2004R0794 EN

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1 E. HORIZONTAL RULES

2 2004R0794 EN B E.1.1

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5 EN Official Journal of the European Union L 204/11 REGULATIONS COUNCIL REGULATION (EU) No 733/2013 of 22 July 2013 amending Regulation (EC) No 994/98 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (Text with EEA relevance) THE COUNCIL OF THE EUROPEAN UNION, of regional aid, is compatible with the internal market and not subject to the notification requirement. Having regard to the Treaty on the Functioning of the European Union, and in particular Article 109 thereof, Having regard to the proposal from the European Commission, Having regard to the opinion of the European Parliament, Whereas: (1) Council Regulation (EC) No 994/98 ( 1 ) empowers the Commission to declare by means of regulations that certain specified categories of aid are compatible with the internal market and are exempted from the notification requirement of Article 108(3) of the Treaty on the Functioning of the European Union (TFEU). (2) State aid is an objective notion defined in Article 107(1) of the TFEU. The power of the Commission to adopt block exemptions as provided for in Regulation (EC) No 994/98 only applies to measures that fulfil all the criteria of Article 107(1) of the TFEU and therefore constitute State aid. Inclusion of a certain category of aid in Regulation (EC) No 994/98 or in an exemption regulation does not predetermine the qualification of a measure as State aid within the meaning of Article 107(1) of the TFEU. (3) Regulation (EC) No 994/98 empowers the Commission to declare, that under certain conditions aid to small and medium-sized enterprises ( SMEs ), aid in favour of research and development, aid in favour of environmental protection, aid in favour of employment and training and aid that complies with the map approved by the Commission for each Member State for the grant ( 1 ) OJ L 142, , p. 1. (4) Regulation (EC) No 994/98 authorises the Commission to exempt aid for research and development, but not for innovation. Innovation has since become a Union policy priority in the context of Innovation Union, one of the Europe 2020 flagship initiatives. Moreover, many aid measures for innovation are relatively small and create no significant distortions of competition. (5) In the culture and heritage conservation sector, a number of measures taken by Member States might not constitute aid because they do not fulfil all the criteria of Article 107(1) of the TFEU, for example because the beneficiary does not carry out an economic activity or because there is no effect on trade between Member States. However, to the extent measures in the field of culture and heritage conservation do constitute State aid within the meaning of Article 107(1) of the TFEU, Member States are currently required to notify them to the Commission. Regulation (EC) No 994/98 authorises the Commission to exempt aid granted to SMEs, but such an exemption would in the cultural sector be of limited use as recipients are often large companies. However, small culture, creation and heritage conservation projects, even if carried out by larger companies, do not typically give rise to any significant distortion, and recent cases have shown that such aid has limited effects on trade. (6) Exemptions in the culture and heritage conservation sector could be designed on the basis of the Commission s experience as set out in guidelines, such as for cinematographic and audiovisual works, or developed case by case. When drafting such block exemptions, the Commission should take into account that they should only cover measures constituting State aid, that they should in principle focus on measures that contribute to the objectives of EU State aid modernisation (SAM), and that only aid is block-exempted in respect of which the Commission has already substantial experience. Furthermore, the primary competence of the Member States in the area of culture, the special protection enjoyed by cultural diversity under Article 167(1) TFEU and the special nature of culture should be taken into account. E.1.2

6 EN L 204/12 Official Journal of the European Union (7) Member States are also required to notify to the Commission State aid measures to make good the damage caused by natural disasters. The amounts granted in this area are usually limited, and clear compatibility conditions can be defined. Regulation (EC) No 994/98 authorises the Commission to exempt such aid from the notification requirement only if it is granted to SMEs. However, large companies may also be affected by natural disasters. In the Commission s experience, such aid does not give rise to any significant distortion, and clear compatibility conditions can be defined on the basis of the experience acquired. (8) Member States are also required to notify to the Commission State aid measures to make good the damage caused by certain adverse weather conditions in fisheries. The amounts granted in this area are usually limited, and clear compatibility conditions can be defined. Regulation (EC) No 994/98 authorises the Commission to exempt such aid from the notification requirement only if it is granted to SMEs. However, large companies may also be affected by adverse weather conditions in fisheries. In the Commission s experience, such aid does not give rise to any significant distortion, and clear compatibility conditions can be defined on the basis of the experience acquired. usually has limited effects on trade between Member States, contributes to the Union s objectives in the field of maritime and fisheries policy, and does not create serious distortions of competition. The amounts granted are usually limited and clear compatibility conditions can be defined. (11) In the sports sector, in particular in the field of amateur sport, a number of measures taken by Member States might not constitute aid because they do not fulfil all the criteria of Article 107(1) of the TFEU, for example because the beneficiary does not carry out an economic activity, or because there is no effect on trade between Member States. However, to the extent that measures in the field of sports do constitute State aid, within the meaning of Article 107(1) of the TFEU, Member States are currently required to notify them to the Commission. State aid measures for sport, in particular those in the field of amateur sport or those that are small-scale, often have limited effects on trade between Member States and do not create serious distortions of competition. The amounts granted are typically also limited. Clear compatibility conditions can be defined on the basis of the experience acquired so as to ensure that aid to sports does not give rise to any significant distortion. (9) In accordance with Article 42 of the TFEU, State aid rules do not apply under certain conditions to certain aid measures in favour of agriculture products listed in Annex I to the TFEU. Article 42 does not apply to forestry or to products not listed in Annex I. Therefore, at present, by virtue of Regulation (EC) No 994/98, aid to forestry and to the promotion of food sector products not listed in Annex I can only be exempted if it is limited to SMEs. The Commission should be able to exempt certain types of aid in favour of forestry, including aid contained in the rural development programmes and also that in favour of promoting and advertising food sector products not listed in Annex I where, according to the Commission s experience, the distortions of competition are limited and clear compatibility conditions can be defined. (10) According to Article 7 of Council Regulation (EC) No 1198/2006 of 27 July 2006 on the European Fisheries Fund, ( 1 ) Articles 107, 108 and 109 of the TFEU apply to aid granted by the Member States to enterprises in the fisheries sector, except for payments made by Member States pursuant to, and in conformity with, Regulation (EC) No 1198/2006. Additional State aid for the conservation of marine and freshwater biological resources ( 1 ) OJ L 223, , p. 1. (12) In relation to aid concerning air and maritime transport, in the Commission s experience, aid having a social character for the transport of residents of remote regions such as outermost regions and islands, including single region island Member States and sparsely populated areas, does not give rise to any significant distortion, provided that it is granted without discrimination related to the identity of the carrier. Moreover, clear compatibility conditions can be defined. (13) In the field of aid to broadband infrastructure, the Commission has in recent years acquired vast experience and has devised guidelines ( 2 ). In the Commission s experience, aid for certain types of broadband infrastructure does not give rise to any significant distortion and could benefit from a block exemption, provided that certain compatibility conditions are met and that the infrastructure is deployed in white areas, being areas where there is no infrastructure of the same category (either broadband or very high-speed next-generation access, NGA ) and where none is likely to be developed in the near future, as outlined in the criteria developed in the guidelines. This is true of aid covering the provision of basic broadband, as well as of aid for ( 2 ) Communication from the Commission EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks (OJ C 25, , p. 1). E.1.2

7 EN Official Journal of the European Union L 204/13 small individual measures covering NGA networks, and of aid to broadband-related civil engineering works and passive broadband infrastructure. (14) As regards infrastructure, a number of measures taken by Member States might not constitute aid because they do not fulfil all the criteria of Article 107(1) of the TFEU, for example because the beneficiary does not carry out an economic activity, because there is no effect on trade between Member States, or because the measure consists of compensation for a service of general economic interest which fulfils all the criteria of the Altmark case-law ( 1 ). However, to the extent that the financing of infrastructure constitutes State aid within the meaning of Article 107(1) of the TFEU, Member States are required to notify it to the Commission. With regard to infrastructure, small amounts of aid for infrastructure projects can be an efficient way of supporting the Union s objectives, to the extent the aid minimises costs and the potential distortion of competition is limited. The Commission should therefore be able to exempt State aid for infrastructure projects that are in support of the objectives mentioned in this Regulation and in support of other objectives of common interest, in particular the Europe 2020 objectives ( 2 ). This could include support for projects involving multi-sectoral networks or facilities where relatively small amounts of aid are necessary. However, block exemptions can only be granted for infrastructure projects where the Commission has enough experience to define clear and strict compatibility criteria, ensuring that the risk of potential distortion of competition is limited and that large amounts of aid remain subject to notification pursuant to Article 108(3) of the TFEU. maximum amounts of aid; such as financial engineering instruments or certain forms of measures aimed to promote risk capital investments. This is in particular due to the fact that such complex measures may involve aid at different levels: direct beneficiaries, intermediate beneficiaries and indirect beneficiaries. Given the increasing importance of such measures and their contribution to the Union s objectives, there should be more flexibility to make it possible to exempt them. It should therefore be possible, in the case of such measures, to define the thresholds for a particular award of aid in terms of the maximum level of State support in or related to that measure. The maximum level of State support may comprise of an element of support, which may not be State aid, provided that the measure includes at least some elements that contain State aid within the meaning of Article 107(1) of the TFEU and which elements are not marginal. (17) Regulation (EC) No 994/98 requires Member States to provide summaries of information concerning aid implemented by them which is covered by an exemption regulation. The publication of those summaries is necessary to ensure the transparency of the measures adopted by the Member States. Their publication in the Official Journal of the European Union was the most effective means for ensuring transparency at the time Regulation (EC) No 994/98 was adopted. However, with the growth of electronic communication media, publication of the summaries on the website of the Commission is a faster and more effective method, with added transparency for the benefit of interested parties. Therefore, instead of being published in the Official Journal, those summaries should be published on the website of the Commission. (15) Therefore, the scope of Regulation (EC) No 994/98 should be extended to include new categories of aid. This inclusion does not affect the qualification of a measure as State aid in categories or sectors where Member States are already active. (16) Regulation (EC) No 994/98 requires the thresholds for each category of aid in respect of which the Commission adopts a block exemption regulation to be expressed either in terms of aid intensities in relation to a set of eligible costs, or in terms of maximum aid amounts. This condition makes it difficult to exempt in block certain types of measures involving State aid which, because of the specific way in which they are designed, cannot be expressed precisely in terms of the aid intensities or ( 1 ) Judgment of the Court of Justice of 24 July 2003 in Case C-280/00, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH ([2003] ECR I-7747). ( 2 ) See Council Recommendation 2010/410/EU of 13 July 2010 on broad guidelines for the economic policies of the Member States and of the Union (OJ L 191, , p. 28) and Council Decision 2010/707/EU of 21 October 2010 on guidelines for the employment policies of the Member States (OJ L 308, , p. 46). (18) Similarly, draft regulations and other documents to be examined by the Advisory Committee on State Aid in accordance with Regulation (EC) No 994/98 should be published on the website of the Commission, rather than in the Official Journal, to ensure greater transparency and to reduce the administrative burden and the delay in publication. (19) The consultation procedure established in Article 8 of Regulation (EC) No 994/98 provides that the Advisory Committee on State Aid be consulted before publication of a draft regulation. However, in the interest of greater transparency, the draft regulation should be published on the website of the Commission at the same time as the Commission consults the Advisory Committee for the first time. (20) Regulation (EC) No 994/98 should therefore be amended accordingly, E.1.2

8 EN L 204/14 Official Journal of the European Union HAS ADOPTED THIS REGULATION: Article 1 Regulation (EC) No 994/98 is amended as follows: (1) The title of the Regulation is replaced by the following: Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid (2) Article l is amended as follows: (a) paragraph 1(a) is replaced by the following: (a) aid in favour of: (i) small and medium-sized enterprises; (ii) research, development and innovation; (iii) environmental protection; (iv) employment and training; (v) culture and heritage conservation; (vi) making good the damage caused by natural disasters; (vii) making good the damage caused by certain adverse weather conditions in fisheries; (viii) forestry; (ix) promotion of food sector products not listed in Annex I of the TFEU; (x) conservation of marine and freshwater biological resources; (xi) sports; (xii) residents of remote regions, for transport, when this aid has a social character and is granted without discrimination related to the identity of the carrier; (xiii) basic broadband infrastructure, small individual infrastructure measures covering nextgeneration access networks, broadband-related civil engineering works and passive broadband infrastructure, in areas where there is either no such infrastructure or where no such infrastructure is likely to be developed in the near future; (xiv) infrastructure in support of the objectives listed in (i) to (xiii) and in point (b) of this paragraph and in support of other objectives of common interest, in particular the Europe 2020 objectives.. (b) paragraph 2(c) is replaced by the following: (c) thresholds expressed in terms of aid intensities in relation to a set of eligible costs or in terms of maximum aid amounts or, for certain types of aid where it may be difficult to identify the aid intensity or amount of aid precisely, in particular financial engineering instruments or risk capital investments or those of a similar nature, in terms of the maximum level of State support in or related to that measure, without prejudice to the qualification of the measures concerned in the light of Article 107(1) of the TFEU; (3) Article 3(2) is replaced by the following: 2. Upon implementing aid systems or individual aids granted outside any system, which have been exempted pursuant to regulations referred to in Article 1(1), Member States shall forward to the Commission, with a view to publication on the website of the Commission, summaries of the information regarding such systems of aid or such individual aids as are not covered by exempted aid systems. (4) Article 8 is amended as follows: (a) paragraph 1(a) is replaced by the following: (a) at the same time as publishing any draft regulation in accordance with Article 6; ; (b) in paragraph 2, the second sentence is replaced by the following: The drafts and documents to be examined shall be annexed to the notification and may be published on the Commission website.. Article 2 This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 22 July For the Council The President C. ASHTON E.1.2

9 EN Official Journal of the European Union C 188/1 II (Information) INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES COMMISSION Communication from the Commission Criteria for the analysis of the compatibility of State aid for training subject to individual notification (2009/C 188/01) 1. INTRODUCTION 1. The Lisbon European Council in March 2000 set a strategic goal for the European Union to become the most competitive and dynamic knowledge-based economy in the world. The Lisbon conclusions stressed the central role of education and training as the main instruments to increase human capital and its impact on growth, productivity and employment. Training usually has positive external effects for society as a whole since it increases the pool of skilled workers from which undertakings can draw and it improves the competitiveness of the economy and promotes a knowledge society capable of embracing a more innovative development path. 2. Undertakings may, however, provide less than a socially optimal level of training if employees are free to change employers and other undertakings can benefit from recruiting employees trained by them. This is particularly true of training targeted at skills that are transferable between undertakings. State aid may help to create additional incentives for employers to provide training at a level that is socially desirable. 3. This Communication sets out guidance as to the criteria the Commission will apply for the assessment of training aid measures. This guidance is intended to make the Commission s reasoning transparent and to create predictability and legal certainty. Pursuant to Article 6(1)(g) of Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) ( 1 ) any individual training aid, whether granted ad hoc or on the basis of a scheme, will be subject to this guidance when its grant equivalent exceeds EUR 2 million per training project. 4. The criteria set out in this guidance will not be applied mechanically. The level of the Commission s assessment and the kind of information it may require will be proportional to the risk of distortion of competition. The scope of the analysis will depend on the nature of the case. 2. POSITIVE EFFECTS OF THE AID 2.1. Existence of market failures 5. Skilled workers contribute to increasing the productivity and competitiveness of undertakings. Nevertheless, employers and employees may under-invest in training for a number of reasons. Employees ( 1 ) OJ L 214, , p. 3. For ad-hoc training aid to a large undertaking below the threshold of EUR 2 million, the Commission will mutatis mutandis apply the principles as outlined in this Communication, though in a less detailed manner. E.2.1

10 EN C 188/2 Official Journal of the European Union may limit their investment in training if they are risk averse, suffer from financial constraints or have difficulties signalling the level of their acquired knowledge to future employers. 6. Undertakings may refrain from training their workforce at the level that would be optimal for society as a whole. This is due to the market failure linked with the positive externalities of training and to difficulties in appropriating the rents if employees are free to change employers. Undertakings may invest less into training, if they are concerned that once trained, an employee will leave before the undertaking has recouped its investment. Undertakings may be reluctant to provide sufficient training to their workers unless training pays off quickly or is rather specific to the needs of the undertaking concerned, or unless contractual clauses can prevent the trained employee from leaving the undertaking before the training cost have been amortised or (part of) the training expenses have been reimbursed. 7. Underinvestment in training may even occur if the undertaking can fully recoup its investment but its private benefits are smaller than the benefits for society as a whole. Such positive externalities of training may arise in particular if training improves transferable skills; that is to say, skills that can be used in more than one undertaking. In contrast, specific training only yields productivity gains in a specific undertaking and can be easily appropriated by undertakings ( 1 ). Thus the scope for positive externalities of specific training is less pronounced than the scope for such externalities of general training. 8. Where undertakings are faced with higher costs and uncertain benefits for training disadvantaged or disabled workers ( 2 ) there may be an incentive to provide less training to those groups. However, training disadvantaged or disabled workers can usually be expected to produce positive externalities for society as a whole ( 3 ). 9. Member States should demonstrate that there is a market failure justifying the aid. In its analysis, the Commission will, among other things, consider the following elements: 1. The nature of the training whether it is specific or general within the meaning of Article 38 of Regulation (EC) No 800/2008; a single training project can comprise both general and specific elements; general training will produce more positive externalities. 2. The transferability of the skills acquired during the training; the more transferable the skills the higher the likelihood of positive externalities training will be considered to provide transferable skills if, for example: (a) training is jointly organised by several independent undertakings, or if employees of different undertakings may benefit from the training; (b) training is certified, leads to a recognised diploma or is validated by public authorities or institutions; (c) training targets the categories of employees that are characterised by a high turnover in the undertaking and in the sector concerned; (d) training could be valuable for the employee beyond his current job (future occupations in another undertaking, social life, well-being etc.). 3. The participants in the training: the inclusion of disabled or disadvantages workers may increase the positive externalities of the training. ( 1 ) However, externalities of general training can also be appropriated by the undertakings through special clauses in contracts requiring the trained employee to remain in the undertaking for a defined period of time after he had received such training. ( 2 ) Disabled and disadvantaged workers are defined in Article 2 of Regulation (EC) No 800/2008. ( 3 ) For example, society will attach more value to training received by young and low skilled workers than an undertaking will do due to a perceived or real lower productivity. E.2.1

11 EN Official Journal of the European Union C 188/ State aid as an appropriate policy instrument 10. State aid is not the only policy instrument available to Member States to encourage training. Most training is provided through education systems (for example, universities, schools, vocational training carried out or sponsored by state authorities). Training can also be undertaken by the individuals themselves, with or without the support of their employers. 11. Where the Member State has considered other policy options, and the advantages of using a selective instrument such as State aid for a specific undertaking are established, the measures concerned are considered to constitute an appropriate instrument. The Commission will in particular take account of any impact assessment of the proposed measure the Member State may have made Incentive effect and necessity of the aid 12. State aid for training must result in the aid beneficiary changing its behaviour so that it provides more and/or better training than would have been the case without the aid. If such an increase in the quantity or quality of planned training activities does not take place, the aid is considered not to have an incentive effect. 13. Incentive effect is identified by counterfactual analysis, comparing the levels of intended training with aid and without aid. Most employers find it necessary to train their workforce in order to ensure the proper functioning of their undertakings. It cannot be presumed that State aid for training, especially for specific training, is always needed. 14. Member States should demonstrate to the Commission the existence of the incentive effect and the necessity of the aid. First, the beneficiary must have submitted an application for the aid to the Member State concerned before it started the training project. Second, the Member State must demonstrate that the State aid leads to an increase, by comparison to the situation without aid, in the size, quality, scope or targeted participants of the training project. The additional amount of training offered with aid can be shown, for example, by higher number of training hours or courses, higher numbers of participants, shifting from undertaking-specific to general training, or increasing the participation of certain categories of disadvantaged or disabled workers. 15. In its analysis, the Commission will consider, among other things, the following elements: (a) internal documents of the aid beneficiary on training costs, budgets, participants, content and scheduling for two scenarios: training with aid and training without aid; (b) the existence of a legal obligation for employers to provide a certain type of training (for example, safety): if such an obligation exists, the Commission will normally conclude that there is no incentive effect; (c) the credibility of the project submitted, for example, by referring to and comparing it with training budgets for previous years; (d) the relationship between the training programme and the business activities of the aid beneficiary: the closer the relationship, the less likely the incentive effect. For example, training on the introduction of a new technology in a specific sector is unlikely to have an incentive effect since undertakings have no choice but to train their workforce on the newly introduced technology Proportionality of the aid 16. The Member State must demonstrate that the aid is necessary and the amount is kept to the minimum in order to achieve the objective of the aid. Eligible costs must be calculated in accordance with Article 39 of Regulation (EC) No 800/2008 and be limited to the costs arising from training activities which would not be undertaken without aid. E.2.1

12 EN C 188/4 Official Journal of the European Union Member States should provide evidence that the aid amount does not exceed the part of the eligible costs that cannot be appropriated by the undertaking ( 1 ). In any case, aid intensities must never exceed those laid down in Article 39 of Regulation (EC) No 800/2008 and will be applied to the eligible costs ( 2 ). 3. NEGATIVE EFFECTS OF THE AID 17. If the aid is proportionate to achieve the objective of the aid the negative effects of the aid are likely to be limited and an analysis of the negative effects may not be necessary ( 3 ). However, in some cases, even where aid is necessary and proportionate for a specific undertaking to increase the amount of training provided, the aid may result in a change in the behaviour of the beneficiary which significantly distorts competition. In those cases the Commission will conduct a thorough analysis of the distortion of competition. The extent of the distortion of competition caused by the aid can vary depending on the characteristics of the aid and of the markets affected ( 4 ). 18. The aid characteristics that may affect the likelihood and the extent of the distortion are: (a) selectivity; (b) the size of the aid; (c) the repetition and duration of the aid; (d) the effect of the aid on the undertaking's costs. 19. For example, a training scheme used to encourage undertakings in general in a Member State to undertake more training is likely to have a different effect on the market than a large amount of aid given to a single undertaking to enable it to increase its training. The latter is likely to distort competition more significantly as the aid beneficiary s competitors become less able to compete ( 5 ). The distortion will be even greater if the training costs in the beneficiary's business represent a high share of the total costs. 20. In assessing the market characteristics, which can give a much more accurate picture of the likely impact of an aid, the Commission will among other things consider: (a) the structure of the market; and (b) the characteristics of the sector or industry. 21. The structure of the market will be assessed through the concentration of the market, the size of undertakings ( 6 ), importance of product differentiation ( 7 ) and barriers to entry and exit. Market shares and concentration ratios will be calculated once the relevant market has been defined. In general, the fewer undertakings there are, the larger their share of the market, and the less competition one would expect to observe ( 8 ). If the affected market is concentrated with high barriers to entry ( 9 ) and the aid beneficiary is a major player on it then it is more likely that competitors will have to alter their behaviour in response to the aid. ( 1 ) This equals the part of the extra costs of the training that the undertaking cannot recover by benefiting directly from the skills acquired by its employees during the training. ( 2 ) See also current case practice, for example, C 35/2007, Training aid to Volvo Cars in Gent, Commission Decision 2008/948/EC of 23 July 2008 on measures by Germany to assist DHL and Leipzig Halle airport (OJ L 346, , p. 1) and Commission Decision 2007/612/EC of 4 April 2007 on State aid C 14/06 which Belgium is planning to implement for General Motors Belgium in Antwerp (OJ L 243, , p. 71). ( 3 ) In addition, if the labour market functioned perfectly, employees could always extract a larger salary for their better skills due to the training received and internalise positive externalities of the training. ( 4 ) A number of markets can be affected by the aid, because the impact of the aid may not be restricted to the markets where the aid beneficiary is active but it can extend to other markets, for example input markets. ( 5 ) It should be noted however, that training aid given to a whole sector in one Member State may lead to a distortion on trade between Member States. ( 6 ) Size of the undertaking can be expressed in the terms of market shares as well as turnover and/or employment. ( 7 ) The lower the degree of product differentiation, the greater the effect of the aid on competitors profits will be. ( 8 ) It is important to note however, that some markets are competitive despite there being few undertakings present. ( 9 ) It should be noted however, that sometimes granting of an aid helps to overcome entry barriers and allows new undertakings to enter a market. E.2.1

13 EN Official Journal of the European Union C 188/5 22. While examining the characteristics of the sector the Commission will look among other things at the importance of the trained workforce for the business, the existence of overcapacity, whether the markets in the industry are growing, mature or declining, financing strategies of competitors for training (State aid, employees, employers). For example, training aid in a declining industry may increase the risk of a distortion of competition by keeping an inefficient undertaking afloat. 23. Training aid may, in particular cases, lead to distortions of competition in respect of market entry and exit, effect on trade flows and crowding out of training investment. Market entry and exit 24. In a competitive market undertakings sell products that generate profits. By altering costs, State aid alters profitability, and can therefore affect the undertaking's decision to offer a product or not. For example, State aid that would reduce the ongoing costs of production such as training for staff would make entry more appealing and enable undertakings with otherwise poor commercial prospects to enter a market or introduce new products to the detriment of more efficient competitors. 25. The availability of State aid may also affect an undertaking's decision to leave a market where it is already operating. State aid for training could reduce the size of losses and enable an undertaking to stay in the market for longer which may mean that other, more efficient undertakings that do not get aid are forced to exit instead. Effect on trade flows 26. State aid for training may result in some territories benefiting from more favourable production conditions than others. This may result in the displacement of trade flows in favour of the regions where such aid is given. Crowding out of training investment 27. To survive in the marketplace and maximize profits, undertakings have incentives to invest in training of staff. The amount of investment in training which each undertaking is willing to make also depends on how much its competitors invest. Undertakings which are subsidised by the state may reduce their own investment. Alternatively, if the aid induces the aid beneficiary to invest more, competitors may react by reducing their own expenditure in training. If, to achieve the same objective, aid beneficiaries or their competitors spend less in the presence of the aid than in its absence, their private investment in training of staff is crowded out by the aid. 4. BALANCING AND DECISION 28. The last step in the analysis is to evaluate the extent to which the positive effects of the aid outweigh its negative effects. This will be done on a case-by-case basis. In order to balance the positive and the negative effects, the Commission will assess them and make an overall assessment of their impact on producers and consumers in each of the markets affected. Unless quantitative information is readily available the Commission will use qualitative information for the purposes of the assessment. 29. The Commission is likely to take a more positive stance and therefore accept a higher degree of distortion of competition, if the aid is necessary, well targeted and proportionate for a specific undertaking to increase its training activities and society benefits from the extra training provided more than the aid beneficiary. E.2.1

14 EN L 308/6 Official Journal of the European Union ANNEX I PART III.2 SUPPLEMENTARY INFORMATION SHEET ON STATE AID FOR TRAINING This supplementary information sheet must be used for the notification of individual aid pursuant to Article 6(1)(g) of Commission Regulation (EC) No 800/2008 ( 1 ) and covered by the Criteria for the compatibility analysis of training State aid cases subject to individual notification (thereinafter Criteria for the compatibility analysis ) ( 2 ). It must also be used in the case of any individual aid or scheme, which is notified to the Commission for reasons of legal certainty. If there are several beneficiaries participating in the notified project, please provide the information below for each of them. COMPATIBILITY OF AID UNDER ARTICLE 87(3)(c) OF THE EC TREATY DETAILED ASSESSMENT Aid for training may be considered to be compatible with the common market pursuant to Article 87(3)(c) of the EC Treaty. The purpose of this detailed assessment is to ensure that high amounts of aid for training do not distort competition to an extent contrary to the common interest, but rather contribute to the common interest. This happens when the benefits of State aid in terms of positive knowledge spill-over outweigh the harm for competition and trade. The provisions below provide guidance as to the type of information the Commission may require in order to carry out a detailed assessment. The guidance is intended to make the Commission s decisions and their reasoning transparent and foreseeable in order to create predictability and legal certainty. Member States are invited to provide all the elements that they consider useful for the assessment of the case. If there are several beneficiaries involved in the project notified as individual aid, please provide the information below for each of them. Characteristics of the notified measure 1. Please provide a brief description of the measure specifying objective(s) of the measure, aid instrument, structure/ organisation of the training, beneficiaries, budget, aid amount, payment schedule, aid intensity, and eligible costs. 2. Does the measure apply to the production and/or processing and/or marketing of the agricultural products listed in Annex I to the EC Treaty? yes no 3. Does the measure apply to the production, processing and/or marketing of the fisheries and/or aquaculture products listed in Annex I to the EC Treaty? yes no 4. Is the aid foreseen for the maritime transport sector? yes no If yes, please answer the following questions: (a) Is the trainee not an active member of the crew but a supernumerary on board? yes no (b) Shall the training be carried out on board of ships entered into Community registers? yes no 5. Does the notified measure relate to: Specific training ( 3 ): yes no ( 1 ) Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (OJ L 214, , p. 3). ( 2 ) OJ C 188, , p. 1. ( 3 ) As defined in Article 38 of Regulation (EC) No 800/2008. E.2.2

15 EN Official Journal of the European Union L 308/7 General training ( 3 ): yes no A combination of general and specific training: yes no Training aid given to disabled or disadvantaged workers ( 4 ): yes no 6. Please provide a detailed description of the training project including programme, skills to be acquired, timing, number of hours, participants, organisers, budget, etc. 7. Please provide details on the beneficiary including identity, group of which the beneficiary is a member, annual turnover, number of employees and business activities. 8. If applicable, please indicate the exchange rate which has been used for the purposes of the notification. 9. Please number all documents provided by the Member States as annexes to the notification form and indicate the document numbers in the relevant parts of this supplementary information sheet. Objective of the aid 10. Please give a detailed description of the objectives of common interest pursued by the notified measure. Existence of positive externalities ( 5 ) 11. Please demonstrate that the training will generate positive externalities and provide the supporting documents. The following elements may be used for the purposes of demonstrating positive externalities. Please specify those relevant for the notified measure, and provide supporting documents: Nature of the training Transferability of the skills acquired during the training Participants to the training Appropriate instrument ( 6 ) 12. Please explain to what extent the notified measure represents an appropriate instrument to increase training activities and provide the supporting documents. Incentive effect and necessity of the aid ( 7 ) In order to demonstrate the incentive effect, the Commission requires an evaluation by the Member State in order to prove that without the aid, i.e. in the counterfactual situation, the quantity or quality of the training activities would be smaller. 13. Has/have the supported project(s) started prior to the submission of the application for the aid by the beneficiary/ beneficiaries to the national authorities? yes no If yes, the Commission considers that the aid does not present an incentive for the beneficiary. 14. If no, specify the relevant dates: The training project will start on: The aid application by the beneficiary was submitted to the national authorities on: Please provide the relevant supporting documents. ( 3 ) As defined in Article 38 of Regulation (EC) No 800/2008. ( 4 ) As defined in Article 2 of Regulation (EC) No 800/2008. ( 5 ) Cf. Criteria for the compatibility analysis, Section 2.1. ( 6 ) Cf. Criteria for the compatibility analysis, Section 2.2. ( 7 ) Cf. Criteria for the compatibility analysis, Section 2.3. E.2.2

16 EN L 308/8 Official Journal of the European Union Please provide the beneficiary s internal documents on training costs, participants, content and scheduling for two scenarios: training project with aid and training project without aid. Please explain, on the basis of this information, how State aid increases the quantity and/or quality of the planned training activities. 16. Please confirm that there is no legal obligation for the employers to provide the training type covered by the notified measure. 17. Please provide with the beneficiary s training budgets for previous years. 18. Please explain the relationship between the training programme and business activities of the aid beneficiary. Proportionality of the aid ( 8 ) Eligible costs Eligible costs must be calculated following Article 39 of Regulation (EC) No 800/2008 and limited to the extra costs necessary to achieve an increase of training activities. 19. Please specify the eligible costs foreseen for the measure trainers personnel costs trainers and trainees travel expenses, including accommodation costs other current expenses such as materials and supplies directly related to the project depreciation of tools and equipment, to the extent that they are used exclusively for the training project cost of guidance and counselling services with regard to the training project indirect costs (administrative, rent, overheads), transport and tuition costs for participants) up to the amount of the total of the other eligible costs referred to above trainees personnel costs ( 9 ). 20. Please provide a detailed calculation of the eligible costs of the notified measure ensuring that the eligible costs are limited to the part of extra costs necessary to achieve an increase of quality or quantity of training activities. 21. Please provide evidence that the aid is limited to the minimum, i.e. to the part of the extra costs of the training that the company cannot recover by benefiting directly from the skills acquired by its employees during the training. Aid intensities for general training 22. Please specify the aid intensity applicable to the notified measure. 23. Is the general training under the notified measure given to disabled or disadvantaged workers? yes no 24. Nature of the beneficiary: Large enterprise yes no Medium-sized enterprise yes no Small enterprise yes no Aid intensities for specific training 25. Please specify the aid intensity applicable to the notified measure. 26. Is the specific training under the notified measure given to disabled or disadvantaged workers? yes no ( 8 ) Cf. Criteria for the compatibility analysis, Section 2.4. ( 9 ) As regards the trainees personnel costs, only the hours during which the trainees actually participate in the training, after deduction of any productive hours, may be taken into account. E.2.2

17 EN Official Journal of the European Union L 308/9 27. Nature of the beneficiary Large enterprise yes no Medium-sized enterprise yes no Small enterprise yes no Analysis of the distortion of competition and trade ( 10 ) 28. Please specify whether the beneficiary received training aid in the past and provide details on the previous aid (dates, amount of aid, and duration of training projects). 29. Please specify the annual training costs of the beneficiary (total training budget for the last three years, proportion of training costs in relation to total costs) and explain how the aid affects the beneficiary s costs (e.g. percentage of annual training costs and total costs covered by the aid, etc.). 30. Please specify the relevant product and geographic markets on which the beneficiary is active and on which the aid is likely to have an impact. 31. For each of these markets please provide: market concentration ratio, market share of the beneficiary, market shares of the other companies present in these markets. 32. Please describe the structure and competitive situation on the relevant markets and provide supporting documents (e.g. barriers to entry and exit, product differentiation, character of the competition between market participants, etc.). 33. Please describe the features of the sector where the beneficiary is active (e.g. importance of the trained workforce for the business, existence of overcapacity, financing strategies of training for competitors, etc.). 34. If relevant, please provide information on the effects on trade (shift of trade flows). CUMULATION 35. Is the aid granted under the notified measure combined with other aid? yes no If yes, please describe the rules on cumulating aid applicable to the notified aid measure: OTHER INFORMATION 36. Please indicate here any other information you consider relevant to the assessment of the measure(s) in concerned. ( 10 ) This section does not apply to measures of less than EUR 2 provided the question 10.3 in Part I of this Annex is duly completed. E.2.2

18 EN C 188/6 Official Journal of the European Union Communication from the Commission Criteria for the analysis of the compatibility of State aid for the employment of disadvantaged and disabled workers subject to individual notification (2009/C 188/02) 1. INTRODUCTION 1. The promotion of employment and social cohesion is a central aim of the economic and social policies of the Community and of its Member States. Unemployment and, in particular, structural unemployment, remains a significant problem in some parts of the Community, and certain categories of workers still encounter difficulties in entering the labour market. State aid in the form of subsidies to wage costs, where wage cost means the total amount actually payable by the beneficiary of the aid in respect of the employment concerned, comprising: (a) the gross wage, before tax; and (b) the compulsory contributions, such as social security charges; and (c) child care and parent care costs ( wage subsidies ) can provide additional incentives to undertakings to increase their levels of employment of disadvantaged and disabled workers. The objective of such aid is thus to encourage the recruitment of the targeted categories of worker. 2. This Communication sets out guidance as to the criteria the Commission will apply for the assessment of State aid in the form of wage subsidies that needs to be notified individually pursuant to Article 6(1)(h) and (i) of the Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation ( 1 )). This guidance is intended to make the Commission s reasoning transparent and to create predictability and legal certainty. 3. This guidance applies to State aid in the form of wage subsidies for disadvantaged workers, severely disadvantaged workers and disabled workers within the meaning of Article 2(18), (19) and (20) of Regulation (EC) No 800/2008. Any individual measure, whether granted ad hoc or on the basis of a scheme, will be subject to this guidance when its grant equivalent exceeds EUR 5 million per undertaking per year for the employment of disadvantaged workers and severely disadvantaged workers (hereinafter referred to together as disadvantaged workers ) and EUR 10 million per undertaking per year for the employment of disabled workers ( 2 ). 4. The criteria set out in this guidance will not be applied mechanically. The level of the Commission s assessment and the kind of information it may require will be proportional to the risk of distortion of competition. The scope of the analysis will depend on the nature of the case. 2. POSITIVE EFFECTS OF THE AID 2.1. Existence of an objective of common interest 5. Certain categories of worker experience particular difficulty in finding jobs, because employers consider them to be less productive or have prejudices against them. This perceived or real lower productivity may be due either to lack of recent experience in employment (for example, young workers or longterm unemployed) or to a permanent disability. Because of their perceived or real lower productivity the workers are likely to be excluded from the labour market unless employers are offered compensation for their employment. 6. It is socially desirable that all categories of workers are integrated in the labour market. This means that a share of the domestic income may be redistributed to the categories of workers concerned by the ( 1 ) OJ L 214, , p. 3. ( 2 ) Due to their specific nature, individual measures applying to the compensation for the additional cost of employing disabled workers and additional costs incurred by social enterprises of which the grant equivalent exceeds EUR 10 million per undertaking per year will be assessed on the basis of Article 87(3)(c) of the Treaty establishing the European Community. For ad-hoc aid for the employment of disadvantaged workers below EUR 5 million and adhoc aid to large undertakings for the employment of disabled workers below EUR 10 million, the Commission will mutatis mutandis apply the principles as outlined in this guidance, though in a less detailed manner. E.3.1