The European Commission’s Code of Best Practices on State Aid Procedures

Closer cooperation between Commission services and Member States.

 

Introduction
 
The European Commission, DG Competition, published on 16 July 2018 on its website and then on 19 July 2018 in the Official Journal of the EU a Code of Best Practices for the Conduct of State Aid Control Procedures.[1]The purpose of the Code is to provide guidance to Member States and undertakings on how State aid procedures work in practice, by making procedures “as transparent, simple, clear, predictable and timely as possible”. It clarifies how and how quickly the Commission can handle formal complaints. The present Code replaces the 2009 Code of Best Practices.In this context, the Commission welcomes pre-notification contacts, expresses its readiness to continue supporting Member States by offering guidance and training through a network of country coordinators and encourages exchange of experiences on best practices and challenges in the application of State aid rules.The Code covers the following issues:

  1. Pre-notification: Objectives, scope, timing and content.
  2. Case portfolio approach and mutually agreed planning: Case portfolio approach and mutually agreed planning.
  3. Preliminary examination of notified measures: Requests for information, agreed suspension of the preliminary examination, ‘state of play’ contacts and contacts with the aid beneficiary.
  4. Streamlined procedures in straightforward cases: Cases that may be subject to the streamlined procedure, pre-notification contacts in determining the use of streamlined procedure, notification and publication of the short summary and short-form decision.
  5. Formal investigation procedure: Publication of the decisions and meaningful summaries, interested parties’ comments, Member States’ comments, requests for additional information from the Member State concerned, requests for information made to other sources, justified suspension of a formal investigation, adoption of the final decision and justified extension of the formal investigation.
  6. Investigations into sectors of the economy and into aid instruments.
  7. Evaluation plans.

The rest of this article quotes the novel and most interesting parts of the Code. (All text in inverted commas is from the Code.)


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Formal complaints

“Article 1(h) of the Procedural Regulation defines interested parties as any Member State and any person, undertaking or association of undertakings whose interests might be affected by the granting of aid, in particular the beneficiary of the aid, competing undertakings and trade associations. Interested parties wanting to submit a formal complaint to the Commission should fill out the complaint form and provide all the requested information, together with a non-confidential version of the complaint. If the complaint form is complete and the submitting party shows that its interests might be affected by the granting of the aid pursuant to Article 1(h) of the Procedural Regulation, the Commission services will register the case as a formal complaint.”

“If the submitting party does not provide all information required by the complaint form or does not show that it has an interest to act, the Commission services will treat the submission as market information.”

“The Commission services endeavour to investigate a formal complaint within a non-binding time limit of 12 months from when they are registered.”

“If a complaint is unsubstantiated, the Commission services will try to inform the complainant within 2 months from its registration that there are insufficient grounds for taking a view on the case.”

“If a complaint concerns unlawful aid, the Commission services will remind the complainant that it is possible to start proceedings before national courts which can order that such aid be suspended or recovered. The Commission services may treat formal complaints on aid measures which are being challenged before national courts as a low priority for the duration of those proceedings.”

“The Commission services will usually, but not necessarily, forward the non-confidential version of the substantiated complaints to the Member State for comments. The Commission services will invite the Member State concerned to meet the deadlines for commenting and providing information on complaints.”

 

Ex post monitoring of State aid

“The Commission keeps all systems of aid that exist in the Member States under constant review. The review takes place in cooperation with the Member States, which must provide all the necessary information to the Commission.”

“To ensure that (GBER-based) measures comply with the rules in a consistent way throughout the EU, it is increasingly important for the Commission to monitor how Member States apply existing or exempted aid schemes. Therefore, the Commission services have set up an annual monitoring process during which they select a sample of State aid cases for further scrutiny.”

“The Commission services check both the compliance of the selected schemes with their legal basis and their implementation.”

“The Commission services obtain the necessary information for the monitoring process through requests for information to the Member States. Member States usually have 20 working days to reply to these requests.”

“If the information provided is not sufficient to conclude whether the measure is correctly designed and implemented, the Commission services will send further requests for information to the Member State.”

“The Commission services will try to complete the monitoring of a State aid measure within 12 months from the first request for information and inform the Member State concerned of the outcome.”

 

Better coordination and partnership with Member States

“To foster closer working relationships with Member States, the Commission services have set up several working groups bringing together representatives from both the Member States and the Commission. These working groups meet on a regular basis and are meant to exchange information on practical aspects and lessons learned in the application of State aid rules. The Commission services provide the secretariat for the working groups.”

“In addition, the Commission services are also ready to support Member States, for example by providing informal guidance on the interpretation of the new rules. The Commission services also try to provide training sessions for Member States on State aid topics when asked for by the Member States.”

“The Commission services have also set up a network of country coordinators to facilitate day-to-day contacts with the Member States. The country coordinator is a contact point for Member States that wish to reach out to the Commission services on the handling of cases and other aspects of the application of State aid rules. The country coordinators should be kept in copy of electronic communication on cross-cutting issues, especially on the case portfolio approach.”

 

Conclusions

The new version of the Code indicates that the Commission wants to cut down on the spurious complaints it receives and which take up valuable administrative resources. Complainants must have a genuine personal interest.

Also, if harmed competitors lodge complaints as well as initiate legal proceedings before national courts, as has been the typical practice, the Commission will not give priority to their complaints. Corporate lawyers will have to make a choice. A complaint to the Commission may take longer to be processed, but the Commission has powers to compel Member States to submit information. A case lodged at a national court may be completed in less time, provided the court does not stay proceedings in order to submit a request for a preliminary ruling from the Court of Justice.

The State aid modernisation that was launched in 2012 has resulted is a significant decline in the number of notifications to the Commission – which reduces administrative costs for Member States – but has also led to an increase in the ex post checks by the Commission. As the Code indicates, these checks can take up to a year for each individual case. Member States must now expend resources in training and spreading State aid knowledge.

These outcomes mean that the increased use of the GBER and the “decentralisation” of State aid implementation coupled with a more systematic ex post control by the Commission have increased the responsibility of Member States to comply with state aid rules.

The revised Code also reveals that in essence compliance with EU law is in fact a shared responsibility. Member States need to be more vigilant. But the Commission has also come to realise that it is not enough simply to apportion responsibility or point the finger at Member States. Even though it is the Member States who ultimately bear the burden of compliance, the Commission too needs to make sure that Member States have the capacity to implement State aid rules correctly.

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[1] OJ C253, 19 July 2018. The Code of Best Practices can be accessed at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.C_.2018.253.01.0014.01.ENG&toc=OJ:C:2018:253:TOC.

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About

Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He presently holds positions at the College of Europe and the University of Maastricht. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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