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EC State Aid Rules

EC STATE AID RULES

Contents:

Scope

Key Points

Background

Compliance

State Aid Unit

Scope

1. This section gives guidance on European Commission (EC) rules on State aid provided by member states. It has application to aid provided by any body to which the Scottish Public Finance Manual (SPFM) is directly applicable.

Key Points

2. Aid provided by a member state, including bodies responsible for distributing member state resources, which the EC could consider to have the potential to distort competition and trade between member states, is incompatible with the European Treaty. There are, however, circumstances in which State aid may be allowed.

3. State aid issues should be considered as early as possible in the policy development stage. Any unlawful aid - State aid given in contravention of the EC's State aid rules - may result in infraction proceedings and the recovery, with interest, of the payment from the recipient. All relevant accounts may also be liable to modification / qualification.

4. The Scottish Government’s State Aid Unit should be consulted on all proposals which may have State aid implications.

Background

5. Aid provided by a member state, including bodies responsible for distributing member state resources which the EC could consider to have the potential to distort competition and trade between member states, is incompatible with the European Treaty. State aid is present where a measure is provided from state resources (e.g. grant, grant in aid, subsidy) provided by a member state or other public body such as a NDPB or local authority; selectively to an undertaking i.e. any entity, regardless of its legal status, engaged in economic activity (e.g. a company, but also some non-profit organisations and similar); and which has the potential to have an effect on competition or trade. All of these criteria must be met for State aid to be present. However, the EC's view of their applicability, including the potential to distort competition criterion, is very broad.

6. Whilst the European Treaty sets out that aid provided by a member state which distorts or threatens to distort competition and trade between member states is incompatible with the common market, there are circumstances in which State aid may be allowed e.g. the promotion of environmental protection, research and development by companies, and support for small and medium sized enterprises (SMEs). This scope is set out in a series of documents - frameworks, guidelines, block exemptions and communications - published by the EC. There are also a number of derogations contained within the European Treaty under which aid may be considered compatible, such as culture and heritage conservation and the development of certain economic areas. In some circumstances State aid may be provided under a scheme which has already been approved under one of the EC's frameworks or guidelines or derogations of the Treaty. In others a scheme or intended single aid payment will require to be notified in advance to, and subsequently approved by, the EC.

Compliance

7. All aid provided by bodies subject to the requirements of the SPFM should comply with EC State aid rules. It is the responsibility of both policy makers and aid administrators to consider State aid issues and ideally this should be done as early as possible in the policy development stage, in consultation with the State Aid Unit. Any unlawful aid - State aid given in contravention of the EC's State aid rules - may result in infraction proceedings and the recovery, with interest, of the payment from the recipient. All relevant accounts may also be liable to modification / qualification.

State Aid Unit

 

8. The State Aid Unit should be consulted on all proposals which may have State aid implications. The Unit can help to make an early assessment of whether a proposed project or policy objective involves State aid and to make full use of the scope available to provide State aid in order to meet policy objectives. It can also assist with notification of aid and, in some instances, may provide guidance on undertaking a State aid risk assessment.

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Page Published / Updated: July 2012