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EEA – EFTA Forum State aid rules - modernisation

EEA – EFTA Forum State aid rules - modernisation. Advokat Hanne S. Torkelsen E-post hanne.torkelsen@wla.no www.wla.no. The objective of state aid legislation. To ensure that government interventions do not distort competition and trade inside the EU/EEA.

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EEA – EFTA Forum State aid rules - modernisation

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  1. EEA – EFTA ForumState aidrules - modernisation Advokat Hanne S. Torkelsen E-post hanne.torkelsen@wla.no www.wla.no

  2. The objectiveofstateaidlegislation To ensure that government interventions do not distort competition and trade inside the EU/EEA.

  3. State aid is accepted to achieve certain objectives, i.a.: Research and development Environment Risk capital Infrastructure (i.e. broadband)

  4. State aid legislation EEA agreement - Article 61 (TFEU Art 107) Secondarylegislation(directives and regulations) Commission Decisions(i.e.re public service compensationgranted to undertakings entrustedwithoperationof services of general economic interest) Commission Guidelines ESA and the EEA Joint committeeadopt legislative measures for State aidruleswhichareidentical to thatofthe European Commission

  5. Enforcement in the EEA EFTA SurveillanceAuthority (ESA): investigatesallegations re illegal State Aid approvesnewaidschemes and individualaid decidethatthe State concerned shall abolish or alter such aid within a period of time to be determined by ESA If a memberstate doesnot comply with the decision within the prescribed time, ESA or any other interested State may refer the matter to the Court of Justice direct.

  6. Enforcement in the EEA, cont Decisions by EFTA Court and the European Court ofJusticeareveryimportant – ESA decisionsmay be reversed by the EFTA Court ODA protocol 3 – On application by an EFTA state , The EFTA States canunanimouslydecidethataid given or plannedaid is compatiblewith EEA article 61 ifjustified by exceptionalcircumstances(beforetheAuthority has madeitsdecision).

  7. State aid - EEA Art 61(1) «[s]ave as otherwiseprovided in this Agreement, anyaidgranted by EC Member States, EFTA States or through State resources in any form whatsoeverwhichdistorts or threatens to distortcompetition by favouringcertain undertakings or theproductionofcertaingoodsshall, in so far as it affects trade betweenContratingparties, be incompatiblewiththefunctioningofthis Agreement»

  8. State aid – EEA Art 61(1) The measureinvolves an economicadvantage Granted by State resources: publicfunds To «undertakings» - (not individuals or households) engaged in economicactivity, irrespectiveofits legal status and theway in which it is financed Aid is selective – it favoursonlycertain undertakings or productionofcertaingoods The aidaffectscompetitionand trade withinthe EEA Cumulativecriteria

  9. Art 61(2) and (3): Exception Art. 61 (2) Shall be compatiblewith EEA Agreement: Aid to individuals Natural disasters; exceptionaloccurrences Art 61 (3). May be compatiblewiththe EEA agreement: Underdevelopment European projects, seriousdisturbance Certaineconomicactivities or areas Culture & heritage other

  10. Exemption from state aid EC Court decision: «Altmarkcriteria» and EC Regulation for compensation for services of general economicinterest Regulationregarding «De Minimisaid» (200 000 Euro over 3 years) may be grantedwithoutnotification Aid covered by groupexcemptionsand guidelines (horizontal or sectoral) and hence is considered legal (for instance regional investmentaid)

  11. EEA art 59. no 2 - SGEI Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Union.

  12. Existing or new aid - recovery Illegal state aid must be recoveredwithinterest (up to 10 years!) Existing Aid = aidexistingbeforetheentry in force ofthe EEA agreement – must not be recovered – onlyaidgrantedafterthedecisionregarding illegal aid is made by ESA

  13. System of state aid control State Aid Art. 61(1) No Case closed Yes • Exceptionsapplicable? • De minimisaid • Block Excemptions • Guidelines • Art 59.2 Existing Aid? Recovery No No

  14. Ongoing modernisation Aim to reduce overall stateaid and to increase «horizontalobjectives» such as research and development, environment, risk capital Commission proposal – «de minimis» aid: To keepthecurrenttresholdvalue at 200 000 Euro Establish a nationalregistry for de minimisaid– within 1.1.2016- to increasesurveillance and control Establishyearlyreporting system (register) to monitor aid

  15. Ongoing modernisation New «de minimis aid» in force: Aid granted to undertakings providing a service of general economicinterestprovided thatthe total amountofaid does not exceed EUR 500 000 over anyperiodofthreefiscalyears. This alsoapply to the «road passenger transport sector»

  16. Ongoing modernisation The general blockexemptionregulation, interalia: SME aid: risk financemeasureswill be revised and a broadcategoryof start-up aid established Research and Development: definitionsareimproved, reasearchinfrastructuresareintroduced and broaderinnovationaid for SME Categoryof Training Aid is established

  17. Ongoing modernisation Definition ofdisadvantagedworkersenlarged to includeyoung people Aid for environmental protection - New blockexemption for district heating

  18. ESA case 69911 – financing of municipal waste collectors Measureassessed in thedecision: The wastecollectionfeecharged by municipality to itsinhabitants to financecosts (household waste) – to avoidpossible cross-subsidies The incometaxexemptionfor municipalwastecollectorsthatare part ofthe legal person ofthemunicipality The Authority has proposed to the Norwegian Government as an appropriatemeasure:

  19. Financing of municipal waste collectors, cont. To organiseinternalaccountsin thewaythatthey show separatelythecosts and revenuesassociatedwiththe non-economicactivities and thoseofeconomicactivities The Norwegian authoritiesshouldensurethatthewastecollectionfeewill be calculatedonthe basis ofthecostsdirectlyrelated to non-economicactivityas well as a proportionateshareoffixedcommoncost

  20. Financing of municipal waste collectors, cont. What is «a proportionateshareoffixed commn cost» ? - the principle of «full cost» (incl. capital cost) or principle of «incremental cost/marginal cost»? Regulation will affect the municipal waste incinerators ability to offer services in a market, and utilize the free capacity In the case of municipal waste incinerators, capital costs are high, and the price including full capital cost might be higher then the market price for industrial waste

  21. Financing of municipal waste collectors, cont To abolishthetaxexcemption, in so far as it applied to theeconomicactivitiesofthemunicipalwastecollectors

  22. Case regarding laboratories The municipalitiesof Trondheim has been operating a laboratory for more than 100 years in order to carryoutthetask for verifyingthequalityofdrinking water and foodstuffs In 2004 theNorwegian Food SafetyAuthoritywasestablished, whichimmediatelydelegatedsomeofitsrepsonsibilities back to theMunicipalityof Trondheim (Analysis Center)

  23. Case regarding laboratories There is a market for laboratory services, and it is a sector subject to competition between commercial providers The Analysis Center provides inhouse services to the municipality, but also provides laboratory services to third parties.

  24. Case regarding laboratories ESA considered the following as an advantage: The municipality of Trondheim provides a number of collective services for free or at least at a price below market price Budget transfer to be used for upgrading the building and equipment Tax excemption for municipalities

  25. Case regarding laboratories Proposed measure: To keep separate accounts for non-economic and economic activites To ensure that accounts contain the direct cost of the economic activities and a contribution to the indirect costs common to both economic and non-economic activities

  26. Case regarding laboratories Proposed measure: To demonstrate that the distribution of common costs allocated to economic/non-economic activites is appropriate (i.e. use of premises, collective services etc at market prices) To ensure that the Analysis Center are subjected to business taxes

  27. Thank you for your attention! E-mail: hanne.torkelsen@wla.no www.wla.no

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