Opinion of the Committee of the Regions on ‘EU Guidelines on State aid for rescuing and restructuring firms in difficulty’
Date: 2013-04-11
Institutions: European Committee of the Regions
Subjects: State aid, aid for restructuring, aid to undertakings, company in difficulties








C_2013139EN.01001701.xml










17.5.2013   


EN


Official Journal of the European Union


C 139/17





Opinion of the Committee of the Regions on ‘EU Guidelines on State aid for rescuing and restructuring firms in difficulty’
2013/C 139/04
THE COMMITTEE OF THE REGIONS






—


agrees that state aid for rescue and restructuring should not keep firms with no prospects for the future from exiting the market, with effects contrary to the principles of a ‘highly competitive social market economy’, which would be harmful to free competition as well as to consumers and taxpayers. Such aid may, however, be useful to help structurally profitable firms to overcome a period of instability, protect jobs and preserve industrial knowhow, and maintain the economic fabric of a region;










—


proposes that de minimis thresholds for notifying state aid for the rescue and restructuring of firms be introduced;










—


proposes that the maximum period for rescue aid measures be increased to six months, renewable once for a further six months;










—


is in favour of requiring specific compensatory measures in the case of exceptional contributions by public authorities, including a ban on payment of dividends during the restructuring period;










—


suggests that the durability of operations clause in Article 57 of the current general regulation on the structural funds be applied by analogy to state aid. That article provides for recovery of aid where the investment is not maintained for five years, or three years for SMEs;










—


believes that the maximum amount of aid for the rescue and restructuring of any one firm, which was set at EUR 10 million in 2007, should be increased to EUR 15 million to take account of inflation and other relevant factors (such as the impact on GDP and on unemployment).










Rapporteur


Christophe ROUILLON (FR/PES), Mayor of Coulaines




Reference document


Communication from the Commission –
Community guidelines on state aid for rescuing and restructuring firms in difficulty (OJ C 244, 1.10.2004, p. 2)




I.   POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS


General comments








1.


emphasises that the revision of the guidelines on state aid for rescuing and restructuring firms in difficulty forms part of the overall reform modernising EU policy on state aid. In that context, the demands put forward in the CoR's opinion on the overall reform (1) apply by analogy, the most important of them being the following: significant simplification of the rules; improvement of their practical implementing measures and speeding up or cutting back on procedures; and focus on those cases with a substantial impact on the internal market;










2.


stresses the importance of state aid for rescuing and restructuring firms in difficulty to local and regional authorities, not only because of the significance of such aid for territorial, economic and social cohesion, but also because local and regional authorities are major grantors of this type of aid;










3.


as a result, despite the fact that the European Union has exclusive competence in relation to state aid rules and that the principle of subsidiarity does not therefore apply, the involvement of local and regional authorities in the revision of these guidelines is beneficial from the point of view of economic and social reality and democratic legitimacy, as well as being in line with the principles of multilevel governance;










4.


recalls, indeed, that in so far as local and regional authorities are responsible for employment policy and for supporting firms undergoing restructuring, they also participate actively in efforts in terms of education, vocational training, making careers more secure and revitalising labour market areas which address the need to anticipate and provide support concerning restructuring;










5.


welcomes the European Commission's decision of 28 September 2012 to extend the 2004 guidelines for a second time and to undertake a second consultation on their revision in spring 2013. That extension and further consultation should make it possible to carry over the principles of the overall state aid reform and to involve all stakeholders more fully in the revision. A first consultation, which took place over a very short period of time between December 2010 and February 2011 (2), received responses from only 19 Member States, nine organisations and no local or regional authorities. The Committee of the Regions therefore requests that it be formally asked for an opinion as part of the second consultation that is due to take place in 2013, so that it can put forward an agreed position on behalf of European local and regional authorities;










6.


also believes that the extension of the current guidelines will make it possible to draw lessons from the impact of the crisis on state aid policy on the rescue and restructuring of firms in difficulty. In that context, is surprised that the Commission's report on the 2012 update of the state aid scoreboard (3) does not clearly show how the volume of state aid for rescuing and restructuring firms in difficulty has changed, and that the analysis of the impact of the crisis on state aid is limited to aid in favour of the financial sector. By way of reminder, the Commission distinguishes non-crisis related state aid, which amounted to EUR 64.3 billion (0.5 % of EU GDP) in 2011, and aid in favour of the financial sector, which reached EUR 714.7 billion (5.7 % of EU GDP) in 2011;










7.


in any event, considers that the possibility of public intervention to support firms in difficulty must not be restricted to times of crisis. Since 1994, the rescue and restructuring guidelines have proved their worth in various economic contexts, with their aim being to set out a European framework that allows, under strict conditions, the preservation of jobs and of economic, social and territorial cohesion. The aims of the guidelines, as set out in 1994 and repeated in 1999 and 2004, therefore remain relevant;










8.


therefore reiterates its opposition, previously expressed in 2004 (4), to the goal of a quantitative, undifferentiated reduction in state aid as a proportion of GDP (which is mentioned in point 3 of the current guidelines);










9.


agrees that funding must be explicitly earmarked for restructuring so as to develop innovative and competitive business activity. State aid for rescue and restructuring should not keep firms with no prospects for the future from exiting the market, with effects contrary to the principles of a ‘highly competitive social market economy’, which would be harmful to free competition as well as to consumers and taxpayers. Such aid may, however, be useful if its purpose is to help structurally profitable firms to overcome a period of instability, protect jobs and preserve industrial knowhow, maintain the economic fabric of a region, carry out public service tasks (where relevant) or even preserve a competitive market structure, so as to avoid a situation of monopoly or oligopoly, as well as to allow firms that carry out an activity of strategic importance to the European Union to overcome temporary situations of global competitive stress;










10.


believes that the rules on state aid for rescuing and restructuring firms in difficulty are an essential tool with which the European Union can address the challenges of globalisation. In that context, restates its support for maintaining the Globalisation Adjustment Fund, which can help improve the capacity of states and regions to handle the impact of the crisis and can help put active labour market measures in place for workers who are suffering as a result of restructuring;










11.


emphasises, however, that social actors within firms as well as states and regions must become involved proactively as far in advance of a restructuring as possible, so as to reduce the effects of restructuring on employment, where possible, or to adapt to the transitions that are made necessary by overcapacity and make adjustments;










12.


calls for the European Commission's inter-service task force to become involved in relation to restructuring. The Commission has highlighted the effectiveness of the task force in matters concerning the car industry, in respect of which it was particularly active in giving advice on the use of resources (providing technical assistance, cutting delays, giving advice on the most efficient use of resources, undertaking monitoring and preparing reports);










13.


therefore wishes to see this task force given a firmer and more formal legal basis to allow it to perform tasks in an effective and legitimate manner;










14.


believes that the task force could be the starting point for putting together a new platform for exchanges, coordination or even negotiation between the European Commission and stakeholders, particularly the social partners at various levels, to make it possible to deal with state aid issues reasonable and realistically;










15.


in that context, reiterates the need to establish new forms of governance in line with developments in industrial policy;










16.


believes that if procedures giving stakeholders involved in state aid a hearing before the European Commission so that they can explain their concerns in relation to restructuring were to be introduced, competitors that would risk to be adversely affected by the state aid would also need to be heard;










17.


asks the European Commission to establish a data-base to be made public on-line and containing comprehensive information on all public aids at EU, National and Regional levels; this initiative could increase the transparency when implementing aid schemes and has a twofold objective: diminish the administrative burden and increase the political accountability over public aids;






Definitions and scope of the guidelines (part 2)








18.


is in favour of maintaining the current definition of a firm in difficulty (points 10 and 11), which has proved its value in practice since 2004 and which makes it possible to privilege the grant of aid at the earliest possible stage, the amount of which is therefore proportionately less than aid given to firms whose medium-term viability is in jeopardy;










19.


nonetheless considers that clarification is needed regarding the interaction between the mechanism for state aid for services of general economic interest (SGEI) and the guidelines on state aid for rescuing and restructuring firms in difficulty. It is unfortunate that the EU framework for state aid in the form of public service compensation (2011) (5) states that ‘Aid for providers of SGEIs in difficulty will be assessed under the Community guidelines on state aid for rescuing and restructuring firms in difficulty’ (point 9). In practice, this means that a firm in difficulty which could be viable with SGEI compensation would, under this provision, be subject to state aid for rescuing and restructuring firms in difficulty - despite the fact that this scheme is administratively unwieldy and involves state aid. The Committee therefore recommends that point 9 of the EU framework for state aid in the form of public service compensation be amended;










20.


is opposed to the idea of limiting the scope of the guidelines to firms that are in formal insolvency proceedings, given that there are very substantial legal risks involved in rescuing insolvent firms, that successful rescues are the exception, particularly for SMEs, and that in any event, it is always most effective to deal with firms' difficulties in advance of collective proceedings;










21.


believes that the distinction between rescue aid and restructuring aid can be kept as it is (points 15 and 16);










22.


proposes that de minimis thresholds for notifying state aid for the rescue and restructuring of firms be introduced. Such a measure would make it possible to exclude in advance aid that does not distort competition. It would also make a substantial contribution to reducing the administrative burden on the Commission, the Member States and local and regional authorities. The specific de minimis thresholds for state aid for the rescue and restructuring of firms could, for example, be set at a guarantee amount of EUR 200 000 for SMEs and EUR 500 000 for other firms. If necessary, aid for rescuing and restructuring could come under the General Block Exemption Regulation (GBER) in the case of SMEs. This would enable public authorities to respond swiftly to the difficult situations facing these companies which, owing to their limited size, have little or no impact on competition and trade in the internal market;






Rescue aid








23.


calls for the maximum period for rescue aid measures, currently set at six months (point 25), to be extended. Experience in practice shows that this time period is often too short in view of the complexity of drafting a plan for continued operation, particularly when that plan involves the purchase of the firm. It is also necessary to take account of the time needed for the Commission to examine restructuring plans, which can take several months and sometimes as long as a year between notification of the aid and the Commission's decision. Therefore proposes that the maximum period for rescue aid measures be increased to six months, renewable once for a further six months;






Compensatory measures








24.


believes that the Commission should take greater account of the negative effects of compensatory measures in the form of asset sales. As things stand, the beneficiary of the aid can be obliged to divest assets than are essential for its future development. Compensatory measures can also have a negative effect on competition where they are likely to cause a restriction of supply on the relevant market. Therefore calls for a case-by-case assessment, on the basis of a market analysis that focuses on the real distortions of competition; suggests that compensatory measures in the form of asset sales should be concentrated on market segments where there is overcapacity;










25.


believes that more focus should be put on behavioural compensatory measures that relate to the firm's management or strategy choices, such as bans on expenditure for expansion and acquisition, advertising bans and so on, when considering compensatory measures;










26.


is in favour of requiring specific compensatory measures in the case of exceptional contributions by public authorities, including a ban on payment of dividends during the restructuring period. That is not only a moral necessity, but would also prevent any possible transfer of the financial costs of restructuring from private capital to the state;










27.


suggests that the durability of operations clause in Article 57 of the current general regulation on the structural funds be applied by analogy to state aid at national, regional and local level. That article provides for recovery of aid where the investment is not maintained for five years, or three years for SMEs. A firm that has been subject to a recovery procedure after transferring its operations cannot benefit from structural funds in future;










28.


considers that it should be possible to include the shareholdings of the firm's subcontractors or employees when calculating the firm's own contribution insofar as they are clearly separate from any form of aid and demonstrate that the firm's actors have confidence in the viability of their firm;






Contribution by the beneficiary








29.


agrees that the principle of a contribution by the beneficiary remains essential to make firms act responsibly. Believes, however, that the current thresholds (point 44) for medium-sized enterprises (at least 40 %) and large firms (at least 50 %) are hard for firms in difficulty to achieve and do not take account of the specific financial characteristics of different sectors. Therefore suggests that the Commission replace the current thresholds with a range, with a minimum rate of 20 % for medium-sized enterprises and 30 % for large firms, to give itself sufficient discretion to deal with the situation of the firm in question;






Maximum amount of aid for the combined rescue and restructuring of any one firm








30.


believes that the maximum amount of aid for the rescue and restructuring of any one firm, which was set at EUR 10 million in 2007, should be increased to EUR 15 million to take account of inflation and other relevant factors (such as the impact on GDP and on unemployment);






Counterfactual analysis








31.


believes that the counterfactual analysis provided for in the current annex to the guidelines does not seem appropriate given the need for very rapid action. In the very short period available to put together a rescue and/or restructuring operation, scientific modelling of the various possible scenarios cannot be treated as having priority over the expectation among customers, suppliers, financial partners and employees for rapid solutions. Therefore proposes that the annex to the guidelines be deleted.





Brussels, 11 April 2013.


The President of the Committee of the Regions

Ramón Luis VALCÁRCEL SISO





(1)  CdR 1528/2012.

(2)  http://ec.europa.eu/competition/consultations/2010_restructuring_aid/index.html

(3)  COM(2012) 778 final, 21.12.2012.

(4)  CdR 518/2004 fin.

(5)  OJ C 8, 11.1.2012, p. 15–22.