New State Aid Rules Combine with EU Support for Green and Digital Transition

The Commission expanded the scope of the General Block Exemption Regulation (GBER) which was approved in 2014, in two ways on July 23, 2021. On July 29, 2021, the OJEU published the Regulation modifying the GBER.

The GBER permits the Member States to award individual aid or create aid schemes that are internal market compatible without having to notify the European Commission first. Only brief information is required after that.

The GBER’s first extension covers aid provided in the context of initiatives funded by European Union programmes. State aid awarded by national governments for projects funded and approved under specific EU centrally managed programmes may now be free from notice to the European Commission.

In specific terms, the goal is to better align the GBER with the EU’s own funding initiatives. As a result, there will be fewer unneeded obligations. Instead of conducting their own assessments under the GBER, Member States will be able to depend on the evaluation of projects that have already been completed at the level of EU programmes.

Member States might, for example, add their own cash or contributions from the Recovery and Resilience Facility to projects that the EU is already sponsoring or acknowledging as being in the European interest, thus offering additional support, depending on the programme.

The funds in concern are for InvestEU Fund-supported financing and investment operations, as well as research, development, and innovation initiatives that have obtained a “Seal of Excellence” under the Horizon 2020 or Horizon Europe programmes, co-funded R&D projects under the Horizon 2020 or Horizon Europe programmes, as well as Teaming actions and European Territorial Cooperation (“ETC”) projects, also known as “Interreg” projects.

The new GBER includes the following new help categories:

Aid for costs incurred by SMEs participating in community-led local development (“CLLD”) projects or European Innovation Partnership (“EIP”) for agricultural productivity and sustainability Operational Group projects;

Aid for costs incurred by undertakings participating in ETC projects;

Aid for projects awarded a Seal of Excellence quality label;

Aid for Marie Skłodowska-Curie actions and European Research Council Proof of Concept actions.

Finally, the amendment expands the extent of the existing exemption in the GBER for aid awarded to ETC projects when it comes to the “Interreg” fund. The previously existing block exemption, which was only applicable to SMEs, has been expanded to include large enterprises as well.

In the context of the implementation of the new Multiannual Financial Framework (“MFF”) 2021-2027, this extension of the GBER will simplify the interplay between the rules applicable to funding and state aid.

The GBER’s second extension contains new areas of aid to help the European Union’s double transition to a green and digital European Union, as well as the economic recovery from the COVID-19 pandemic’s impacts.

There is a third extension to the GBER, in addition to the two previously mentioned extensions: In essence, under the Block Exemption Regulation, businesses in financial distress are not eligible for assistance. In view of the Corona pandemic, an exemption has been granted to businesses that ran into financial difficulties between January 1, 2020, and June 30, 2021. This exemption has now been renewed for another six months. Aid to troubled undertakings may now be exempted from the notification obligation under the GBER if the troubled undertaking arose between January 1, 2020, and December 31, 2021.

All of these indicators are part of a larger picture. The Commission decided in July 2020 to extend the GBER’s validity until 2023. Simultaneously, the Commission has held multiple public consultations on its guidelines for various types of help in recent months (aid for environmental protection and energy, aid for RDI, aid for risk finance investments, etc.).

The expansion of GBER’s scope fits within the larger picture of post-coronavirus recovery. The Commission wants to remedy the pandemic’s economic and social damage. To that purpose, it has created the “NextGenerationEU” recovery plan, which aims to boost economic recovery following the crisis while simultaneously transforming the economy into a greener, more digital, and more resilient one.

The “Recovery and Resilience Facility,” which has a budget of EUR 672.5 billion in loans and grants and intends to support Member States’ reforms and investments, is one of the primary tools of this recovery strategy.

To be eligible for these funds, Member States must develop national recovery and resilience plans that include all of the changes and public investment projects that must be implemented by 2026. To date, the majority of countries have submitted their national plans to the European Commission, including Belgium, Germany, France, and Spain.

National plans that are forward-looking must contribute to the EU’s green and digital transition, as well as growth and job creation.

The GBER’s current reform intends to assist this progress and make it easier for the Member States to put these plans into action.

A careful analysis of the conditions set by, say, the GBER is required to assure the legal certainty of public funding and to avoid violations of EU state aid law, including the subsequent duty to return aid with interest.

As part of the evaluation of the different guidelines presently under review, more changes to the GBER are likely.

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