State Aid

On 18 July 2024, the current President of the European Commission (“Commission”), Ursula von der Leyen, was reconfirmed by the European Parliament for a second 5-year term. As part of her reconfirmation, President von der Leyen delivered a speech before the European Parliament, complemented by a 30-page program, which lays down the Commission’s political program for the next five years.

A key pillar of the program – “A new plan for Europe’s sustainable prosperity and competitiveness” – has the objective of combining competitiveness and prosperity with the achievement of the European Green Deal goals.

Specifically on competition policy, according to President von der Leyen, a new approach is needed to achieve this objective. This blog post projects where competition policy is likely headed in the 2024-2029 period by commenting on the most relevant paragraphs of the program.Continue Reading The 2024-2029 Commission Political Guidelines: Where Is Competition Policy Likely Headed?

On 31 May 2024, the European Commission (“Commission”) adopted an amendment to its Regional aid Guidelines (“RAG”), allowing EU Member States to grant higher amounts of aid to investment projects falling into the Strategic Technologies for Europe Platform’s (“STEP”) objectives in disadvantaged areas of the EU. STEP is an EU initiative designed to boost the EU’s industrial competitiveness and reinforce EU sovereignty by supporting critical and emerging strategic technologies and their respective value chains.

Key takeaways

  • In the EU, large businesses can only receive State aid from Member States for their large investment projects (“LIPs”) in production facilities if their projects take place in disadvantaged areas of the EU. The conditions to access such State support and the maximum aid amount are laid down in the RAG.
  • STEP’s objectives are to support the development and the manufacturing of clean tech, digital technologies, and bio-tech.
  • The amendment to the RAG allows Member States to grant large businesses higher amounts of aid for their LIPs where they contribute to the STEP objectives.

Continue Reading The Commission amends regional aid rules to foster support for strategic technology projects

The EU Foreign Subsidies Regulation (“FSR”), which creates a new clearance mechanism for non-EU subsidies granted to companies engaging in certain activities in the EU, took effect on 12 July 2023, with notification obligations starting on 12 October 2023. On 22 February 2024 the European Commission’s (“Commission”) Directorate General for Competition (“DG COMP”) published a Policy Brief discussing the 100 days since the start of the notification obligation for concentrations.

This post provides an update to our previous blog post on FSR enforcement expectations for 2024, taking account of the Policy Brief, the reported enforcement activity of the Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs (“DG GROW”) for public procurement procedures, and the launch of the first in-depth investigation by DG GROW into a public procurement procedure in Bulgaria.

Key Takeaways

  • The Commission does not publish the decisions it adopts after a preliminary review and will not issue guidelines on key concepts underpinning the FSR before 2026. In the meantime it has sought to provide some additional guidance to companies through informal documents such as Q&A pages, news articles, and Policy Briefs. However, it has yet to provide guidance on how it assesses the distortive potential of foreign subsidies. Companies will therefore have to anticipate how such foreign subsidies will be assessed under the FSR, with a view to developing their own narratives to persuade the Commission that any foreign subsidies they may have received are unproblematic.
  • As of 20 January 2024, DG COMP had received 53 (pre-)notifications, higher than the 30 notifications it expected annually in its 2021 FSR proposal. To review these files and launch investigations on its own, DG COMP has been restructured with the creation of a new directorate (Directorate K) from 1 March.
  • As on 19 January, DG GROW, which is in charge of reviewing public procurement procedures, had received over 100 notifications / declarations. DG GROW also opened its first in-depth investigation into foreign subsidies received by CRRC, a Chinese rolling stock manufacturer.

Continue Reading The EU Foreign Subsidies Regulation – Key takeaways from the first 100 days

The Foreign Subsidies Regulation (“FSR”) enters into force today, 12 July 2023. It creates a new instrument designed to prevent foreign subsidies from distorting the EU internal market (see our blog). The objective is to level the playing field within EU markets between companies subject to scrutiny under the EU State aid rules and companies receiving subsidies from non-EU Member States. Two days ago, on 10 July 2023, the European Commission (the “Commission”) adopted the Implementing Regulation (“IR”), which sets out the procedure and enacts the notifications forms. Continue Reading The EU Foreign Subsidies Regulation starts to apply – what you need to know about the notification obligations

The European Competition Commissioner, Margrethe Vestager, announced on 20 March 2023 that new State aid investigations into “aggressive tax planning” practices of multinationals can be expected. This follows an in-depth inquiry into tax ruling practices in European Union (“EU”) Member States for the period 2014-2018.

While the European Courts have annulled several European Commission (“Commission”) decisions that ordered companies to repay to the State advantages gained from tax rulings, they have decided that State aid law also applies to tax measures, even if direct taxation is a prerogative of Member States. However, as this article sets out, the European Courts have limited the Commission’s review.

In particular, by its judgment of 8 November 2022 in the Fiat Chrysler case (C-885/19 P), the Court of Justice of the European Union annulled a Commission decision ordering Fiat Chrysler to refund EUR 30 million of tax advantages to Luxembourg. It clarifies when a tax ruling can be considered State aid.

These are the key takeaways of this judgment:

  • Although not harmonized at the EU level, direct taxation must comply with State aid rules. Therefore, the Commission may review tax rulings under State aid law and verify, for instance, that the tax system is applied consistently with the objectives pursued.
  • As long as direct taxation is not harmonized at the EU level, it is up to Member States to determine the tax regime applicable to companies. Therefore, the Commission should consider that the normal tax system, against which discriminations favoring certain companies may be State aid, is determined by national law.
  • When examining whether a tax measure favors certain companies over others, the Commission cannot substitute the normal national applicable law with its own standard of normality.

This judgement will likely impact pending investigations into the tax rulings issued to other companies and in ongoing proceedings. It will also set the approach the Commission may take in potential new investigations.

In short, this judgment says that if a tax ruling is issued in compliance with the national legal framework and not manifestly inconsistent with the objectives pursued by the national tax regime, it is unlikely to be State aid.Continue Reading Will the EU Commission start new State aid investigations into multinationals’ tax rulings after of the Court of Justice’s judgment in the Fiat Chrysler case?

As part of “A Green Deal Industrial Plan for the Net Zero Age” to respond to the US Inflation Reduction Act (IRA) (see our alert), the European Commission (the “Commission”) adopted on 9 March 2023 its Temporary Crisis and Transition Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (the “TCTF”). The text amends the Temporary Crisis Framework last amended on 28 October 2022 (see our blog). 

These are the three most important things you need to know about the TCTF:

  • To avoid that an investment would be located outside the European Economic Area (EEA), EU countries may support investments in the manufacturing of relevant equipment for the transition towards a net-zero economy, such as batteries, solar panels, wind turbines, heat pumps, carbon capture usage and storage (CCUS), as well as their key components and critical raw materials necessary for their production. They may even grant aid matching foreign subsidies to support those investments, provided that they are located in the poorer areas of the EU.
  • EU countries’ possibilities to grant aid for accelerating the rollout of renewable energy are extended to any renewable technologies, including hydropower, and no longer require a bidding process to select the aided projects that are considered as less mature.
  • The TCTF is not a subsidy program, and it is up to EU Member States to provide public funding.

Continue Reading The Commission adopts its Temporary Crisis and Transition Framework relaxing State aid rules as a response to the US Inflation Reduction Act

On 19 October 2022, the European Commission (the “Commission”) adopted its new State aid Framework for research, development and innovation (the “2022 RDI aid Framework”). This instrument governs Member States’ investment in RDI activities. It is an important response to the 2020 Commission Communication on a new European Research Area for Research and Innovation (the “ERA Communication”), aiming at strengthening investments and reaching a 3% GDP investment target in the field of RDI. The 2022 RDI aid Framework is a revision of the previous version of 2014.

The three most important things you need to know about the 2022 RDI aid Framework are:

  • The Commission’s approval is subject to a set of criteria to determine whether the aid is justified and can be authorised, and compliance with recent EU objectives such as the EU Green Deal and the EU Industrial and Digital Strategies will have a positive influence on the Commission’s assessment;
  • RDI activities now explicitly include digitalisation and digital technologies; and
  • Member States can grant aid for testing and experimentation infrastructures which predominantly provide services to undertakings for R&D activities closer to the market.

Continue Reading The Commission has revised its framework for State aid for research and development and innovation

On 28 October 2022, the European Commission (the “Commission”) adopted the  second amendment to its Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (the “Framework”). The second amendment to the Framework extends its duration by one year until 31 December 2023.

The four most important things you need to know about this amendment are:

  • Maximum aid amounts have been increased;
  • Guarantees or subsidised interests can now cover larger amounts of loans when taken by large energy utilities companies that provide financial collateral for trading activities on energy markets. Exceptionally, guarantees can also be provided as unfunded financial collateral directly to central counterparts or clearing members to cover the liquidity needs of energy companies, to clear their trading activities on energy markets;
  • To achieve the EU targets of reducing electricity consumption in response to high energy prices, Member States may provide compensation for genuine reductions in electricity consumption; and
  • State recapitalisations are not subject to detailed rules as under the COVID-19 Temporary Framework, however the Commission highlights the general principles it will use to assess them on a case-by-case basis. 

Continue Reading The Commission prolongs and amends its Temporary Crisis Framework relaxing State aid rules to support the economy following the aggression against Ukraine by Russia

On 30 May 2022, the European Union (“EU”) adopted the revised Regulation on guidelines for trans-European energy infrastructure (No. 2022/869) (the “TEN-E Regulation 2022”), which replaces the previous rules laid down in Regulation No. 347/2013 (the “TEN-E Regulation 2013”) that aimed to improve security of supply, market integration, competition and sustainability in the energy sector. The TEN-E Regulation 2022 seeks to better support the modernisation of Europe’s cross-border energy infrastructures and the EU Green Deal objectives.

The three most important things you need to know about the TEN-E Regulation 2022:

  • Projects may qualify as Projects of Common Interest (“PCI”) and be selected on an EU list if (i) they fall within the identified priority corridors and (ii) help achieve EU’s overall energy and climate policy objectives in terms of security of supply and decarbonisation. The TEN-E Regulation 2022 updates its priority corridors to address the EU Green Deal objectives, while extending their scope to include projects connecting the EU with third countries, namely Projects of Mutual Interest (“PMI”).
  • PCIs and PMIs on the EU list must be given priority status to ensure rapid administrative and judicial treatment.
  • PCIs and PMIs will be eligible for EU financial assistance. Member States will also be able to grant financial support subject to State aid rules.

Continue Reading The European Union adopted new rules for the Trans-European Networks for Energy

On 23 March 2022, the European Commission (the “Commission”) adopted a Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (the “Framework”). In a similar fashion to the temporary framework that the Commission has adopted to address the COVID-19 outbreak (the “COVID-19 Temporary Framework”), and earlier, to deal with the 2008 financial crisis (the “Banking Framework”), the Framework is based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (the “TFEU”), which allows State aid to be granted in order to remedy a serious disturbance in the economy, in this case caused by the Russian aggression against Ukraine and/or by the sanctions imposed or by the retaliatory counter measures taken in response. It sets out the conditions under which the Commission will assess such State aid. Measures that meet all the conditions set out in the Framework must be notified to the Commission and will be considered compatible with the Internal Market if all conditions are indeed met.
Continue Reading The Commission’s Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia