State Aid Matters July 2008

A new dawn for State aid administration: the General Block Exemption Regulation (GBER)

The European Commission (“the Commission”) adopted the long awaited General Block Exemption Regulation (“GBER”) on 7 July 2008. It should formally enter into force in the very near future following publication in the EU Official Journal (expected late July or early August 2008), but its benefits can already be used now. It will expire on 31 December 2013. The final version adopted is more generous than earlier drafts and should therefore be of great value.

The GBER will have a noted effect on the procedures for State bodies in many areas. Most notably this will be felt as regards investing in: (i) risk capital; (ii) research, development and innovation (“R&D&I” for non SMEs); and (iii) environmental projects. The GBER brings these areas into a block exemption for the first time. The GBER also consolidates the provisions of existing block exemptions for regional, SME, employment and training aid into one instrument for ease of reference. The GBER also introduces a new specific aid possibility for the first time in aid for the creation of enterprises by female entrepreneurs.

The UK and similar developed countries are still adjusting to the redrawn structural funds and regional aid eligibility maps for 2007/2013, so an instrument like this that facilitates the processing of aid projects in areas no longer eligible for regional aid (ie most of the UK) is most welcome.

Why a GBER?

The EC Treaty renders State aid illegal unless authorised by the Commission (and the Commission alone) following an individual notification. Whether the Commission will approve an aid (ie exempt it from the usual prohibition) is guided by a legacy of case law and a series of published Commission guidelines for different types of project.  The range and detail of those guidelines has been developed at a policy level, hence certain types of activity like aid for environmental investment is allowed, when (for example) operating aid to everyday businesses is usually not.

In addition, the Commission is empowered to issue “block exemption” regulations which state that up to the specific limits set out in those regulations, an aid project may be deemed exempted by the Commission and proceed without an individual notification and authorisation procedure.

Many areas of State aid that are permitted by reference to different guidelines are not yet covered by block exemptions. Risk capital, R&D&I for large companies and the environment were three examples. Guidelines for all three have been revised recently. The GBER harnesses the rules and limits set out in these different guidelines to allow the less sensitive of these projects to proceed without individual scrutiny from the Commission. Even relatively simple Commission notifications can be costly and time consuming. Thus, being able to proceed without going to the Commission for many projects that are clearly within the limits of relevant guidelines should make the administrative jobs of many public sector bodies a lot easier.