Proposal for a COUNCIL REGULATION amending Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid
Date: 2018-06-06
Institutions: Directorate-General for Competition, European Commission
Subjects: European Commission, State aid, aid system, application of EU law, codification of EU law, control of State aid, single market

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   EUROPEAN COMMISSION  Brussels, 6.6.2018 COM(2018) 398 final 2018/0222 (NLE)  Proposal for a COUNCIL REGULATION amending Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid  (Text with EEA relevance)  
 
 
EXPLANATORY MEMORANDUM 

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

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

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

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

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

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

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

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

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

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

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Commission  Regulation  (EU)  2017/1084  of  14  June  20171  (General  Block  Exemption 
Regulation  –  GBER)  plays  a  key  role  in  this  context.  It  declares  certain  categories  of  aid 
compatible  with  the  internal  market  and  enables  Member  States  to  directly  implement  aid 
measures without prior approval by the European Commission.  

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

National financing combined with InvestEU Fund’s instruments 
The  Commission  presented  today  its  proposal  for  the  new  InvestEU  Fund2,  a  single  set  of 
rules  for  all  financial  instruments  and  budgetary  guarantees  in  the  next  EU  budget.  The 
proposal  ensures  that  the  Commission  plays  a  strong  role  in  the  selection  of  supported 
projects and schemes in accordance with a common EU interest, and that public support will 
complement private investment, will be transparent and that its effects will be evaluated. The 
design  of  the  InvestEU  Fund  already  incorporates  key  State  aid  principles.  Once  these 
principles  are  translated  into  sufficiently  clear  rules  on  the  operations  of  the  Fund,  only 
limited  additional  State  aid  requirements  are  needed  to  protect  competition  in  the  Single 
Market, when Member State money is combined with EU money within the InvestEU fund. 
On  that  basis,  the  relevant  State  aid  requirements  could  be  laid  down  in  the  GBER,  to 
accompany  an  InvestEU  Fund  Regulation  and  the  InvestEU  Fund’s  Investment  Guidelines 
that  contains  the  necessary  safeguards.  Such  a  modification  of  the  GBER  could  exempt 
Member  State  money  that  is  channelled  through  the  InvestEU  Fund  or  supported  by  the 
InvestEU  Fund  from  prior  notification  to  the  Commission  under  State  aid  rules,  thereby 
ensuring a streamlined and efficient implementation of the InvestEU Fund. 

Research, development and innovation 
The Commission also presented today its proposal for Horizon Europe3. Under that proposal, 
certain research projects by small and medium-sized enterprises (SMEs) can be awarded the 
‘Seal of Excellence’ label. This requires that they are evaluated by the Commission as being 
“excellent”  and  that  they  are  eligible  under  the  strict  requirements  under  EU  rules  for  EU 
funding, with the only reason they cannot actually be funded being budget constraints of the 
EU fund. Such projects could be allowed to secure their whole funding from Member States 
(including  from  structural  funds)  without  requiring  the  Commission’s  prior  approval.  The 
design of the Commission's Horizon Europe proposal as regards 'Seal of Excellence' projects 
and the relatively limited size of financial support remove any competition concerns.  

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

European Territorial Cooperation 

For  many  years,  the  promotion  of  European  Territorial  Cooperation  (ETC)  has  been  an 
important priority in EU cohesion policy. Under the current State aid rules, such projects can 

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OJ L 156, 20.6.2017, p. 1. 
COM(2018)439 
COM(2018)441 

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already  be  supported  through  public  money.  In  the  last  years  the  Commission  has  gained 
significant experience in relation to aid measures aimed at the promotion of ETC projects. A 
further  extension  of  the  scope  of  aid  measures  allowed  under  the  GBER  could  therefore  be 
considered.  

The legal basis of the GBER, i.e. Council Regulation (EU) 2015/1588 of 13 July 2015 on the 
application  of  Articles  107  and  108  TFEU  to  certain  categories  of  horizontal  State  aid 
(codification)  (the  ‘Enabling  Regulation’)4,  therefore  needs  to  be  modified,  to  allow  the 
Commission to include all appropriate measures into the GBER following a consultation of all 
interested stakeholders and of the advisory committee of Member States. 

1. 

OBJECTIVE AND CONTEXT OF THE PROPOSAL 

The  Enabling  Regulation  allows  the  Commission  to  declare,  by  means  of  regulations,  that 
certain categories of State aid are compatible with the common market and are exempted from 
the notification requirement provided for in  Article 108(3)  TFEU. Those categories include, 
for  example,  aid  to  SMEs,  aid  for  research  and  development  or  aid  for  environmental 
protection. The Commission now proposes to add two additional categories. 

The  proposal  to  include  two  new  categories  in  the  Enabling  Regulation  enables  the 
Commission to adopt block exemptions, based on a definition of clear compatibility criteria, 
ensuring  that  the  effect  on  competition  and  trade  between  Member  States  is  limited.  By 
adopting such block exemptions it would be possible to significantly simplify administrative 
procedures  for  Member  States  and  the  Commission  on  the  basis  of  clearly  defined  ex  ante 
compatibility  conditions.  However,  the  proposal  for  new  categories  in  the  Enabling 
Regulation  neither  entails  the  immediate  block  exemption  of  these  categories,  nor  does  it 
mean that all measures that fall within a category would be block-exempted in their entirety. 

New categories proposed for inclusion in the Enabling Regulation 

Member States’ financing channelled through or supported by EU financial instruments or 
budgetary guarantees managed centrally by the Commission 

The importance of EU financial instruments and budgetary guarantees for delivering support 
in  a  wide  range  of  areas  has  increased  over  the past  years.  It  is  set  to  increase  even  further 
under the post-2020 Multiannual Financial Framework. The Commission's proposals for EU 
financial instruments and budgetary guarantees managed centrally by the Commission contain 
important  safeguards  to  prevent  undue  distortions  of  competition.  Furthermore,  they  are 
typically  less  distortive  than  grants  of  a  similar  amount,  since  they  usually  involve  smaller 
amounts of aid. For example, a non-market conform guarantee for a loan of EUR 100 million 
typically  only  entails  an  amount  of  aid  corresponding  to  the  difference  between  a  market 
conform guarantee premium and the actual guarantee premium paid by the beneficiary, which 
is considerably lower than the full amount of EUR 100 million. 

It  is  therefore  appropriate  to  enable  the  Commission  to  block-exempt  aid  provided  through 
Member  State  financing,  which  is  further  channelled  through  or  supported  by  EU  financial 
instruments  or  budgetary  guarantees  managed  centrally  by  the  Commission,  provided  that 
certain  conditions  are  fulfilled.  In  the  Commission's  experience,  the  alignment  of  such  aid 
with the conditions applicable to EU centrally-managed financial instruments and budgetary 
guarantees, as implemented by Union bodies, ensures that the aid provided by Member States 

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OJ L 248, 24.9.2015, p. 1. 

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does not give rise to any significant distortions of competition and that it is possible to define 
clear compatibility conditions for this aid. 

Aid for European Territorial Cooperation 

For many years, promoting European Territorial Cooperation (ETC) has been a major priority 
of EU cohesion policy. Support for SMEs for costs incurred in ETC projects is already block-
exempted  under  the  GBER.  Special  provisions  for  regional  aid  for  investments  by 
undertakings of all  sizes are also included in the Guidelines on regional State aid for 2014-
20205  and  in  the  regional  aid  section  of  the  GBER.  This  means  that  the  Commission  has 
gained significant experience in relation to aid measures aimed at promoting ETC projects. It 
is  therefore  appropriate  to  enable  the  Commission  to  block-exempt  financing  provided  in 
support of these projects. 

2. 

CONSISTENCY  WITH  THE  UNION’S  OTHER  POLICIES  AND 
OBJECTIVES 

This  proposal  is  closely  linked  to  the  Multiannual  Financial  Framework  and  to  the  various 
spending programmes proposed by the Commission.  

Additional  national  funding  provided  to  projects  supported  by  centrally-managed  EU  funds 
constitutes  State  aid  under  Article  107(1)  TFEU.  This  proposal  aims  to  facilitate  the 
combinations of such state resources with EU financial instruments and budgetary guarantees 
managed centrally by the Commission to give legal certainty while ensuring that distortions of 
competition remain limited. 

Promoting  ETC  projects  has  been  an  important  priority  for  EU  cohesion  policy  for  many 
years, and will be facilitated further by this proposal. 

3. 

• 

LEGAL ASPECTS 

Legal basis 

The legal basis of this proposal is Article 109 TFEU, which allows the Council to make any 
appropriate  regulations,  in  particular  to  determine  the  conditions  in  which  Article 108(3) 
TFEU  applies,  and  the  categories  of  aid  exempted  from  that  procedure.  The  Council  must 
decide  by  a  qualified  majority  on  a  proposal  from  the  Commission  and  after  consulting  the 
European Parliament. 

• 

Subsidiarity and proportionality 

The  proposal  falls  under  the  exclusive  competence  of  the  Union.  The  subsidiarity  principle 
therefore does not apply. 

The  proposal  does  not  go  beyond  what  is  necessary  to  achieve  its  objective,  and  therefore 
complies with the proportionality principle. 

• 

Choice of instruments 

Proposed instrument: regulation. 

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OJ C 209, 23.7.2013, p. 1. 

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A  regulation 
is 
(EU) 2015/1588. 

the  only  appropriate 

legal 

instrument  for  amending  Regulation 

4. 

BUDGETARY IMPLICATIONS 

The proposal has no implications for the Union budget. 

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2018/0222 (NLE) 

Proposal for a 

COUNCIL REGULATION 

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

(Text with EEA relevance) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 109 thereof, 

Having regard to the proposal from the European Commission, 
Having regard to the opinion of the European Parliament6, 

Whereas: 

(1) 

(2) 

Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 
and 108 of the Treaty on the Functioning of the European Union to certain categories 
of horizontal State aid7 empowers the Commission to declare by means of regulations 
that certain specified categories of aid are compatible with the internal market and are 
exempted from the notification requirement of Article 108(3) of the Treaty. 

Centrally-managed  EU  funds,  meaning  funds  under  direct  or  indirect  Union 
management  (to  the  exclusion  of  funds  under  shared  management  with  Member 
States),  increasingly  support  activities  in  the  common  EU  interest  through  financial 
instruments  or  budgetary  guarantees,  and  thereby  provide  a  particularly  valuable 
contribution  to  growth  and  cohesion.  The  Commission  should  be  enabled  to  declare 
that,  under  certain  conditions,  aid  granted  by  Member  States,  which  is  channelled 
through  or  supported  by  such  centrally-managed  financial  instruments  or  budgetary 
guarantees, is  compatible with  the internal market and not  subject to  the notification 
requirement.  In  the  Commission's  experience,  such  aid  does  not  give  rise  to  any 
significant distortions of competition, as it is aligned with the conditions applicable to 
the relevant financial instruments or budgetary guarantees, as implemented by Union 
bodies, and clear compatibility conditions can be defined. 

(3) 

The  promotion  of  European  Territorial  Cooperation  is  an  important  priority  of  EU 
cohesion  policy.  The  Commission  should  be  enabled  to  declare  that,  under  certain 
conditions,  aid  for  European  Territorial  Cooperation  projects  is  compatible  with  the 
internal  market  and  not  subject  to  the  notification  requirement.  In  the  Commission's 

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OJ C, p. . 
OJ L 248, 24.9.2015, p. 1. 

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experience,  such  aid  only  has  limited  effects  on  competition  and  trade  between 
Member States and clear compatibility conditions can be defined. 

(4) 

Therefore,  the  scope  of  Council  Regulation  (EU)  2015/1588  should  be  extended  to 
include such categories of aid. 

(5) 

Council Regulation (EU) 2015/1588 should therefore be amended accordingly, 

HAS ADOPTED THIS REGULATION: 

In point (a) of Article l(1) of Regulation (EU) 2015/1588, the following subpoints are added: 

Article 1 

financing  channelled  through  or  supported  by  EU  centrally-
‘(xv) 
managed  financial  instruments  or  budgetary  guarantees,  where  the  aid 
consists  in  the  form  of  additional  funding  provided  through  State 
resources; 

(xvi) 
programmes’. 

projects  supported  by  EU  European  Territorial  Cooperation 

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

Article 2 

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

Done at Brussels, 

For the Council 
The President 

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