State aid rules for RDI Key issues / Questions identified ......K. REPPEL, Deputy Head of Unit,...

Regional Policy

State aid rules for RDI

Key issues / Questions identified by practitioners in Member States

K. REPPEL, Deputy Head of Unit, Smart & Sustainable Growth, DG REGIO

V. AUGUSTIDOU, Legal Officer, DG REGIO

Disclaimer: The views expressed are those of the authors and cannot be regarded as

stating an official position of the European Commission.

Regional Policy

• Questions on

• economic v. non-economic activities

2

3

"I understand that State aid rules allow a 100%-

financing of non-economic RDI activities. How do I

distinguish economic and non-economic activities?"

4

• Public funding (100%) of non-economic activities is not

State aid - but it is necessary to clearly separate from

any economic activities (RDI Framework 2014, para 18)

• On distinction between economic and non-economic: – List of non-economic activities in para 19 RDI Framework 2014

– Paras 12-37 of the Notion of Aid Notice referring to Court judgments

and decisional practice

• Economic: "offering goods or services on a market" /

construction of an infrastructure commercially exploited

5

"Is the obligation of Research Organisations, to

prove the economic/non-economic nature of their

activities, mandatory for both segments, or,

is it mandatory only for Research Organisations

with economic activities?"

6

• SA rules apply only to RO involved in economic

activities

– do not apply to RO involved solely in non-economic

activities

• But RO must be able to demonstrate that public funding

benefits solely non-economic activities (p.2.1.1. RDI

Framework)

• If RO has ancillary economic activities

– Separate accounts: due allocation of costs, funding and

revenues

– demonstrate respective shares in total overall activity

• so that you can verify compliance with 20% threshold

7

"Can the funding body presume that research

organizations with public funding only and no (or

negligible) own income have no economic activity –

with no need for further basis?

If these research organizations, do not have full

analytic accountability of inputs, but only of financial

resources, can financial statements be considered

sufficient to demonstrate the ancillary nature of any

economic use?"

8

• Point 20 RDI Framework defines "ancillary

economic activity". – The 20% threshold must be assessed on an annual basis at

the level of the "relevant entity" regardless of (separate) legal

personality.

• Neither GBER nor RDI Framework provide for any

mandatory means to measure the "overall annual

capacity share" of economic activities. – Possible to rely on indicators e.g. time of use or total value of

inputs consumed yearly.

– Financial statements are not thus sufficient to demonstrate the

ancillary character of economic activities

9

"In regards to point 20 of the RDI Framework

(Framework for State aid for research and

development and innovation), are there any

examples of how to/how not to measure the "overall

annual capacity share" of economic activities, that

we could use when considering how to set up the

system of monitoring the use of RI.?"

10

• It's possible to rely on indicators such as the time

of use or the total value of inputs (such as

material, equipment, labour and fixed capital)

consumed yearly.

• The share of the overall annual capacity of publicly

funded research infrastructures that will be used

for economic activities should be estimated on the

basis of the best available information at the time

of awarding the aid.

11

"If we grant funds for RI as non-State aid (to RO for

their non-economic activities) which contains new

building, for how long do we have to monitor their

activities to be in line with regulation above? "

12

• Insofar as the eligible costs are investments

costs relating to the construction or upgrade of

RI, the period to be considered for the purposes

of monitoring the share of the overall annual

capacity that is used for economic activities

would be the lifetime period of the relevant

assets.

13

"The obligation to assess the threshold of 20% of

economic activities at the relevant entity's overall

annual capacity, does it require analyses at

different levels:

– The signatory of the funding agreement

– The developer/owner of the RI (not always a legal

entity)

– The RI itself

– If applicable, the operator and, in any case, the

end-users. ?"

14

• Indeed the 20% threshold for considering that an

economic activity is limited in scope will be

assessed at the level of the "relevant entity":

– i.e. every individual entity (such as a laboratory or

department) that, with the organisational structure,

capital, material and workforce that it effectively

has at its disposal, could alone perform the

activity concerned,

– regardless of whether or not such "relevant entity"

has a separate legal personality.

15

"Could technology transfer, under specific

conditions, be considered as a non-economic

activity?"

16

• Technology transfer may be a non-economic

activity

– where it is conducted by a RO/RI (or jointly with other

similar research entities) and

– where any net income is reinvested in the primary

activities of that RO/RI.

17

"What does self-sustainability of economic activities

(use of own resources) concretely mean? "

18

• It means that operating aid can be given to e.g.

innovation clusters, for a limited period of time,

until they become able to self-finance their

activity.

• The aid is granted to the operator of the cluster

and similar conditions to RI as regards access

and pricing are imposed.

19

"If the 20% ceiling is exceeded, the management authority can

choose between two mechanism: the claw-back or asses the

project under standard State aid rules (GBER - art. 26).

In the second hypothesis, shall we apply the state rules

conditions at this stage, i.e., check the incentive effect and limit

the public funding to eligible costs? Alternatively, is it advisable,

in any case, to limit the funding to eligible costs and check out

the incentive effect at instruction stage?"

20

• It's recommended to use the claw-back mechanism

which is easy to use. If you reassess the whole public

funding from the start, it is much more complex work.

In any event, it is difficult to apply the incentive effect

in a retroactive way.

21

"We expect that our planned research infrastructure

will be used only to a small extent for economic

activities. How should we determine if our research

infrastructure will stay below the 20% ancillary

threshold for economic activities?"

22

• RDI financing can fall outside State aid rules in its entirety

if the economic use of research infrastructure is purely

ancillary (Recital 49 GBER 2014, para 20 RDI Framework 2014)

– Rules require i.a. that economic use must be < 20% of

relevant annual capacity

• Capacity-share can be determined in several ways

– e.g. number of working hours, share of input; however,

revenues are typically not appropriate for measuring capacity

• Reasonable prognosis necessary

– Article 26(7) GBER: monitoring and claw-back mechanism to

address situation where economic share increases

23

"How do I avoid spill over of public funding for non-

economic activities to economic activities?"

24

• Activities need to be clearly separated so that

cross-subsidisation of economic activities is

effectively avoided

• Separation is done by keeping separate accounts

in line with the principles governing the

Transparency Directive 2006/111/EC ("functional

separation")

25

"On the grounds of non-economic character of

knowledge transfer activities, as defined in the RDI

Framework, does the concept of “such entities”

include other research/knowledge dissemination

organisations only, or does it comprehend also

enterprises,

provided that [jointly with, or on behalf of

other such entities], all profits from those

activities are reinvested in the primary

activities of the research organisation or

research infrastructure?"

26

• Knowledge transfer activities can only be considered

non-economic and thus its financing fall outside of

State aid rules when the two cumulative conditions

spelled out in Point 19 b) of the RDI Framework are

fulfilled

– activities performed by a research organisation &

– all revenues generated reinvested in primary

activities

• Otherwise, knowledge transfer activities need to be

considered as economic activities.

27

Other Questions

28

"If, because of the conditions of the regime and the

specificity of the project, it is not possible to apply the

regulation on RI, is it acceptable to apply the aid for

local infrastructure framework (as long as the project

contribute to improving the business, consumer

environment and modernising and developing the

industrial base)?

Indeed, the regime shall not apply to aid for

infrastructures that is covered by other sections of the

GBER (GBER – art. 56), but, on the other hand,

managing authorities are supposed to apply the most

favourable regime."

29

• You cannot use Article 56 GBER as a legal base

if you can use another one.

• The managing authority could either modify the

project parameters to fit under the RI –relevant

rules or they could notify.

30

"What can we do to avoid State aid in technology

transfers?"

31

• Technology transfers (from a public entity, or when

developed with public resources) to an undertaking

may involve State aid if transfer not adequately

remunerated

• Ways for ensuring an adequate remuneration:

– Undertakings pay the market price

– In RDI cooperation, the contribution to the joint research

may be sufficient

• Advisable that cooperation contracts/agreements

explicitly mention remuneration for the (potential) transfer

of technology / IP rights

32

“Can you give us an example of an independent

collaborative R&D under point 19 a) of the RDI

Framework and the consideration that a granting

authority should take into account when deciding

if the specific activities are of a non-economic

nature?"

33

• Paras. 19(a) & 21 of RDI Framework:

– independent collaborative R&D implemented by a RO =

non-economic activity

• provided that the project meets the requirements of para.

27 of the RDI Framework and is of an independent nature

i.e. the topic of the research is fully in line with the

institutional mission of the ROs/Ris (no influence

regarding research goals, e.g. new materials)

– contract research by a RO = economic activity.

34

"I heard that the block exemption cannot be applied

to sectorial schemes. Can my innovation scheme fit

under the GBER even if it is targeting only a few

sectors?"

35

• The RDI GBER section can apply to sectorial

schemes

• However, the regional aid section of the GBER does

not apply to sectorial schemes:

o a scheme is considered sectorial only if it applies to

less than 5 classes of the NACE Rev.2 statistical

classifications (Art. 2(45) GBER 2014)

o Ad-hoc aid is possible

o State aid notifications can allow for sectorial schemes

as regional aid

36

"Is the requirement for a contribution of at least

10% in Article 26(4) GBER meant to be 'per

undertaking' or can this be done by several

undertakings together?

Can contributions in the form of land and buildings

qualify as contribution under Article 26(4) GBER?"

37

• Art.26 GBER applies to investment aid for research

infrastructures (RI)

• Access to RI has to be open to several users but

undertakings which have financed at least 10% of

the investment cost may get preferential access

(under more favourable conditions)

o The 10%-contribution applies 'per undertaking'

o Contributions in the form of land and buildings can

qualify for achieving the 10% participation

38

"Innovations clusters:

we understand that the legal entity operating the

cluster can be the only beneficiary. Must that entity

also be the owner of the infrastructure?

Would it be possible (and how) to allow for some of

the ownership of the cluster infrastructure remain in

the public domain?

39

• Art. 27 GBER allows for both investment & operating aid

– but only entity eligible as aid beneficiary is cluster

operator (Art. 27(2) GBER); if operator & investor/owner are different

legal entities, no investment aid can be granted.

• If operator pays concession fees to owner for using

infrastructure = operating cost of the cluster

– but concession fees not included in eligible costs of

innovation aid (Art. 27(8) GBER)

• Investment costs borne by undertakings would thus not

be eligible for innovation cluster investment aid.

– but could benefit from preferential access (under more

favourable conditions)

40

"Innovations clusters:

Is it possible to create a new cluster with some

members that are also members of other slightly

different clusters under which they have received

already cluster aid ?

In such a context, how to read the individual

threshold of 7.5 million euro foreseen in Art. 4

GBER?

41

• Art. 27 GBER: aid is granted to entity operating the

cluster, not its members.

• If new cluster overlaps with existing one and the aid

to the new cluster brings the total aid above

notification threshold:

– circumvention of the applicable GBER threshold

– aid to new cluster (above GBER threshold) and should

be notified to the Commission

• Operating aid to cluster operator up to 10 years max

– existing clusters: any past aid must be taken into

account, i.e. calculation since date of first aid granted

42

"Innovations clusters:

Can a combination of article 26 and 27 GBER be a

solution for the granting of aid to one beneficiary

(e.g. the public body partner) for the infrastructure

based upon article 26 & the operating aid of the

cluster via article 27 for the cluster operator?

Is a combination of aid based upon the RDI

Framework and Articles 26-27 GBER possible for a

single beneficiary?”

43

• The facilities of an innovation cluster do not normally

qualify as a research infrastructure (Article 2(91) GBER)

as they are not used by the scientific community to

conduct research

• Any investment aid for the construction/upgrade of

innovation cluster (including all its assets) falls under

Article 27GBER; and

– the notification threshold laid down in Article

4(1)(k)GBER must not be circumvented.

44

"Article 2 (87) in the GBER provides a definition of

´feasibility study´, explaining that it concerns ´the

evaluation and analysis of the potential of a

project…”.

Is it correct to understand that the projects in

question are only those which are preparatory to

industrial research or experimental development

activities?

45

• Feasibility studies, have to relate to a research and

development project complying with at least one of

the research categories mentioned in Article 25 (2)

(a) – (c) of the GBER

– Fundamental research

– Industrial research

– Experimental development

46

"In Article 28 GBER 2014 the definition of

'innovation advisory services' does not require that

services are related to an 'innovative' technology

transfer.

Is it therefore sufficient to verify that the services

are related a technology transfer?"

47

• For Article 28 GBER to apply, it is necessary that the

support is for 'innovation'

• Even if definition in Article 2(94) GBER does not

repeat word 'innovation', requirement that services

are related to innovation, results from the scope of

exemption set out in Article 28(1) GBER

• Therefore, if 'innovation advisory services' are related

to a technology transfer, then the technology to be

transferred needs to be innovative

48

"Article 2 (94) GBER provides a definition of

´innovation advisory services´.

Could you confirm that one of the activities eligible

for support is consultancy, assistance and training

in the field of knowledge transfer, and that

‘knowledge transfer’ in this context corresponds to

the definition provided in the RDI Framework (section

1.3 v) ?"

49

• ‘Innovation advisory services’ means consultancy,

assistance and training in the field of knowledge

transfer (indeed in the meaning of the definition

covered by the RDI Framework), acquisition,

protection and exploitation of intangible assets, use

of standards and regulations embedding them.

• Costs incurred by SMEs when procuring consultancy

services fulfilling the above definition are considered

as eligible under Article 28 GBER (Innovation aid for

SMEs).

50

“ERDF Regulation (No. 1301/2013) encourages MS to

strengthen RDI in various ways (Article 5.1 b), e.g. funding of

so-called test beds, i.e. where operators (public & private)

meet to network, test innovative solutions to problems of

mutual interest, etc.

Which GBER Articles would be advisable to apply in

relation to the setting up of such a `test bed facility,

regarding investments and staff costs?

Are there any workable alternatives to aid for

innovation clusters (Article 27 GBER)?”

51

• Aid for innovation clusters (Article 27 GBER) is the only

option to support ‘test beds’ under GBER, combined with:

– aid to participating SMEs under Art. 28 GBER - SME

innovation advisory and support services

– Art. 31 GBER - training aid

– Art. 25(2)(d) - feasibility studies

– Art. 22 - start up aid &

– de minimis aid

• Art. 56 of the GBER (Investment aid for local

infrastructure) – not possible option

52

"We would like to combine resources from Horizon

2020 with ERDF. What does this mean for the

calculation of the GBER notification thresholds and

for aid intensities?"

53

• H2020 are centrally managed Union resources which do not qualify as

State aid. By contrast, ERDF resources are State resources as MS

decide its use

• Where H2020 and ERDF are combined, only ERDF (+ any other

national public funding) is taken into account for calculating notification

thresholds or maximum aid intensities (see Article 8(2) GBER)

• However, most favourable funding rates may not be exceeded for the

same eligible cost

• In case of requirement of own contributions, H2020 resources do not

count as own resources

54

"In order to check the incentive effect in Seal of

Excellence projects to be funded under an

exempted GBER scheme, what is the correct point

in time when the works on the project should not

have started:

before the H2020 application, or before the written

application which is needed for the GBER based

aid scheme?"

55

• In the case of Seal of Excellence projects the

application date for funding under the Horizon 2020

SME Instrument programme is considered as the

relevant application date to the H2020 call (see Explanatory

Note on application of State aid rules to national funding schemes supporting

projects with a H2020 Seal of Excellence)

– Written application has to include the undertaking's

name and size, description of the project (incl. the start

and end dates) and its costs, location of the project and

the type of aid

56

"I need legal certainty for my project. Please tell me

how I should to set it up and draft my support

scheme to have it compliant with State aid rules"

57

• MS have flexibility on how to set up projects/schemes

• For achieving State aid compliance, MAs

– should first discuss with their national State aid contacts

– TA budget may be used for getting expert advice

(Jaspers, TAIEX Peer 2 Peer)

– Send interpretation questions to 'ECN e State aid -WIKI',

through national contact points

– contact COMP (H2 Unit – SA for RDI, IPCEI and

Environment) for pre-notification discussions

• Key part of Cohesion policy 2014-2020: increase

administrative capacity in MS in the field of State aid

58

Thank you for your attention!