Download pdf version of the European Community State Aids Guidance (292Kb)

Foreword

This is an updated edition of the guidance booklet for officials on the European State aid rules. As before, the booklet aims to demystify European Community State aid rules for all Government officials whose work involves developing policy or administering any form of support for business. It assumes you have no prior understanding of State aid - though we hope there is much of value for those with experience of State aid issues too. Since the last edition, the Council Regulation on Procedure in State aid 659/99 has come into effect, which sets out, among other things, the timetable for handling State aid cases. There are new sections on block exemption regulations and dealing with structural funds llocations which are State aid.

There are four key points which make up the central message of the booklet.

• Build in "State aid implications" to your initial appraisal
  There are special rules which apply to certain sectors (e.g. coal, shipbuilding); size of firm (e.g. SMEs); location (regional aid); or purpose (e.g. environmental improvement). Make sure you understand early on how the rules apply to your proposed aid scheme or individual aid so that there are no unwelcome surprises later.
• Allow enough time for Commission clearance
  The Commission will take a minimum of two months from receipt of a complete notification to take a decision. Recently the average time taken is 4-5 months from the date of notification. The Commission can and does stop the clock (which is then re-set to zero) if they need more information. The clock does not re-start until the answers to the questions are received. Neither the State aid policy unit, nor the UK permanent representation in Brussels (UKRep) can make up for lack of time allowed for clearing aid through Brussels.
• Be aware of the risks of implementing unapproved aid
  Aid is illegal unless and until the Commission has approved it. Companies placed in this situation risk having to repay the illegal aid plus interest from the date of first payment, and also may face actions for damages from third parties. You should alert Ministers to these risks at an early stage.
• Liaise with the State Aid Policy Unit (SAPU)
  It is your responsibility to assess whether your proposals include aid; and where they do, to assess how the aid can be paid within the State aid rules. DTI's State Aid Policy Unit (SAPU) can help your assessment by providing advice on the relevant State aid rules and procedures. SAPU offers a central resource for all Government departments, agencies, and local and regional bodies and devolved institutions providing aid to industry. Notifications of aid should be routed through DTI's State Aid Policy Unit*. This applies to the devolved institutions too. SAPU will forward them to UKRep in Brussels who in turn ensure transmission to the Commission. At all stages, primary responsibility rests with the administrator providing the aid for ensuring the State aid rules are complied with and for allowing sufficient time to achieve this.

* The Department for Environment, Food and Rural Affairs (DEFRA) and the Department for Transport, Local Government and the Regions (DTLR) carry out the same function in respect of agricultural and transport aids respectively. Contact details are given at the back of this booklet.

Introduction

European Community rules and laws have a profound effect on many areas of Government and industry in the UK and in other European countries. This is particularly so in the case of the very wide range of activities undertaken by different departments, devolved administrations and agencies in support of industry. This booklet provides advice and guidance on Community law and the Commission's powers over what Member States can and cannot do in support of their industries. Although many of the principles are the same, different rules apply to the agricultural sector, on which separate guidance is available from the Department for Environment, Food and Rural Affairs (DEFRA).

One of the central messages, repeated throughout the booklet, is that the EC dimension is not only relevant to those involved in offering financial assistance to UK industry. Any Government action which affects the operations of companies will need to involve you in understanding and thinking through the effects of Community rules. This can include advice and other support services for small firms, provisions made for privatisation, equity investment, loans or guarantees, help with premises or training and measures to promote the regeneration of urban areas. If your work up to now has involved little or no dealings with the Commission, you should not assume that the State aid rules are irrelevant to you.

All benefits given by Government at all levels to certain undertakings could be State aid, and it is important that the businesses you are seeking to help should never find themselves facing problems or uncertainties over support they have received in good faith.

How the Site is organised

The booklet sets out this first section what powers the Commission has for controlling and monitoring all forms of assistance given to industry. It also provides an updated summary of the special sectoral restrictions and of frameworks governing certain kinds of aid (such as for promoting research and development or for small and medium sized enterprises). It explains how the Commission develops such rules.

Part two of the booklet deals with the more procedural questions of what to do in the case of having to notify a new scheme, a particular project or significant changes to an existing, previously notified scheme. The procedures for dealing with smaller schemes are explained in this section.

Part three offers advice on handling inquiries from the Commission about the operation of UK schemes. In addition the procedure followed by the Commission on contentious cases is also explained along with a note on the European Court of Justice (ECJ).

Reference will be made to Euros (EUR). The £/EUR exchange rate is published in the Official Journal (OJ). The correct one to use for State aid purposes (unless the Commission state otherwise) will be the rate published in the first OJ of the year, and will be valid for the whole of that year.

Updates and Contacts

The State aid rules are developing all the time - through new frameworks and case law - and you should not take the advice and information in this booklet as the last word on State aid. The State Aid Policy Unit in the DTI keeps up to date as the Commission develops its policies and there is a list of contacts under link Contacts which you are encouraged to make full use of. This site will be updated regularly.

Throughout this site reference is made to European Community law and rules rather than to those of the European Union. This is because the Commission's powers and the obligations on Member States in the State aid area rest very much on elements of European law which belong to the original founding of the Community. The Maastricht Treaty, which established the European Union, essentially created new areas for co-operation and co-ordination between Member State Governments without substantially adding or taking away from the Commission's role in the fundamentals of Community business. In the language of Maastricht, the first "pillar" of the Community - meaning the powers laid down for the Commission, the Court, the European Parliament and Council - remained very much in place, with some amendments, while two new inter-Governmental "pillars" were added for what then became the European Union. Strictly speaking, therefore, it is right to talk of State aid control as a Community, rather than Union, matter. It is unlikely, however, that such legal niceties will survive the growing use of EU in place of EC.