Further Views on Editorial by Andreas Bartosch (EStAL 1/2022, 1)

Reading the Editorial by Andreas Bartosch (EStAL 1/2022, 1), I feel tempted – not to worship Satan or the GBER, but to add some more colours to the picture drawn up by the esteemed colleague. It is true that the Block Exemption Regulations were intended to save the Commission Services from „lästigem Alltagsgerümpel“ (“boring routine rubbish”, as Andreas Bartosch dubbed it in EuZW 2022, 441). But this is only one half of the picture.

Looking back in State aid history, one will find that number as well as complexity of State aid cases massively increased in the 1990s, due to waves of privatization rolling through Europe after the end of the Soviet Empire and its “socialist” (i. e. State regulated and planned) economic system. In addition came the growing deficits of many public services and the liberalization of former State monopolies by the (then) European Community, e. g. postal services, rail transport, and telecommunications. Many sectors that had until then never seen any competition, or at least only at the distant horizon, now found themselves in a market environment. Automatically, this implied the applicability of State aid rules to these sectors.

It took a while to implant this fact into the minds and heads of all players involved in State funding, be it on the giving or on the taking end. After this “transition period”, the number of notifications on the desks of the Commission officials soared – not to say sky-rocketed. With the parallel enlargement from 12 (1989) to 15 (1995) to 25 (2004), 27 (2007), and finally 28 (2013) members and the increase in competences and responsibilities for the EC, and later EU, by the series of treaties from the Single European Act (1986/7) via Maastricht (1992/3), Amsterdam (1997/9), Nice (2001/3) to Lisbon (2007/9), the headcount in Brussels did not keep pace. So, Member States were facing the situation that there were many more State aid cases under the Treaty provisions and under the obligation to be notified to the Commission, without adequate increases in case handlers at the other end. This did not shorten the time span from notification to decision – quite the contrary.

As a result, both sides built up a rather remarkable degree of displeasure, not to say discontent. So did, by the way and not surprisingly, the third player at the table. the prospective recipients of the funding, eagerly awaiting the “go” for their investment or research project. A solution had to be found, allowing for a well-balanced reconciliation of the need for State aid control and the need for speed. Based on its expertise from former decisions – “case law” – and Luxemburg rulings (there were not so many by then), the Commission started, as Andreas Bartosch rightfully recalls, the series of regulations to exempt certain measures constituting State aid from notification prior to enactment. Of course, for the Member States this was not enough, from the very beginning on, and they demanded the regulations to be extended to ever more aid measures. The Commission usually responded with a presumed “lack of experience” and asked for notification in order to acquire an overview of the types and amounts of State aid and their impact on the market.

The Member States, eager to help the Commission to make progress in this process of enlightenment, duly obeyed. In the field of Culture, the sheer amount of notifications of aid measures, ranging from a few thousand to several millions of Euros, led to para. 2.6 and rec. 197 (b) in the “Guidance on the Notion of State aid”, to the effect that only very few, very large, and very international cultural institutions or events qualify as recipients of State aid in the sense of Art. 107 TFEU, at least as far as the Commission is concerned. As of today, it is not known that Luxemburg had objected to the mentioned classification by the Commission, so there can be no evidence.

Similarly, the DG Competition was – virtually – flooded with notifications concerning ports, sea ports, inland ports, large, medium, small. They seem to have been surprised by the sheer amount of cases, so that the respective articles of the GBER were introduced at a truly remarkable speed. So, prima facie, the GBER serves both sides well, reducing the work load, at least for DG COMP, and the calendar gap between application for and granting of funding. This can rightfully be called a win-win.

But the deal between Commission and Member States comprised another element not mentioned by Andreas Bartosch, and that is the retrospective evaluation of aid measures by the Commission. Artt. 10 and 12 of the GBER, in combination with artt. 12 and 13 of the Procedural Regulation 2015/1589 form the legal framework for the Commission to investigate into every project funded by a Member State under the GBER, and eventually order the recovery of the aid, plus the option to ban a Member State – partly or completely – from applying the GBER. This had to be accepted, in the negotiations prior to the 2014 GBER, as the price the Member States had to pay for the widening of the scope of the regulation and for the speeding up of the remaining notification procedures.

The Member States were well aware of the risk of mis- or over-interpreting the articles of the GBER, to be followed by the possible consequences just mentioned. This did naturally include the risk of the ECJ overruling the Commission to the detriment of the granting authority or the recipient of an aid. They openly and consciously accepted this risk as part of the deal, as well as the Commission accepted the risk of a certain amount of distortions of competition not deemed to be worthwhile prevented. Insofar, it was a fair deal, and by no means a fruitless temptation.

What was not part of the deal, but might have been expected, given the decades-long experience with EU law making, was the way many of the GBER provisions were eventually phrased. Art. 56, for instance, came as a complete surprise between 2nd Committee and publication, its scope remains unclear up to now, except for some unofficial clarifying attempts by Commission officials. Other provisions contain expressions not or only insufficiently explained, or a procedure so complicated that it can deter even the most hard-core investors. Unclear wording and twisted conditionalities are well suited to increase the risk of the Member State beyond reasonable measure, and this was not part of the deal, which ran under the heading of “simplification”.

For me, this does not mean a warning towards the Member State for potential disillusionment. But it should be a decisive call in the direction of Brussels not to forget what GBER was meant to be, and not to turn this undertaking from a mutual understanding of having to make things easier into an exercise of massive non-understanding of over-complicated legal provisions. E.g.: Art. 56e of the current GBER alone is already stretched over seven pages in the OJ, the draft amendment of the GBER published for consultation comprises another 55 pages of detailed definitions. This has nothing to do with simplification. Perhaps, also, Member States can help by reducing their expectations and introducing some cuts in their wish-lists for future GBER regulations?


Author

Dr. Hans Arno Petzold, Head of Unit in European Department


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Established in 2002, Lexxion offers professional journals, books, and events closely related to legal practice. Lexxion’s products cover topics such as Competition law, State aid law, Public Procurement, Public-Private Partnerships, EU Funds, Food Law, Chemical law and Climate Law at the European level. In 2013 we have launched the State Aid Uncovered blog as a Lexxion imprint, in 2018 the CoRe Blog followed.

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