be fulfilled.

non-economic character if these activities are of an internal
nature (25) and all income from these activities is reinvested in
the primary activities of the research organisations (26).

3.1.2. Public funding of economic activities

innovation
If research organisations or other not-for-profit
intermediaries (for example,
incubators,
technology centres,
chambers of commerce) perform economic activities, such as
to business
renting out
undertakings or performing contract research, this should be
done on normal market conditions, and public funding of these
economic activities will generally entail State aid.

supplying services

infrastructures,

3.1.1. Public funding of non-economic activities

If the same entity carries out activities of both economic and
non-economic nature, in order to avoid cross-subsidisation of
the economic activity, the public funding of the non-economic
activities will not fall under Article 87(1) of the EC Treaty, if the
two kinds of activities and their costs and funding can be clearly
separated (24). Evidence that
the costs have been allocated
correctly can consist of annual
the
financial statements of
universities and research organisations.

However, if the research organisation or not-for-profit innova-
tion intermediary can prove that the totality of the State funding
that it received to provide certain services has been passed on to
the final recipient, and that there is no advantage granted to the
intermediary, the intermediary organisation may not be recipient
of State aid.

For aid to the final recipients, normal State aid rules apply.

The Commission nevertheless considers
the primary
activities of research organisations are normally of a non-
economic character, notably:

that

— education for more and better skilled human resources;

— the conduct of independent R&D for more knowledge and
better understanding, including collaborative R&D;

3.2.

Indirect State aid within the meaning of

Article 87(1) of the EC Treaty to undertakings through
publicly funded research organisations

This section is intended to clarify under which conditions
undertakings obtain an advantage within the meaning of
Article 87(1) of the EC Treaty in cases of contract research by
a research organisation or collaboration with a research
organisation. As far as the other elements of Article 87(1) of
the EC Treaty are concerned,
In
particular, it will have to be assessed in accordance with the
relevant case-law whether
the research
organisation can be attributed to the State (27).

the behaviour of

rules apply.

the normal

— the dissemination of research results.

The Commission furthermore considers that technology transfer
activities (licensing, spin-off creation or other forms of manage-
ment of knowledge created by the research organisation) are of

(23) Case 118/85 Commission v. Italy [1987] ECR 2599, paragraph 7, Case
C-35/96 Commission v. Italy [1998] ECR I-3851, CNSD, paragraph 36;
Case C-309/99 Wouters [2002] ECR I-1577 paragraph 46.

(24) Economic activities comprise in particular research carried out under
contract with industry, the renting out of research infrastructure and
consultancy work.

(25) By internal nature, the Commission means a situation where the
management of the knowledge of the research organisation(s) is
conducted either by a department or a subsidiary of the research
organisation or jointly with other research organisations. Contract-
ing the provision of specific services to third parties by way of open
tenders does not jeopardise the internal nature of such activities.

(26) For all remaining kinds of

technology transfer receiving State
funding, the Commission does not consider itself in a position, on
the basis of its current knowledge, to decide in a general manner
upon the State aid character of the funding of such activities. It
underlines the obligation of the Member States under Article 88(3)
of the EC Treaty to assess the character of such measures in each case
and to notify them to the Commission, in case they consider them to
represent State aid.

(27) Cf. Case C-482/99 France v. Commission [2002] ECR I-4397, on the

issue of imputability to the State.

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3.2.1. Research on behalf of undertakings (Contract research or

research services)

This point concerns the situation in which a project is carried out
by a research organisation on behalf of an undertaking. The
research organisation, acting as an agent, renders a service to the
undertaking acting as principal in situations where (i) the agent
receives payment of an adequate remuneration for its service and
(ii) the principal specifies the terms and conditions of
this
service. Typically, the principal will own the results of the project
and carry the risk of failure. When a research organisation carries
out such a contract, there will normally be no State aid passed to
the undertaking through the research organisation, if one of the
following conditions is fulfilled:

(1)

(2)

the research organisation provides its service at market
price; or

there is no market price,

the research organisation
if
provides its service at a price which reflects its full costs
plus a reasonable margin.

3.2.2. Collaboration of undertakings and research organisa-

tions

In a collaboration project, at least two partners participate in the
design of the project, contribute to its implementation and share
the risk and the output of the project.

In the case of collaboration projects carried out jointly by
undertakings and research organisations,
the Commission
considers that no indirect State aid is granted to the industrial
partner through the research organisation due to the favourable
conditions of the collaboration if one of the following conditions
is fulfilled:

(1)

(2)

(3)

the participating undertakings bear the full cost of the
project.

the results which do not give rise to intellectual property
rights may be widely disseminated and any intellectual
property rights to the R&D&I results which result from the
activity of the research organisation are fully allocated (28)
to the research organisation.

the research organisation receives from the participating
undertakings compensation equivalent to the market price
for the intellectual property rights (29) which result from the
activity of the research organisation carried out in the
project and which are transferred to the participating

(28) ‘Full allocation’ means that the research organization enjoys the full
economic benefit of those rights by retaining full disposal of them,
notably the right of ownership and the right to license. These
the organisation decides to
conditions may also be fulfilled if
conclude further contracts concerning these rights
including
licensing them to the collaboration partner.

(29) ‘Compensation equivalent to the market price for the intellectual
property rights’ refers to compensation for the full economic benefit
of those rights. In line with general State aid principles and given the
inherent difficulty to establish objectively the market price for
intellectual property rights,
the Commission will consider this
condition fulfilled if the research organisation as seller negotiates in
order to obtain the maximum benefit at the moment when the
contract is concluded.

undertakings. Any contribution of the participating under-
takings to the costs of the research organisation shall be
deducted from such compensation.

If none of the previous conditions are fulfilled, the Member State
may rely on an individual assessment of
the collaboration
project (30). There may also be no State aid where the assessment
of the contractual agreement between the partners leads to the
conclusion that any intellectual property rights to the R&D&I
results as well as access rights to the results are allocated to the
different partners of the collaboration and adequately reflect
their respective interests, work packages, and financial and other
contributions to the project. If conditions (1), (2) and (3) are not
the collaboration
fulfilled and the individual assessment of
project does not lead to the conclusion that there is no State aid,
the Commission will consider the full value of the contribution
of the research organisation to the project as aid to undertakings.

4.

COMPATIBILITY OF AID UNDER ARTICLE 87(3)(B) OF

THE EC TREATY

Aid for R&D&I to promote the execution of an important project
of common European interest may be considered to be
compatible with the common market pursuant to Article 87(3)
(b) of the EC Treaty.

The Commission will conclude that Article 87(3)(b) of the EC
Treaty applies if the following cumulative conditions are fulfilled:

(1)

(2)

the aid proposal concerns a project which is clearly defined
in respect of the terms of its implementation including its
participants as well as its objectives. The Commission may
also consider a group of projects as together constituting a
project.

the project must be in the common European interest: the
project must contribute in a concrete, clear and identifiable
manner to the Community interest. The advantage achieved
by the objective of the project must not be limited to one
Member State or the Member States implementing it, but
must extend to the Community as a whole. The project
must present a substantive leap forward for the Community
objectives, for instance by being of great importance for the
European Research Area or being a lead project
for
European industry. The fact that the project is carried out
by undertakings in different countries is not sufficient. The
positive effects of the aid could be shown for example by
important spill-overs for society, through the contribution
of the measure to the improvement of the Community
situation regarding R&D&I in the international context,
through creation of new markets or the development of

(30) This provision does not intend to modify the obligation of the
Member States to notify certain measures on the basis of Article 88
(3) of the EC Treaty.

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new technologies. The benefits of the project should not be
confined to the industry directly concerned but its results
should be of wider
relevance and application to the
economy within the Community (up- or downstream
markets, alternative uses in other sectors, etc.).

the aid is necessary to achieve the defined objective of
common interest and presents an incentive for
the
execution of the project, which must also involve a high
level of risk. This could be shown by looking at the level of
profitability of the project, at the amount of investment and
time path of cash flows and at feasibility studies, risk
assessments and expert opinions.

is of great

the project
to its
character and its volume: it must be a meaningful project
with regard to its objective and a project of substantial size.

importance with respect

(3)

(4)

The Commission will consider notified projects more favourably
if they include a significant own contribution of the beneficiary
to the project. It will equally consider more favourably notified
projects involving undertakings or research entities from a
significant number of Member States.

In order to allow for the Commission to properly assess the case,
the common European interest must be demonstrated in
practical terms: for example, it must be demonstrated that the
project enables significant progress to be made towards achieving
specific Community objectives.

5.

COMPATIBILITY OF AID UNDER ARTICLE 87(3)(C) OF

THE EC TREATY

State aid for research and development and innovation shall be
compatible with the common market within the meaning of
Article 87(3)(c) of the EC Treaty, if, on the basis of the balancing
test,
it leads to increased R&D&I-activities without adversely
affecting trading conditions to an extent contrary to the
common interest. The Commission will view favourably
notifications of aid measures which are supported by rigorous
evaluations of similar past aid measures demonstrating the
incentive effect of the aid. The following measures are eligible for
compatibility under Article 87(3)(c) of the EC Treaty.

5.1.

Aid for R&D projects

Aid for R&D projects will be considered compatible with the
common market within the meaning of Article 87(3)(c) of the EC
Treaty provided that the conditions set out in this section are
fulfilled.

5.1.1. Research categories

The aided part of the research project must completely fall within
one or more of the following research categories: fundamental
research, industrial research, experimental development.

When classifying different activities, the Commission will refer to
its own practice as well as the specific examples and explanations
provided in the Frascati Manual on the Measurement of Scientific
and technological Activities, Proposed Standard Practice for
Surveys on Research and Experimental Development (31).

When a project encompasses different tasks, each task must be
qualified as falling under the categories of fundamental research,
industrial research or experimental development or as not falling
under any of those categories at all.

This qualification need not necessarily follow a chronological
approach, moving sequentially over time from fundamental
research to activities closer to the market. Accordingly, nothing
will prevent the Commission from qualifying a task which is
carried out at a late stage of a project as industrial research, while
finding that an activity carried out at an earlier stage of the
project constitutes experimental development or is not research
at all.

5.1.2. Basic aid intensities

The aid intensity, as calculated on the basis of the eligible costs of
the project, shall not exceed:

(a)

100 % for fundamental research;

(b) 50 % for industrial research;

(c)

25 % for experimental development.

The aid intensity must be established for each beneficiary of aid,
including in a collaboration project.

In the case of State aid for an R&D project being carried out in
collaboration between research organisations and undertakings,
the combined aid deriving from direct government support for a
specific research project and, where they constitute aid (see
section), contributions from research organisations to that
project may not exceed the applicable aid intensities for each
benefiting undertaking.

5.1.3. Bonuses

The ceilings fixed for
development may be increased as follows:

industrial research and experimental

(a) where the aid is to be given to SMEs, the aid intensity may
be increased by 10 percentage points for medium-sized
enterprises and by 20 percentage points
small
enterprises;

for

(31) Organisation for Economic Co-operation and Development, 2002.

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(b)

up to a maximum aid intensity of 80 %, a bonus of 15
percentage points may be added if (32):

(i)

the project involves effective collaboration between at
least two undertakings which are independent of each
other and the following conditions are fulfilled:;

— no single undertaking must bear more than
70 % of the eligible costs of the collaboration
project;

— the project must involve collaboration with at
least one SME or be cross-border, that is to say,
the research and development activities are
carried out in at least two different Member
States.

(ii)

the project involves effective collaboration between an
undertaking and a research organisation, particularly
in the context of co-ordination of national R&D
policies, and the following conditions are fulfilled:

— the research organisation bears at least 10 % of

the eligible project costs;

— the research organisation has the right to publish
the results of the research projects insofar as they
stem from research implemented by that
organisation.

(iii) only in case of industrial research, if the results of the
project are widely disseminated through technical and
scientific conferences or published in scientific or
technical
in open access repositories
(databases where raw research data can be accessed
by anyone), or through free or open source software.

journals or

For the purposes of points (i) and (ii) subcontracting is not
considered to be effective collaboration.
In case of
collaboration between an undertaking and a research
organisation, the maximum aid intensities and bonuses
specified in this Framework do not apply to the research
organisation.

Small enter-
prise

Medium-
sized enter-
prise

Large Enter-
prise

45 %

60 %

35 %

50 %

25 %

40 %

for large undertak-
ings: cross-border or
with at least one SME

or

— collaboration of an
undertaking with a
research organisation

or

— dissemination of

results

Experimental development

Experimental development

subject to:

— collaboration

between undertak-
ings;

for large undertak-
ings, with cross-bor-
der or at least one
SME

or

— collaboration of an
undertaking with a
research organisation

5.1.4. Eligible costs

The aid intensity will be calculated on the basis of the costs of the
research project to the extent that they can be considered as
eligible. All eligible costs must be allocated to a specific category
of R&D.

Table illustrating the aid intensities:

The following costs shall be eligible:

Small enter-
prise

Medium-
sized enter-
prise

Large Enter-
prise

(a)

personnel costs (researchers, technicians and other support-
ing staff to the extent employed on the research project);

Fundamental research

100 %

100 %

100 %

Industrial research

Industrial research

subject to:

— collaboration

between undertak-
ings;

70 %

80 %

60 %

75 %

50 %

65 %

(b)

costs of instruments and equipment to the extent and for
the period used for the research project. If such instruments
life for the
and equipment are not used for their full
research project, only the depreciation costs corresponding
to the life of the research project, as calculated on the basis
of good accounting practice, are considered as eligible;

(32) Projects funded under the Framework programme of the European
Community for research, technological development and demon-
stration activities will automatically qualify for a bonus
for
collaboration due to the minimum conditions for participation in
such projects.

(c)

costs for building and land, to the extent and for the
duration used for the research project. With regard to
buildings, only the depreciation costs corresponding to the
life of the research project, as calculated on the basis of

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good accounting practice are considered as eligible. For
land, costs of commercial transfer or actually incurred
capital costs are eligible;

research,

technical knowledge and
cost of contractual
patents bought or licensed from outside sources at market
prices, where the transaction has been carried out at arm’s
length and there is no element of collusion involved, as well
as costs of consultancy and equivalent services used
exclusively for the research activity;

additional overheads incurred directly as a result of the
research project;

other operating expenses,
including costs of materials,
supplies and similar products incurred directly as a result of
the research activity.

(d)

(e)

(f)

In case of a success exceeding the outcome defined as successful,
the Member State concerned should be entitled to request
payments beyond repayment of the advance amount including
interest according to the reference rate foreseen by the
Commission.

In case the project fails, the advance does not have to be fully
repaid. In case of partial success, the Commission will normally
require that the repayment secured is in proportion to the degree
of success achieved.

The advance may cover up to a maximum of 40 % of the eligible
costs for the experimental development phase of the project and
up to 60 % for the industrial research phase, to which bonuses
can be added.

5.1.5. Repayable advance

5.1.6. Fiscal measures

If a Member State grants a repayable advance which qualifies as
State aid within the meaning of Article 87(1) of the EC Treaty,
the following rules shall apply.

On the basis of evaluation studies (34) provided by Member States
in the notification, the Commission will consider that R&D&I
fiscal aid schemes have an incentive effect by stimulating higher
R&D&I-spending by undertakings.

Where a Member State can demonstrate, on the basis of a valid
methodology based on sufficient verifiable data, that it is possible
to calculate the gross grant equivalent of such aid granted in the
form of a repayable advance and to accordingly design a scheme
where this gross grant equivalent
fulfils the conditions on
maximum intensities in this section, it may notify this scheme
and the associated methodology to the Commission.
the
Commission accepts the methodology and deems the scheme
compatible, the aid may be granted on the basis of the gross
grant equivalent of
the repayable advance, up to the aid
intensities permissible under this section.

If

In all other cases, the repayable advance is expressed as a
percentage of the eligible costs; it may then exceed the rates
indicated in this section. provided that the following rules are
fulfilled.

In order to allow the Commission to assess the measure, it must
provide for detailed provisions on the repayment in case of
success and clearly define what will be considered as a successful
outcome of the research activities. All these elements must be
notified to the Commission. The Commission will examine that
the definition of a successful outcome has been established on
the basis of a reasonable and prudent hypothesis.

In case of a successful outcome, the measure must provide that
the advance is repaid with an interest rate at least equal to the
applicable rate resulting from the application of the Commission
notice on the method for setting the reference and discount
rates (33).

(33) OJ C 273, 9.9.1997, p. 3. also published under:

http://ec.europa.eu/comm/competition/state_aid/legislation/refer-
ence.html.

The aid intensity of an R&D&I fiscal State aid measure can be
calculated either on the basis of individual R&D&I projects or, at
the level of an undertaking, as the ratio between the overall tax
relief and the sum of all eligible R&D&I costs incurred in a period
not exceeding three consecutive fiscal years. In the latter case, the
R&D&I fiscal State aid measure may apply without distinction to
all eligible R&D&I activities; the applicable aid intensity for
experimental development must then not be exceeded (35).

At the time of notification, the Member State must provide an
estimate of the number of beneficiaries.

5.1.7. Matching clause

intensities

international

trade, higher

to address actual or potential direct or

indirect
In order
distortions of
than
generally permissible under this section may be authorized if
— directly or indirectly — competitors located outside the
Community have received (in the last three years) or are going to
receive, aid of an equivalent
intensity for similar projects,
programmes, research, development or technology. However,
where distortions of international trade are likely to occur after
more than three years, given the particular nature of the sector in
question, the reference period may be extended accordingly.

(34) Even though this may not be possible ex ante for a newly introduced
fiscal State aid measure, Member States will be expected to provide
evaluation studies on the incentive effects of
their own fiscal
measures.

(35) Conversely, where an R&D&I fiscal State aid measure distinguishes
between different R&D&I categories, the relevant aid intensities must
not be exceeded.

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If at all possible, the Member State concerned will provide the
Commission with sufficient information to enable it to assess the
situation, in particular regarding the need to take account of the
competitive advantage enjoyed by a third-country competitor. If
the Commission does not have evidence concerning the granted
or proposed aid, it may also base its decision on circumstantial
evidence.

5.2.

Aid for technical feasibility studies

experimental development

feasibility studies preparatory to industrial
Aid for technical
research or
shall be
compatible with the common market within the meaning of
Article 87(3)(c) of the EC Treaty provided that the aid intensity,
as calculated on the basis of the study costs, does not exceed the
following aid intensities:

activities

(a)

(b)

for SMEs, 75 % for studies preparatory to industrial research
activities and 50 % for studies preparatory to experimental
development activities,

for large undertakings, 65 % for studies preparatory to
industrial research activities and 40 % for studies prepara-
tory to experimental development activities.

5.3.

Aid for industrial property rights costs for SMEs

the costs associated with obtaining and
Aid to SMEs for
validating patents and other industrial property rights shall be
compatible with the common market within the meaning of
Article 87(3)(c) of the EC Treaty up to the same level of aid as
would have qualified as R&D aid in respect of the research
activities which first
led to the industrial property rights
concerned.

Eligible costs are:

all costs preceding the grant of the right in the first legal
including costs relating to the preparation,
jurisdiction,
filing and prosecution of the application as well as costs
incurred in renewing the application before the right has
been granted;

translation and other costs incurred in order to obtain the
granting or validation of
legal
jurisdictions;

in other

right

the

(a)

(b)

(c)

5.4.

Aid for young innovative enterprises

Aid to young innovative enterprises shall be compatible with the
common market within the meaning of Article 87(3)(c) of the EC
Treaty if the following conditions are fulfilled (36):

(a)

the beneficiary is a small enterprise that has been of
existence for less than 6 years at the time when the aid is
granted and

(b)

the beneficiary is an innovative enterprise, on the basis that:

(i)

(ii)

the Member State can demonstrate, by means of an
evaluation carried out by an external expert, notably
on the basis of a business plan, that the beneficiary
in the foreseeable future develop products,
will
services or processes which are technologically new
or substantially improved compared to the state of the
art in its industry in the Community, and which carry
a risk of technological or industrial failure, or

the R&D expenses of the beneficiary represent at least
15 % of its total operating expenses in at least one of
the three years preceding the granting of the aid or in
the case of a start-up enterprise without any financial
history, in the audit of its current fiscal period, as
certified by an external auditor.

(c)

the aid is not higher than EUR 1 million. This aid may not
exceed EUR 1,5 million in regions eligible for
the
derogation in Article 87(3)(a) of
the EC Treaty, and
EUR 1,25 million in regions eligible for the derogation in
Article 87(3)(c) of the EC Treaty.

The beneficiary may receive the aid only once during the period
in which it qualifies as a young innovative enterprise This aid
may be cumulated with other aid under this framework, with aid
for research and development and innovation exempted by
Regulation (EC) No 364/2004 or any successor regulation and
with aid approved by the Commission under the risk capital
guidelines.

The beneficiary may receive State aid other than R&D&I aid and
risk capital aid only 3 years after the granting of the young
innovative enterprise aid.

5.5.

Aid for process and organisational innovation in

services

Innovation in services may not always fall within the research
categories defined in section 5.1 but is typically less systematic

costs incurred in defending the validity of the right during
the official prosecution of the application and possible
opposition proceedings, even if such costs occur after the
right is granted.

(36) This is without prejudice to the application of the Guidelines on
national regional aid for 2007 — 2013, OJ C 54, 4.3.2006, p. 13,
and notably the granting of aid for newly created small enterprises
up to a total of EUR 2 million per small enterprise located in regions
eligible for the derogation in Article 87(3)(a) of the Treaty.

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and stems frequently from customer interaction, market demand,
adoption of business and organisational models and practices
from more innovative sectors or from other similar sources.

5.6.

Aid for innovation advisory services and for

innovation support services

Aid for process and organisational innovation in services shall be
compatible with the common market within the meaning of
Article 87(3)(c) of the EC Treaty with a maximum aid intensity of
15 % for large enterprises, 25 % for medium enterprises and
35 % for small enterprises. Large enterprises are only eligible for
such aid if they collaborate with SMEs in the aided activity,
whereby the collaborating SMEs must incur at least 30 % of the
total eligible costs.

Routine or periodic changes made to products, production lines,
manufacturing processes, existing services and other operations
in progress, even if such changes may represent improvements,
do not qualify for State aid.

The following conditions must be fulfilled:

(a)

(b)

(c)

(d)

(e)

organisational innovation must always be related to the use
Information and Communication
and exploitation of
Technologies (ICT) to change the organisation;

the innovation must be formulated as a project with an
identified and qualified project manager, as well as
identified project costs;

the result of the aided project must be the development of a
standard, of a business model, methodology or concept,
which can be systematically reproduced, possibly certified,
and possibly patented;

the process or organisational innovation must be new or
substantially improved compared to the state of the art in
its industry in the Community. The novelty could be
demonstrated by the Member States for instance on the
basis of a precise description of the innovation, comparing
it with state of the art process or organisational techniques
used by other undertakings in the same industry;

the process or organisational innovation project must entail
a clear degree of risk. This risk could be demonstrated by
the Member State for instance in terms of: project costs in
relation to company turnover, time required to develop the
new process, expected gains from the process innovation by
comparison with the project costs, probability of failure.

Eligible costs are the same as for aid to R&D projects (cf. section).
In case of organisational innovation, however, costs of instru-
ICT instruments and
ments and equipment cover costs of
equipment only.

Aid for innovation advisory services and for innovation support
services shall be compatible with the common market within the
meaning of Article 87 (3) (c) of the EC Treaty if each of the
following conditions are fulfilled:

(1)

the beneficiary is an SME;

(2)

(3)

(4)

the aid does not exceed a maximum of EUR 200 000 per
beneficiary within any three year period (37);

the service provider benefits from a national or European
certification. If the service provider does not benefit from a
national or European certification, the aid may not cover
more than 75 % of the eligible costs;

the beneficiary must use the State aid to buy the services at
market price (or if the service provider is a non-for-profit
entity, at a price which reflects its full costs plus a
reasonable margin).

The following costs shall be eligible:

— as regards innovation advisory services the following costs:
management consulting; technological assistance; technol-
ogy transfer services; training; consultancy for acquisition,
protection and trade in Intellectual Property Rights and for
licensing agreements; consultancy on the use of standards

— as regards innovation support services the following costs:
office space; data banks; technical libraries; market research;
use of laboratory; quality labelling, testing and certification;

If the service provider is a not-for-profit entity, the aid may be
given in the form of a reduced price, as the difference between
the price paid and the market price (or a price which reflects full
costs plus a reasonable margin). In such a case, the Member
States shall set up a system ensuring transparency about the full
costs of the innovation advisory and innovation support services
provided, as well as about the price paid by the beneficiary, so
that the aid received can be measured and monitored.

5.7.

Aid for the loan of highly qualified personnel

Aid for the loan of highly qualified personnel seconded from a
research organisation or a large enterprise to an SME shall be
compatible with the common market within the meaning of
Article 87(3)(c) of
the EC Treaty, provided the following
conditions are fulfilled:

The seconded personnel must not be replacing other personnel,
but must be employed in a newly created function within the
beneficiary undertaking and must have been employed for at
the large
least

two years in the research organisation or

(37) Without prejudice to the possibility of also receiving de minimis aid in

respect of other eligible expenses.

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enterprise, which is sending the personnel on secondment. The
seconded personnel must work on R&D&I activities within the
SME receiving the aid.

The statistical effect regions which fall under the derogation
under Article 87(3)(c) of the EC Treaty from 1 January 2011 will
be eligible for an aid intensity of 20 %.

for borrowing and
Eligible costs are all personnel costs
employing highly qualified personnel,
including the costs of
using a recruitment agency, as well as a mobility allowance for
the seconded personnel. The maximum aid intensity shall be
50 % of
for a maximum of 3 years per
the eligible costs,
undertaking and per person borrowed.

This provision does not allow covering consultancy costs
(payment of
the service rendered by the expert, without
employing the expert in the undertaking) as such, which are
covered under the rules for SME-aid (38).

5.8.

Aid for innovation clusters

Investment aid may be granted for the setting up, expansion
and animation of innovation clusters exclusively to the legal
entity operating the innovation cluster. This entity shall be in
charge of managing the participation and access to the cluster’s
premises, facilities and activities. Access to the cluster’s premises,
facilities and activities must not be restricted and the fees charged
for using the cluster’s facilities and for participating in the
cluster’s activities should reflect their costs.

Such aid may be granted for the following facilities:

— facilities for training and research centre:

In the case of aid being granted to an SME, the maximum
intensities shall be increased by 20 percentage points for aid
granted to a small enterprise and by 10 percentage points for aid
granted to a medium-sized enterprise.

The eligible costs shall be the costs relating to investment in land,
buildings, machinery and equipment.

Operating aid for cluster animation may be granted to the
legal entity operating the innovation cluster. Such aid must be
temporary and, as a general rule, must be abolished over time, so
as to provide an incentive for prices to reflect costs reasonably
rapidly.

Such aid may be granted for a limited duration of five years
where the aid is degressive. Its intensity may amount to 100 %
the first year but must have fallen in a linear fashion to zero by
the end of the fifth year. In the case of non-degressive aid, its
duration is limited to five years and its intensity must not exceed
50 % of the eligible costs. In duly justified cases, and on the basis
of convincing evidence provided by the notifying Member State,
aid for cluster animation may be granted for a longer period of
time, not exceeding 10 years.

— open-access research infrastructures:

laboratory,

testing

facility;

The eligible costs shall be the personnel and administrative costs
relating to the following activities:

— broadband network infrastructures.

The maximum aid intensity is 15 %.

— marketing of the cluster to recruit new companies to take

part in the cluster,

In the case of regions falling under Article 87(3)(a) of the EC
Treaty, the Commission considers that the intensity must not
exceed:

— management of the cluster’s open-access facilities,

— 30 % for regions with less than 75 % of average EU-25 GDP
per capita, for outermost regions with higher GDP per
capita and until 1 January 2011 statistical effect regions (39),

— organisation of

training programmes, workshops and
conferences to support knowledge sharing and networking
between the members of the cluster.

— 40 % for regions with less than 60 % of average EU-25 GDP

per capita,

— 50 % for regions with less than 45 % of average EU-25 GDP

per capita.

In recognition of their specific handicaps, the outermost regions
will be eligible for a further bonus of 20 % if their GDP per capita
falls below 75 % of the EU-25 average and 10 % in other cases.

(38) Currently Regulation (EC) No 70/2001.
(39) Cf. Guidelines on national regional aid for 2007-2013, para. 18-20.

When notifying investment aid or aid for cluster animation, the
Member State must provide an analysis of the technological
specialisation of
existing regional
potential, existing research capacity, presence of clusters in the
Community with similar purposes and potential market volumes
of the activities in the cluster.

innovation cluster,

the

Cases where Member States fund innovation infrastructure to be
operated on an open access basis within not for profit research
organisations should be assessed using the provisions set out in
section 3.1.

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6.

INCENTIVE EFFECT AND NECESSITY OF AID

increase in speed: shorter time before completion of the project as
compared to the same project being carried out without aid;

State aid must have an incentive effect, i.e. result in the recipient
changing its behaviour so that it increases its level of R&D&I
activity. As a result of the aid, the R&D&I activity should be
increased in size, scope, amount spent or speed.

The Commission considers that the aid does not present an
incentive for the beneficiary in all cases in which the R&D&I-
activity (40) has already commenced prior to the aid application
by the beneficiary to the national authorities.

increase in total amount spent on R&D&I: increase in total R&D&I
spending by the aid beneficiary; changes in the committed
budget for the project (without corresponding decrease in the
budget of other projects); increase in R&D&I spending by the aid
beneficiary as a proportion of total turnover.

If the aided R&D&I-project has not started before the application,
the Commission considers that the incentive effect is auto-
matically met for the following aid measures:

If a significant effect on at least one of these elements can be
demonstrated, taking account of the normal behaviour of an
undertaking in the respective sector,
the Commission will
normally conclude that the aid proposal has an incentive effect.

— project aid and feasibility studies where the aid beneficiary
is below EUR

is an SME and where the aid amount
7,5 million for a project per SME,

— aid for industrial property rights costs for SMEs,

— aid for young innovative enterprises,

— aid for innovation advisory services and innovation support

services,

— aid for the loan of highly qualified personnel.

For all other measures (41), the Commission will require that an
incentive effect is demonstrated by the notifying Member States.

In order to verify that the planned aid will
induce the aid
recipient to change its behaviour so that it increases its level of
R&D&I activity, the Member States shall provide an ex-ante
evaluation of the increased R&D&I activity for all individual
measures assessed by the Commission, on the basis of an
analysis comparing a situation without aid and a situation with
aid being granted. The following criteria may be used, together
with other
relevant quantitative and/or qualitative factors
submitted by the Member State that made the notification:

increase in project size: increase in the total project costs (without
decreased spending by the aid beneficiary by comparison with a
situation without aid); increase in the number of people assigned
to R&D&I activities;

in scope:

increase in the number of

increase
the expected
deliverables from the project; more ambitious project illustrated
by a higher probability of a scientific or technological break-
through or a higher risk of failure (notably linked to the higher
risk involved in the research project, to the long-term nature of
the project and uncertainty about its results);

If the Commission undertakes a detailed assessment of an
these indicators may not be considered
individual measure,
sufficient demonstration of an incentive
effect, and the
Commission may need to be provided with complementary
evidence.

When assessing an aid scheme, the conditions relating to the
incentive effect shall be deemed to be satisfied if the Member
State has committed itself to grant individual aid under the
approved aid scheme only after it has verified that an incentive
reports on the
effect
In the annual
implementation of
reports, the Member State must demonstrate how it has assessed
the incentive effect of the aid before granting the aid through the
use of the quantitative and qualitative indicators given above.

is present and to submit annual

the approved aid scheme.

7.

COMPATIBILITY OF AID SUBJECT TO A DETAILED

ASSESSMENT

The Commission considers that an increase in the level of
R&D&I activity in the Community is in the common interest of
the Community as it can be expected to significantly contribute
to growth, prosperity and sustainable development.
In this
context, the Commission recognises that State aid has a positive
role to play when it is well targeted and creates the right
incentive for undertakings to increase R&D&I. Nevertheless,
State aid may also lead to significant distortions of competition
which must be taken into consideration.

(40) If the aid proposal is to grant aid for an R&D&I-project, this does not
exclude that
the potential beneficiary has already carried out
feasibility studies which are not covered by the request for State aid.
(41) I.e. project aid for large undertakings and for SMEs for aid exceeding
EUR 7,5 million; aid for process and organisational innovation in
services and aid for innovation clusters.

7.1.

Measures subject to a detailed assessment

For the following measures, due to the higher risk of distortion
of competition, the Commission will carry out a more detailed
assessment.

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For measures covered by a BER

— for all cases notified to the Commission following a duty to

notify aid individually as prescribed in the BER.

for measures subject to a detailed assessment. This guidance is
intended to make the Commission’s decisions and their reason-
ing transparent and foreseeable in order to create predictability
and legal certainty.

For measures covered by this framework:

Where the aid amount exceeds :

— for project aid (42) and feasibility studies:

— if

the

project

fundamental
research (43), EUR 20 million per undertaking, per
project/feasibility study;

predominantly

is

— if the project is predominantly industrial research (44),
EUR 10 million per undertaking, per project/feasibility
study;

— for all other projects, EUR 7,5 million per under-

taking, per project/feasibility study.

— for process or organisational

innovation in services

activities, EUR 5 million per project per undertaking;

Detailed assessment will be conducted on the basis of
the
following positive and negative elements which will apply in
addition to the criteria set out in Chapter 5. In some cases, the
applicability and the weight attached to these elements may
depend on the form or objective of the aid. The level of the
Commission’s assessment will be proportional to the risk of
distortion of competition. This means that the scope of the
analysis will depend on the nature of the case. State aid for
activities that are far away from the market is therefore less likely
to give rise to very extensive scrutiny.

Member States are invited to provide all the elements that they
consider useful for the assessment of the case. The Member
States are, in particular, invited to rely on evaluations of past
State aid schemes or measures, impact assessments made by the
granting authority, risk assessments, financial reports, internal
business plans that any company should realise for important
projects, expert opinions and other studies related to R&D&I.

— for innovation clusters (per cluster), EUR 5 million.

7.3.

Positive effects of the aid

The purpose of this detailed assessment is to ensure that high
amounts of aid for R&D&I do not distort competition to an
extent contrary to the common interest, but actually contribute
to the common interest. This happens when the benefits of State
aid in terms of additional R&D&I outweigh the harm for
competition and trade.

The detailed assessment is a proportionate assessment, depend-
ing on the distortion potential of the case. Accordingly, the fact
that a detailed assessment will be carried out does not necessarily
imply the need to open a formal
investigation procedure,
although this may be the case for certain measures.

Provided Member States ensure full co-operation and provide
adequate information in a timely manner, the Commission will
use its best endeavours to conduct the investigation in a timely
manner.

7.2.
Methodology of the detailed assessment: R&D&I
criteria for economic assessment of certain individual cases

Below, the Commission presents guidance as to the kind of
information it may require and the methodology it would follow

(42) For EUREKA projects, this ceiling is set at twice the amount.
(43) A project is considered to consist ‘predominantly’ of fundamental
research, if more than half of the eligible project costs is incurred
through activities which fall within the category of fundamental
research.

(44) A project is considered to consist

industrial
research, if more than half of the eligible project costs is incurred
industrial
through activities which fall within the categories of
research or fundamental research.

‘predominantly’ of

The fact that the aid induces undertakings to pursue R&D&I in
the Community which they would not otherwise have pursued
constitutes the main positive element to take into consideration
when assessing the compatibility of the aid.

In this context, the Commission will notably pay attention to the
following elements:

— the net increase of R&D&I conducted by the undertaking,

— the contribution of the measure to the global improvement
of the sector concerned as regards the level of R&D&I,

— the contribution of the measure to the improvement of the
Community situation regarding R&D&I in the international
context.

7.3.1. Existence of a market failure

As indicated in Chapter 1, State aid may be necessary to increase
R&D&I in the economy only to the extent that the market, on its
own, fails to deliver an optimal outcome. It is established that
certain market failures hamper the overall level of R&D&I in the
Community. However, not all undertakings and sectors in the
economy are confronted to these market failures to the same
extent. Consequently, as regards measures subject to a detailed

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assessment, the Member State should provide adequate informa-
tion whether the aid refers to a general market failure regarding
R&D&I in the Community, or to a specific market failure.

the planned aid will
which they would not otherwise have pursued.

induce undertakings to pursue R&D&I

the
Depending on the specific market
Commission will take into consideration the following elements:

failure addressed,

— Knowledge spillovers: the level of information dissemina-
tion foreseen; the specificity of the knowledge created; the
availability of IPR protection.

— Imperfect and asymmetric information: level of risk and
complexity of research; need for external finance; char-
acteristics of the aid beneficiary to receive external finance.

intensity of

— Coordination failures: number of collaborating under-
takings;
collaboration; diverging interest
between collaborating partners; problems in designing
contracts; problems of third parties to coordinate colla-
boration.

take into account:

the Commission will

For State aid targeting R&D&I projects or activities located in
assisted areas,
(i)
disadvantages caused by the peripherality and other regional
specificities,
(ii) specific local economic data, social and/or
historic reasons for a low level of R&D&I activity in comparison
with the relevant average data and/or situation at national and/or
Community level as appropriate; and (iii) any other relevant
indicator showing an increased degree of market failure.

7.3.2. Appropriate Instrument

State aid for R&D&I can be authorised under Article 87(3)(c) of
the EC Treaty when it is necessary to achieve an objective of
common interest, as an exception to the general prohibition of
State aid. An important element in the balancing test is whether
and to what extent State aid for R&D&I can be considered an
appropriate instrument to increase R&D&I activities, given that
other less distortive instruments may achieve the same results.

In its compatibility analysis, the Commission will take particular
account of any impact assessment of the proposed measure
which the Member State has made. Measures for which the
Member State has considered other policy options and for which
the advantages of using a selective instrument such as State aid
are established and submitted to the Commission, are considered
to constitute an appropriate instrument.

7.3.3. Incentive effect and necessity of aid

Analysing the incentive effect of the aid measure is the most
aid for R&D&I.
important
Identifying the incentive effect translates into assessing whether

condition in analysing State

Chapter 6 provides a series of indicators that can be used by
Member States to demonstrate an incentive effect. However,
when a measure undergoes a detailed assessment, the Commis-
sion will
the aid is
substantiated more precisely,
to avoid undue distortions of
competition.

the incentive effect of

require that

In its analysis, the Commission will, in addition to the indicators
mentioned in Chapter 6, take into consideration the following
elements:

— Specification of intended change: the intended change in
behaviour State aid aims at in the notified case has to be
well specified (new project triggered, size, scope or speed of
a project enhanced).

— Counterfactual analysis: the change of behaviour has to
be identified by counterfactual analysis: what would be the
level of
intended activity with and without aid? The
difference of the two scenarios is considered to be the
impact of the aid measure and describes the incentive effect.

— Level of profitability: if a project would not, in itself, be
profitable to undertake for a private undertaking, but would
generate important benefits for society, it is more likely that
the aid has an incentive effect. To evaluate the overall
the project, evaluation
profitability (or lack thereof) of
methodologies can be used which are standard practice in
the particular industry concerned (45).

— Amount of investment and time path of cash flows:
High start-up investment, low level of appropriable cash
flows and a significant fraction of cash flows arising in the
very far future will be considered positive elements in
assessing the incentive effect.

— Level of risk involved in the research project: On the
basis of e.g. feasibility studies, risk assessments and expert
opinions, the assessment of risk will in particular take into
account the irreversibility of the investment, the probability
of commercial failure, the risk that the project will be less
productive than expected, the risk that conducting the
project would undermine other activities and the risk that
the project costs undermine the undertaking’s financial
viability. For State aid targeting R&D&I projects or activities
located in assisted areas, the Commission will take into
account disadvantages caused by the peripherality and
other regional specificities, which negatively impact on the
level of risk in the research project.

(45) These may include methods to evaluate the Net Present Value of the
project (that is to say, the sum of the discounted expected cash flow
resulting from the investment minus the investment cost),
the
internal rate of return (IRR) or the return of capital employed
(ROCE). Financial reports and internal business plans containing
information on demand forecasts; cost forecasts; financial forecasts
(for example, NPV, IRR, ROCE), documents that are submitted to an
investment committee and that elaborate on various investment
scenarios or documents provided to the financial markets could
serve as evidence.

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— Continuous evaluation: measures for which (low scale)
pilot projects are foreseen, or which define well specified
milestones resulting in termination of the project in case of
failure and where a publicly available ex post monitoring is
foreseen will be considered more positively as regards the
assessment of the incentive effect.

7.3.4. Proportionality of the aid

Independently of
the
Member State concerned should provide the additional following
information:

the criteria mentioned in Chapter 5,

— Open selection process: Where there are multiple
(potential) candidates for undertaking the R&D&I project
in a Member State, the proportionality requirement is more
likely to be met if the project has been allocated on the
basis of
transparent, objective and non-discriminatory
criteria.

— Aid to the minimum: Member States have to explain how
the amount given has been calculated to ensure that it is
limited to the minimum necessary.

There are three distinct ways in which R&D&I aid can distort
competition in product markets:

(1) R&D&I aid can distort the dynamic incentives of market

players to invest (crowding out effect);

(2) R&D&I aid can create or maintain positions of market

power;

(3) R&D&I aid can maintain an inefficient market structure.

State aid may also have a negative effect on trade in the common
market. In particular where R&D&I aid leads to the crowding out
of competitors, the aid measures may essentially result in a shift
of trade flows and location of economic activity.

7.4.1. Distorting dynamic incentives

The main concern related to R&D&I aid to undertakings is that
competitors’ dynamic incentives to invest are distorted. When an
undertaking receives aid, this generally increases the likelihood of
successful R&D&I on the part of this undertaking leading to an
increased presence on the product market(s) in the future. This
increased presence may lead competitors to reduce the scope of
their original investment plans (crowding out effect).

7.4.

Analysis of the distortion of competition and trade

In its analysis, the Commission will consider the following
elements:

State aid for R&D&I may impact on competition at two levels: (i)
competition in the innovation process, i.e. competition in terms
of R&D&I which takes place upstream of product markets and
(ii) competition in the product markets where the results of the
R&D&I activities are exploited.

— Aid amount. Aid measures which involve significant
amounts of aid are more likely to lead to significant
crowding out effects. The significance of the aid amount
will be measured with reference to total private R&D
expenditure in the sector, and the amount spent by the
main players.

focus

its analysis of

the aid measure,

the
In assessing the negative effects of
Commission will
the distortions of
competition on the foreseeable impact the R&D&I aid has on
competition between undertakings in the product markets
concerned. The Commission will give more weight to risks for
competition and trade that arise in a predictable future and with
particular likelihood.

The impact on competition in the innovation process will be
relevant insofar as it has a foreseeable impact on the outcome of
future product market competition. In certain cases the results of
R&D&I, for example, in the form of intellectual property rights,
for
are themselves traded in so-called technology markets,
instance through patent licensing. In these cases, the Commis-
sion may also consider the effect of the aid on competition in the
technology markets.

The impact of R&D&I on product markets is largely dynamic and
the analysis will
therefore be of a forward-looking nature.
Frequently, the same innovative activity will be associated with
multiple future product markets. If so, the impact of State aid will
be looked upon on the set of markets concerned.

— Closeness to the market/category of the aid. The more
the aid measure is aimed at R&D&I activity close to the
market, the more it is liable to develop significant crowding
out effects.

— Open selection process: Where the grant is given on the
basis of objective and non-discriminatory criteria,
the
Commission will take a more positive stance.

— Exit barriers: Competitors are more likely to maintain (or
even to increase) their investment plans when exit barriers
to the innovation process are high. This may be the case
when many of the competitors’ past investments are locked
in to a particular R&D&I trajectory.

— Incentives to compete for a future market: R&D&I aid
may lead to a situation where competitors to the aid
beneficiary renounce competing for a future market,
because the advantage provided by the aid (in terms of
the degree of technological advance or in terms of timing)
reduces the possibility for them to profitably enter this
future market..

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— Product differentiation and intensity of competition:
innovation is rather about developing
Where product
for example, to distinct
differentiated products (related,
brands,
groups)
technologies,
standards,
competitors are less likely to be affected. The same is true
if there are many effective competitors in the market.

consumer

7.4.2. Creating market power

Aid in support of R&D&I may have distortive effects in terms of
increasing or maintaining the degree of market power in product
markets. Market power is the power to influence market prices,
output, the variety or quality of goods and services, or other
parameters of competition on the market for a significant period
of time, to the detriment of consumers. The Commission will
assess the market power before the aid is granted, and the change
in market power, which can be expected as a result of the aid.

The Commission is concerned mainly about
those R&D&I
measures allowing the aid beneficiary to transfer or strengthen
market power held on existing product markets to future
product markets. The Commission is therefore unlikely to
identify competition concerns related to market power
in
markets where each aid beneficiary has a market share below
25 % and in markets having a market concentration with
Herfindahl-Hirschman Index (HHI) below 2 000.

In its analysis, the Commission will consider the following
elements:

— Market power of aid beneficiary and market structure:
Where the recipient is already dominant on a product
market, the aid measure may reinforce this dominance by
further weakening the competitive constraint that competi-
tors can exert on the recipient undertaking. Similarly, State
aid measures may have significant impact in oligopolistic
markets where only a few players are active.

— Level of entry barriers: In the field of R&D&I, significant
entry barriers may exist for new entrants. These barriers
intellectual
include legal entry barriers
property rights), economies of scale and scope, access
barriers to networks and infrastructure, and other strategic
barriers to entry or expansion.

(in particular

— Buyer power: The market power of an undertaking may
also be limited by the market position of the buyers. The
presence of strong buyers can serve to counter a finding of
a strong market position if it is likely that the buyers will
seek to preserve sufficient competition in the market.

— Selection process: Aid measures which allow under-
takings with a strong market position to influence the
selection process,
to
recommend undertakings
in the selection process or
influencing the research path in a way which disfavours
alternatives path on unjustified grounds, is liable to raise
concern by the Commission.

for example, by having the right

7.4.3. Maintaining inefficient market structures

R&D&I aid may,
if not correctly targeted, support inefficient
undertakings and hence lead to market structures where many
market players operate significantly below efficient scale. In its
analysis, the Commission will consider whether the aid is granted
in markets featuring overcapacity, in declining industries or in
sensitive sectors. Concerns are less likely in situations where State
aid for R&D&I aims at changing the growth dynamics of the
sector, notably by introducing new technologies.

7.5.

Balancing and decision

the

resulting distortions adversely affect

these positive and negative elements,

In the light of
the
Commission balances the effects of the measure and determines
whether
trading
conditions to an extent contrary to the common interest. The
analysis in each particular case will be based on an overall
assessment of the foreseeable positive and negative impacts of
the State aid. For that purpose the Commission will not use the
criteria set out in sections 7.3 and 7.4 mechanically but will make
an overall assessment based on the proportionality principle.

The Commission may raise no objections to the notified aid
measure without entering into the formal investigation proced-
ure or, following the formal investigation procedure laid down in
Article 6 of Regulation (EC) No 659/1999, decide to close the
procedure with a decision pursuant
that
Regulation. If it takes a conditional decision within the meaning
it may in
of Article 7(4) of Regulation (EC) No 659/1999,
particular consider attaching the following conditions, which
must reduce the resulting distortions or effect on trade and be
proportionate:

to Article 7 of

— lower aid intensities than the maximum intensities allowed
including claw-back mechanisms and

in Chapter 5,
different conditions for repaying reimbursable advances,

— diffusion of results, collaboration and other behavioural

commitments,

— separation of accounts in order to avoid cross-subsidization
from one market to another market, when the beneficiary is
active in multiple markets,

— no discrimination against other potential beneficiaries

(reduce selectivity).

8.

CUMULATION

the aid ceilings

regards cumulation,

As
this
framework shall apply regardless of whether the support for
the aided project is financed entirely from State resources or is
partly financed by the Community, except in the specific and
limited context of the conditions established for Community
the RTD Framework Programmes, adopted
funding under

fixed under

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respectively in accordance with Title XVIII of the EC Treaty or
Title II of the Euratom Treaty.

No 1698/2005 under the same conditions and at the same
intensity as the co-financing.

Where the expenditure eligible for aid for R&D&I is eligible in
whole or in part for aid for other purposes, the common portion
will be subject
the
applicable rules. This limitation does not apply to aid granted
in accordance with the Community guidelines on State aid to
promote risk capital investments in SME (46).

favourable ceiling under

to the most

Aid for R&D&I shall not be cumulated with de minimis support in
respect of the same eligible expenses in order to circumvent the
maximum aid intensities laid down in this framework.

9.

SPECIAL RULES FOR AGRICULTURE AND FISHERIES

As regards R&D aid concerning products listed in Annex I to the
EC Treaty, and by way of derogation from aid intensity
limitations or supplements specified elsewhere in this frame-
work, the Commission will continue to allow an aid intensity of
up to 100 %, subject to fulfilment in each case of the four
following conditions:

Cases of R&D aid for products listed in Annex I to the EC Treaty
not fulfilling the conditions in this chapter are to be examined
under the normal rules of this framework.

10.

FINAL PROVISIONS

10.1.

Reporting and monitoring

10.1.1. Annual reports

In line with the requirements of Regulation (EC) No 659/1999
and Commission Regulation (EC) No 794/2004 of 21 April
2004 implementing Council Regulation (EC) No 659/1999
laying down detailed rules for the application of Article 93 of the
EC Treaty (48), Member States must submit annual reports to the
Commission.

Beyond the requirements stipulated in those provisions, annual
reports for R&D&I-aid measures shall contain for each measure,
including the granting of aid under an approved scheme, the
following information:

— it is of general interest to the particular sector or sub-sector

concerned;

— the name of the beneficiary,

— information that research will be carried out, and with
which goal,
is published on the internet, prior to the
commencement of the research. An approximate date of
expected results and their place of publication on the
internet, as well as a mention that
the result will be
available at no cost, must be included;

— the aid amount per beneficiary,

— the aid intensity,

— the sectors of activity where the aided projects are

undertaken.

— the results of the research are made available on internet,
for a period of at least 5 years. This information on the
internet shall be published no later than any which may be
given to members of any particular organisation;

In case of fiscal aid, the Member State must only provide a list of
those beneficiaries who have received an annual tax relief in
excess of 200 000 EUR.

— aid shall be granted directly to the researching institution or
body and must not involve the direct granting of non-
research related aid to a company producing, processing or
marketing agricultural products, nor provide price support
to producers of such products.

The Commission will allow State aid for cooperation pursuant to
Article 29 of Council Regulation (EC) No 1698/2005 of
20 September 2005 on support for rural development by the
European Agricultural Fund for Rural Development (EAFRD) (47)
if such cooperation has been approved for Community co-
financing under that Article and/or the State aid is granted as
additional financing pursuant to Article 89 of Regulation (EC)

In case of clusters, the report must also give a brief description of
the activity of
the cluster and its effectiveness in attracting
R&D&I activity. The Commission may request additional
information regarding the aid granted, to check whether the
the Commission’s decision approving the aid
conditions of
measure have been respected.

The annual reports will be published on the internet site of the
Commission.

For all aid granted under an approved scheme to large
undertakings, Member States must also explain in the annual
report how the incentive effect has been respected for aid given
to such undertakings, notably using the indicators and criteria
mentioned in Chapter 6 above.

(46) OJ C 194, 18.8.2006, p. 2.
(47) OJ L 277, 21.10.2005, p. 1. Regulation as amended by Regulation

(EC) No 1463/2006 (OJ L 277, 9.10.2006, p. 1).

(48) OJ L 140, 30.4.2004, p. 1. Regulation as amended by Regulation

(EC) No 1627/2006 (OJ L 302, 1.11.2006, p. 10).

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10.1.2. Access to full text of schemes

The Commission considers that further measures are necessary
to improve the transparency of State aid in the Community. In
particular, it appears necessary to ensure that the Member States,
economic operators, interested parties and the Commission itself
have easy access to the full text of all applicable R&D&I aid
schemes.

This can easily be achieved through the establishment of linked
internet sites. For this reason, when examining R&D&I aid
schemes, the Commission will systematically require the Member
State concerned to publish the full text of all final aid schemes on
the internet and to communicate the internet address of the
publication to the Commission. The scheme must not be applied
before the information is published on the internet.

10.1.3. Information sheets

Besides, whenever aid for R&D&I is granted on the basis of aid
schemes without falling under the duty for individual notifica-
tion, and exceeds EUR 3 million, Member States must, within 20
working days starting from the granting of the aid by the
competent authority, provide the Commission with the informa-
tion requested in the standard form laid down in the Annex to
this framework. The Commission will make summary informa-
tion available to the public through its website (http://ec.europa.
eu/comm/competition/index_en.html).

Member States must ensure that detailed records regarding the
granting of aid for all R&D&I measures are maintained. Such
records, which must contain all
information necessary to
establish that the eligible costs and maximum allowable aid
intensity have been observed, must be maintained for 10 years
from the date on which the aid was granted.

The Commission will ask Member States to provide this
information in order to carry out an impact assessment of this
framework three years after its entry into force (49).

10.2.

Appropriate Measures

The Commission herewith proposes to Member States, on the
basis of Article 88(1) of the EC Treaty, the following appropriate
respective existing research and
measures concerning their
development aid schemes:

In order to comply with the provisions of this framework,
Member States should amend, where necessary, such schemes in
order to bring them into line with this framework within twelve
months after its entry into force, with the following exceptions:

— Member States have twenty four months to introduce
amendments regarding the provisions covered in point
3.1.1 of this framework;

— the new threshold for large individual projects will apply as

from the entry into force of this framework;

— the duty to provide more detailed annual reports pursuant
to point 10.1.1. and the duty to submit information sheets
pursuant to point 10.1.3. will apply to existing aid schemes
six months after the entry into force of this framework.

The Member States are invited to give their explicit unconditional
agreement to these proposed appropriate measures within two
months from the date of publication of this framework. In the
absence of any reply, the Commission will assume that the
Member State in question does not agree with the proposed
measures.

10.3.

Entry into force, validity and revision

This framework will enter into force on 1 January 2007 or, if it
has not been published in the Official Journal of the European
Union before that date, on the first day following its publication
therein and will replace the Community Framework for State aid
for Research and Development.

This framework will be applicable until 31 December 2013. After
consulting the Member States, the Commission may amend it
before that date on the basis of important competition policy or
research policy considerations or in order to take account of
other Community policies or international commitments. The
Commission intends to carry out a review of the framework 3
years after its entry into force.

The Commission will apply this framework to all aid projects
notified in respect of which it is called upon to take a decision
after the framework is published in the Official Journal, even
where the projects were notified prior to its publication. This
includes individual aid granted under approved aid schemes and
notified to the Commission following an obligation to notify
such aid individually.

In line with the Commission notice on the determination of the
applicable rules for the assessment of unlawful State aid (50), the
Commission will apply in the case of non-notified aid,

— this framework if the aid was granted after its entry into

force,

— the framework in force when the aid was granted in all

other cases.

(49) In that process, Member States may want

the
Commission by providing their own ex post assessment of schemes
and individual measures.

to support

(50) OJ C 119, 22.5.2002, p. 22.

C 323/26

EN

Official Journal of the European Union

30.12.2006

Form for the provision of summary information for aid under the extended reporting obligation (section 10.1)

ANNEX

(1) Aid in favour of (name of the undertaking/undertakings receiving the aid, SME or not): . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Aid scheme reference (Commission reference of the existing scheme or schemes under which the aid is awarded): .

(3)

Public entity/entities providing the assistance (name and co-ordinates of the granting authority or authorities):

. . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Member State where the aided project or measure is carried out:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

Type of project or measure:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

Short description of project or measure:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Where applicable, eligible costs (in EUR):

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Discounted aid amount (gross) in EUR: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) Aid intensity (% in gross grant equivalent):

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) Conditions attached to the payment of the proposed aid (if any):

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) Planned start and end date of the project or measure:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12) Date of award of the aid:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .