European Commission publishes decisions related to local public support measures that do not constitute State aid

When a Member State grants aid in any form by favoring certain undertakings, sectors or activities, it has to notify the European Commission regarding the aid in so far as it threatens competition or affects trade between Member States. Such State aid is considered unlawful by the Treaty, but it may be approved by the Commission in certain circumstances, after being notified by the respective Member State. Under this procedure, the European Commission ruled in five cases on the compatibility of local public support measures in Spain, Germany and Portugal regarding EU State aid rules (hereinafter, the “decisions”).

The aid granted by the Portuguese State¹ concerned a subsidy of 80% of the eligible costs of a project for the construction by the charitable institution Santa Casa da Misericórdia de Tomar (SCMT) of an assisted living facility for the elderly with a capacity for 60 residents.

In the decisions on the aid granted by the Spanish State, the Commission analyzed two public support measures for regional languages –Basque and Valencian². In both cases, the Spanish State intended to grant financial support to local media publishing in their respective regional language.

The aid granted by the German State³ related to financial support to:

(i) the construction of several sports facilities at the complex “Sportcamp Nordbayern” in the region of Bavaria to be used predominant ly by schools, non-profit sports clubs and for social or educational activities, and
(ii) the renovation and modernization of infrastructure in the port of Föhr island (with only 8.000 inhabitants) which is almost exclusively used to deliver supplies to the island by ferry service to and from the German mainland.

The decisions confirmed that a Member State may grant, without prior permission by the Commission, certain public support measures, to the extent that such measures do not affect the trade between Member States. The decisions follow a set of seven decisions published in 2015 that already provided guidance on what types of local public support do not need to be notified to the Commission.

In its Notion of Aid Notice of May 2016, the Commission had already clarified that a public support measure does not, in principle, affect the trade between Member States when:

• The measure has impact only on a limited area within a Member State;
• It is unlikely to attract customers from other Member States; and
• It could not be foreseen that the measure would have more than a marginal effect on the conditions of cross-border investments or establishment.

In the decisions, the Commission began by explaining that it is not required to demonstrate the actual effect of the aid on competition and on trade, but that such effect cannot be merely hypothetical or presumed. Therefore, an analysis of the foreseeable and actual effects of the aid on intra-Union trade has to be made.

In its analysis of the above mentioned measures, the Commission pointed out some factors that favored a conclusion on marginal effects on intra-Union trade:

• The services provided by the entities at stake were purely local and were only available within a restricted geographical area;
• The number of beneficiaries was limited;
• The services provided were not particularly attractive for citizens from other Member States;
• The services were provided in the respective local languages and the external communications of those entities had local scope only;
• The services generated low revenue (and thus would be unlikely that these activities would attract significant investment from other Member States).

This position of the Commission, in particular, the stricter approach adopted in relation to the concept of intra-Union trade, increases legal certainty for Member States and undertakings in this field, reducing the resources needed for the implementation of aid and the red tape for its approval. However, such approach still has to be confirmed by EU Courts, the case law of which has followed a broader interpretation of this concept. The decision related to the alleged state aid to SCMT is under appeal before the TGUE, which promises to be an important judgment in this area.

The decisions confirmed that a Member State may grant, without the previous consent of the Commission, certain public support measures to the extent that such measures do not affect trade between Member States. Insofar as they rely on a stricter interpretation of the concept of intra-Union trade, the Commissions ’ decisions will result in a higher number of cases potentially falling under this rule. However, the decisions still have to be confirmed by EU Courts, the case law of which has followed a broader interpretation of this concept.

_______________________