European Commission consults on simplifying state aid procedural rules

The Commission's consultation is particularly focussing on how state aid complaints are handled once referred to the Commission and on how it obtains market information as part of an investigation into potentially illegal state aid. The consultation is open until 5 October.

The proposals are part of a package of measures to streamline existing rules announced by the Commission in May. If approved, the new system could be in place by the end of 2013.

"The Commission considers it should be able to set priorities for handling complaints, in order to focus its work on cases with a potentially high impact on competition and trade in the Internal Market," it said in a statement. "The changes envisaged would also allow the Commission to launch more investigations on its own initiative into areas where significant distortions of competition threaten to hamper the functioning of the Internal Market."

State aid is an advantage or incentive granted by a national government to a particular company, and can take a variety of forms including grants, tax reliefs, guarantees, government holdings of all or part of a company or the provision of goods and services on preferential terms. To ensure fair competition inside the EU, state aid is prohibited unless it can be justified for general economic development reasons.

Member states must apply to the Commission for clearance on a case by case basis before they can offer funding or incentives which amount to state aid, although some types of aid are automatically exempted under the General Block Exemption Regulation. Member states can be required to recover illegal aid from companies which have received public support in breach of the state aid rules.

The state aid Procedural Regulation (15-page / 75KB PDF) sets out detailed rules of procedure governing state aid investigations. It has not been revised since its introduction in 1999.

Under current rules there are no formal requirements attached to the lodging of a state aid complaint, meaning that the Commission has to investigate every alleged infringement it receives from any source. In addition, it must issue a decision stating that the action complained of is compatible with the rules before it can close the examination of a complaint.

The Commission has the right to prioritise complaints depending on factors such as the scope of the alleged infringement or the economic sector involved. This means that most of the on average 300 complaints received by the Commission each year are "not given priority treatment and the duration of those cases thus tends to increase", according to the consultation.

As part of the reforms, the Commission proposes that it be able to collect relevant information directly from affected markets rather than member states. The Commission is currently "largely dependent" on member states as the primary information source for its investigations, according to the consultation. States have to answer the Commission's information requests, which may involve commissioning market studies and gathering information for the market as well as exchanging information with the beneficiary of the support. This can, the Commission said, lead to "delays" where that information is not readily available and may "place a heavy burden" on national authorities.

Other reforms proposed by the European Commission in May include a review of the existing state aid exemptions, including those outlined in the General Block Exemption Regulation and Enabling Regulation, to simplify the investigation of those cases which have only a limited impact on trade. It will also consider whether the 2008 'de minimis' regulation, which exempts payments below €200,000 from being declared, should be reviewed to reflect current market conditions.

Approximately €52 billion, or 0.42% of EU GDP, was granted by member states in the form of state aid in 2010, according to Commission figures. The funds were used to support objectives including regional development, environmental protection and research and development.