The role of block examptions and state aid medernization in enforcing state aid rules in the European Union

Размещено на http://www.allbest.ru/

The role of block exemptions and state aid modernization in enforcing state aid rules in the European Union

Natalia Fokina

Abstract

The article covers the role and effects of introducing block exemptions in state aid in the EU and the prerequisites for reforming state aid that was launched on a big scale in 2012, known as State Aid Modernization. Herein presented are key substantive uses of block exemptions as well as reform constituents and business processes employed by the European Commission to ensure that state aid regulatory framework is up-to- date and feasible. The article explores the trends prevalent in enforcing state aid rules given the increase of decentralization trends and overviews the implications of the implementation of regulatory acts upon which the state aid modernization was based.

The role of block examptions and state aid medernization in enforcing state aid rules in the European Union

After the last EU enlargement, the trend of decentralizing state aid rules enforcement has been prevalent. This has given rise to the need of state aid modernization via utilizing bottom-up approach to assessing state aid measures. The state aid modernization is predicated upon the use of evidence-based approach to make sure that respective changes in business processes and standard operating procedures are feasible and expedient. One of the key state aid modernization tools is block exemption. It decreases the backlog of cases pending before the European Commission and allows it to concentrate on cases that may have truly adverse effects on competition. This development is of very critical importance for strategic governance in terms of state aid procedures. Here the European Commission clearly draws distinction between minor cases that do not constitute much trade distortion for Member States and really important cases that can largely impact economy of a Member State, the internal market and competition in the EU. This is a best practice which can be used in terms of providing regulatory, institutional and enforcement framework of the functioning of state aid institute. Therefore, to ensure the transparency of evidence used as a basis for any prospective modernization the Commission regularly publishes reports - the European Commission State Aid Scoreboard Reports. By means of these reports, it makes available analysis that encompasses expenditures as to all existing aid measures advantageous for industries and services (including agriculture and fisheries). Only those expenditures in respect of which the Commission took an official decision or got summary information from the Member States for measures that qualify for exemption under the General Block Exemption Regulation. The funding granted in line with the de minimis rules is not usually analyzed in these reports because such spending does not constitute State aid. The reports also do not cover most of the aid aimed at railways and services of general economic interest. Seeing the benefit and efficiency of this reform, the European Commission continues to analyze its results. However, the results of the reform have only recently started to manifest and not all rules have been reformed to check whether the rules have actually worked in accordance with the intention behind them and whether are fit for their purpose. It should be observed that state aid modernization tool (especially via GBER) has to a great extent enabled faster decision-making in view of a larger GBER uptake in recent years, State aid measures can in general be processed in a much more rapid manner, seeing as an increasing number of measures to be applied under GBER can be implemented without any decision on the part of Commission. However, it has been proven that Member States can exercise their sovereignty in internal development policy as to the choice of recipient of state aid provided that EU law on state aid and acquis are not violated. Therefore, State aid control does not hinder Member State governments from making the target of aid on their own legitimate policy objectives and priorities.

Keywords: state aid, modernization, block exemptions, state aid measures, internal market.

Анотація

Стаття присвячена висвітленню ролі та практичних наслідків запровадження блокових виключень в галузі державної допомоги в ЄС та передумови масштабного реформування державної допомоги, яке було розпочато у 2012 році та яке відоме як „модернізація державної допомоги". У статті представлені основні сфери застосування блокових виключень, а також складові реформи та бізнес-процеси, якими послуговується Європейська комісія для забезпечення актуальності та можливості практичного застосування нормативно-правової бази щодо державної допомоги. У статті досліджено тенденції застосування норм державної допомоги з огляду на збільшення ролі децентралізації та розглянуто наслідки впровадження нормативно-правових актів, на яких ґрунтувалася модернізація державної допомоги.

Ключові слова: державна допомога, модернізація, блокові виключення, заходи державної допомоги, внутрішній ринок.

Formulation of the problem. Spending state resources has always been intrinsically connected with public policy based on economic priorities of the respective state. Given that public investments can be a major component of comparative benefits of a company, industry or economy as a whole, public investment directly influences competitiveness of in the market. Although in the EU for over 60 years state aid system has been operational, new political, economic, social and cultural developments took place on the global scale as well as in the EU itself, so it was evident that substantial reform was required.

Analysis of the research. The issues of state aid modernization, efficacy of enforcing state aid rules and implementation of block exemptions have been researched by Angela Wigger, Erika Szyszczak, Hubert Buch-Hansen, Leigh Hancher, Phedon Nicolaides, Piet Jan Slot, Tom Ottervanger and others.

Formulation of the purpose of the article. This article is aimed at uncovering the impact of competition decentralization via the use of block exemptions on enforcing state aid rules as well as rationale and practical effect of state aid modernization. reform state aid modernization

Presenting main material. The preliminary step in the reform of the EU State Aid Institute was the adoption of the Europe 2020 strategy1. In Europe 2020 strategy, only one paragraph was devoted to state aid, emphasizing in particular its role in achieving the objectives of the overall Europe 2020 strategy, by stimulating and supporting an initiative for more modernized, efficient, green technologies, at the same time improving access to public support as to investment, risk capital, research and development funding.2

Substantially new rules and approaches for the State Aid Institute were developed in 2012 under the name State Aid Modernization (SAM). The main purpose of SAM was to optimize the various state aid rules, to focus European Commission actions on those types of aid that most distort competition in the internal market and trade, and to exempt EU Member States from administrative burdens as far as possible from notification (notification) of any measure that falls under the concept of „State aid", without giving regard to its size and influence on the internal market1

The European Commission Communication to Other EU Institutions on State Aid Modenization (COM / 2012/209 final) outlines the main objectives and priorities of reforming the State Aid Institute, namely: promoting sustainable, prudent and inclusive competition in the EU internal market; focusing the European Commission on ex ante ex-ante State aid which has the greatest impact on the internal market, as well as strengthening cooperation between EU Member States in the field of State aid, streamlining State aid rules and securing timely European Commission decisions.

Moreover, control over state aid helps EU Member States strengthen budgetary discipline and improve the quality of public finance spending - making better use of taxpayers' money, which in turn contributes to greater efficiency in public spending.

To achieve these objectives, the European Commission proposed: (a) to identify the general principles applicable to ways of assessing whether State aid is compatible with the EU internal market; (b) to review and rationalize State aid guidelines to comply with these general principles; c) to conduct a much more systematic analysis of the potential adverse impacts of State aid, in particular in terms of distorting the distributive effectiveness of such aid. The European Commission also suggested revising de minimis rules (Commission Regulation (EC) No.1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid); to extend the General Block Exemption Regulation as to the principle setting forth incompatibility of State aid with the internal market (Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in the application of Articles 87 and 88 of the Treaty (General Time Exemption Regulation)); to review procedural regulation regarding complaint handling and market intelligence tools.

The purpose of the new Block Exemption Regulation is precisely to provide exemption to EU Member States that would not impose on them as obligation to notify new measures having to do with State aid. European Commission officials noted that around 87% of all State aid measures implemented by Member States were adopted under GBER Regulation. Since July 2014, European Commission has examined around 700 State aid cases, but there is no evidence that they have been „the most serious consequences for the internal market" The EU's State Aid Modernisation - taking stock of its initial results. / by Phedon Nicolaides [electronic source] // The College of Europe Policy Brief. - access date 12 November 2021 The EU's State Aid Modernisation - taking stock of its initial results. / by Phedon Nicolaides [electronic source] // The College of Europe Policy Brief. - access date 15 November 2021

With regard to the reform of procedural rules, the European Commission has received new procedural tools to investigate situations in the relevant markets. New (at the time) procedural regulatory framework, namely: Council Regulation (EC) No 734/2013 of 22 July 2013 amending Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty Council Regulation (EU) No 734/2013 of 22 July 2013 amending Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty [electronic source] // The European Council website. - access date 3 November 2021 has given the European Commission the power to request information not only from the notifying Member State, but also from other EU Member States and from economic operators during the formal investigation phase. Like antitrust powers, the European Commission can conduct sector research and request state aid instruments if such State aid measures could significantly restrict or distort competition in the internal market of several EU Member States.

According to Article 6(1) of Commission Regulation (EC) 794/2004, the Commission has to publish, annually, a State aid synopsis („State Aid Scoreboard") on the basis of the expenditure reports provided by Member States COMMISSION REGULATION (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty [electronic source] // The European Commission website. - access date 3 November 2021 .

Official data on the specific impact of the State Aid Modernization policy were contained there. The previous State aid Scoreboard report as of November 29, 2017, looked more optimistic than the estimate provided by non-governmental analysts. That Report noted that, at the time of its drafting, the following objectives had already been achieved: greater use of the General Block Exemption Regulation provisions and close cooperation between the Commission and Member States and a better understanding of the concept of State aid. Indirectly achieved are the objectives of increasing the efficiency of state aid expenditures. However, the understanding of the application of State aid rules and the level of legal certainty have decreased. It is unclear whether goals such as contributing to growth, focusing on measures that have the greatest impact on the internal market and assessing state aid ex post are achieved.

That is, by increasing the use of GBER standards, EU Member States can avoid the administrative costs of notifying and ex ante evaluations and, accordingly, the European Commission may focus its efforts on the most serious cases rather than monitoring minor state aid cases. At the same time, reducing administrative costs and avoiding unnecessary notification of State aid and control by the European Commission had an unexpected negative impact. This has contributed to reducing the visibility in terms of state aid measures and understanding of the public of how their implementation is arranged. Undoubtedly, the transition to an ex-post assessment of the effectiveness of State aid might result in a much more thorough assessment as to the overall impact of State aid measures on the European Union economy.

According to the European Commission, in 2019, more than 95% of new state aid cases in the EU fell under general block exemptions, 25% less compared to 2013 data. The level of spending under GEBER exceeds the respective indicator for notified cases.

The significant increase in cases of application of the GBER indicates that State aid measures were processed faster than in previous years. In fact, the average duration of European Commission assessing State aid measures remained largely at the same level of approximately 5 months in 2013-2016 in the EU. However, given the increasing number of block exemptions that can be implemented without delay by EU Member States, it looks like on average, state aid measures can be set in operation in a much faster way than in the previous years. Calculated at EU level, the average decision-making time in theoretic terms was at the level of about 3 months in 2013, whereas in 2016 it constituted about 2.5 months, hence a decrease of 20% in the average length of time required for carrying out State aid measures.

Notified State aid measures which can seriously damage competition or fragment the EU internal market are subject to more scrutiny and, as a rule, cover higher budgets and costs than in previous years. In particular, in 2016, the average annual budget of implemented state aid measures amounted to about 222 million euros, which is 18% and 124% more than in 2015 and 2013, respectively.

However, the overall and unexpected effects of SAM are still being evaluated. The EU's State Aid Modernisation - taking stock of its initial results. / by Phedon Nicolaides

The College of Europe Policy Brief. - access date 17 November 2021

Conclusion

The significant increase in cases of application of the GBER indicates that State aid measures were processed faster than in previous years. Expanding scope of state aid regulation by the new General Block Exemption Regulation was aimed, first, at ensuring that existing bureaucratic procedures and administrative burdens on EU Member States are reduced (so-called notifications); second, General Block Exemption Regulation would exempt the European Commission from dealing with ordinary or minor State aid cases; thirdly, the European Commission's assessment of new types of state aid shall be based on transparent and uniform rules for all countries; fourthly, General Block Exemption Regulation includes transparency measures to assist the European Commission in monitoring compliance with its provisions (by disclosing information on non-notified aid if its amount exceeds EUR 500 000 and by setting up by Member States specially dedicated website where they publish the beneficiary's of such aid (undertaking-recipient of State aid), the amount and purpose of the aid and its legal basis within six months after the aid has been granted).

Размещено на Allbest.ru