Local Government Briefing Note 3 of 2013 - State Aid: Proposed Reform of the Enabling Regulation

• Local government - Briefing notes

15-01-2013

The European Commission has announced proposals to amend the Enabling Regulation adopted in 1998. This forms part of the EC’s State Aid Modernisation Initiative. It will allow the EC to focus on larger more complex proposed State aid measures by adopting more block exemptions where the proposed State aid need not be notified to the EC for a specific clearance. The block exemptions will relate to instances where the proposed State  aid will have more  limited impact on the internal market and where the EC has experience of assessing State aid in relevant categories and can write compatibility rules. The  following categories are being considered:

• culture and heritage conservation
• making good damage caused by natural disasters 
• making good damage caused by certain adverse weather conditions in fisheries
• forestry and the promotion of certain food products
• conservation of marine biological resources
• innovation
• amateur sports
• residents of remote regions for transport, when such aid has a social character
• coordination of transport or reimbursement for the discharge of certain obligations inherent in the concept of a public service pursuant to Article 93 TFEU
• certain broadband infrastructure

The EC aim for the amendments to the Enabling Regulation to be passed in 2013 and full consultation with Member States will follow on the terms of block exemptions which may take around a further year.  Block exemptions may not be brought forward for all categories in the first instance.

The proposed reform are a welcome development and will give public bodies and State aid recipients greater clarity and transparency in terms of permitted State aid. The proposals will, however, give a clear indication in the relevant categories that if the proposed State aid is not expressly exempted under the block exemption  then any such support in these areas will need to be formally notified to and approved in advance of grant by the EC unless it can be established to involve no State aid eg under the Market Economy Investor Principle.

In categories such as culture and heritage, innovation and amateur sports this may increase the risk of public support (outside of any new Block Exemptions) being required to be formally notified to the EC whereas previously a risk assessed approach may  have been taken as to the presence of State aid at all. Hence there will need to be a greater focus on ensuring such support is State aid compliant.