COMMON STATE AID ACTION PLAN

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1 COMMON STATE AID ACTION PLAN Strengthening Administrative Capacity for the Management of the Funds of Member States in the Field of State Aid Directorate General for Regional and Urban Policy July 2017

2 COMMON STATE AID ACTION PLAN Strengthening Administrative Capacity for the Management of the Funds of Member States in the Field of State Aid Contents 1 Introduction Main challenges Shift in the focus of cohesion policy Complex rules Persistent problems Ex-ante conditionalities Previous actions and output Identification and dissemination of good practices Country-specific seminars Thematic expert seminars Training of ESIF practitioners PEER 2 PEER exchanges High-level meetings Proposed actions Strategic training programme Thematic expert seminars Training of ESIF practitioners Training of auditors Exchange of good practices PEER 2 PEER exchanges Round tables for good practices Other High-level meetings Improved communication of key developments in State aid Better use of estate aid WIKI Pool of thematic experts Annex

3 1 INTRODUCTION The current document sets out the reasons for action in the area of State aid, the actions implemented so far and the action proposed for 2017 and State aid rules ensure a level-playing field for competition across the single market. They prevent distortions of competition that would lead to a loss of general welfare within the EU. Member States granted an average of EUR 76.6 billion State aid per year (0.5 % of GDP) in the period (excluding crisis aid and most aid to the railway sector and services of general economic interest aid). State aid and ESIF State aid rules apply to aid granted by Member States to entities carrying out an economic activity. Any aid granted directly by the Commission, or any other EU body such as the European Investment Bank, is not subject to State aid rules. Support from European Structural Funds (ESIF) is implemented under a system of shared management, in which national authorities have discretion as to the use of the resources. Therefore, the implementation of ESIF is not exempt from State aid rules and needs to fully adhere to the rules. Common State Aid Action Plan The Common State Aid Action Plan aims at supporting Member States implementing (EU co-financed) investments in compliance with State aid rules. The main objective is to enhance the administrative capacity of ESIF stakeholders to identify and grant State aid in compliance with the EU State aid rules. Ultimately, this should lead to a reduction in State aid related irregularities for ESIF projects and programmes during the programming period. Administrative capacity cannot be measured directly but the State aid error rate (a proxy for irregularities 1 ) is reported by the European Court of Auditors (ECA). Therefore, it can be used as result indicator for the current Action Plan. 1 The error rate is a statistical estimation of the occurrence of irregularities. 2

4 It has to be noted the error rate is affected by other factors than administrative capacity (e.g. changes in legislation). The impact of the Action Plan (i.e. the change that can be credibly attributed to the actions) should thus not be equated to changes in error rate. One practical problem with the error rate as a result indicator is that it is only available with a long delay. 2 The first Common State Aid Action Plan was developed jointly by DG REGIO and DG COMP in the wake of the State aid Modernisation programme and the introduction of the State aid ex-ante conditionalities. It was adopted by the Board of Directors in DG REGIO in March Since the first actions were implemented in 2015 it makes sense to take it as the base year for the result indicator. A first stocktaking on outputs, results and impact of the Action Plan will be taken by mid Based on the state of progress, actions may be adjusted. This will cover all actions but particular attention will be paid to the 'Pool of thematic experts'. 2 MAIN CHALLENGES As a general rule Member State need to notify the Commission (DG COMP) about any plans to grant State aid. After the notification the Commission determines whether the proposed measure constitutes State aid and it assesses whether the aid is compatible with State aid rules. The Commission has the exclusive authority to make this compatibility assessment. For categories of aid which are likely to be compatible with the internal market, the Commission has created exemptions to the general notification requirement. The rules and conditions for the exemption set out in the General Block Exemption Regulation (GBER). 2.1 Shift in the focus of cohesion policy Cohesion policy for the period has an increased focus on boosting jobs, growth and investment. Consequently, substantial amounts of ESIF allocations are directly linked to economic activities (e.g. broadband, energy networks, and renewable energy). Support to economic activities/actors is likely to constitute State aid. Thus the share of ESIF support falling under the State aid regime is expected to increase significantly. Further, the amount of ESIF support implemented through financial instruments is also increasing. Financial instruments pose specific challenges with regard to State aid. 2.2 Complex rules The assessment whether a measure constitutes State aid and whether the aid is compatible with the EU rules is often very complex. Each measure is different and needs to be assessed individually. State aid assessments require specialised legal and economic knowledge and their application to specific situations. 2 ECA publishes its Annual Report some 10 months after the end of the reporting year. (The report for concerning the financial year 2015 was published in October 2016.) 3

5 According to a survey by the European Court of Auditors (ECA) almost all national audit authorities consider the EU s legal framework for State aid to be at least fairly complex. More than 35 % of them cited the volume of legislation as the biggest factor causing complexity in State aid. Another 35 % stated that they had difficulty in applying legislation in practice. More than 85 % of all audit authorities also considered that they would benefit from further support from the Commission. These results (regarding complexity and need for support) are likely to be valid not only for audit authorities but for other authorities involved in the implementation of ESIF as well. Change in legislation The challenges of correctly applying State aid rules increased due to a court ruling and the revision of the General Block Exemption Regulation. The Leipzig-Halle judgments of the European courts 3 have widened the scope of State aid to types of investment that were previously considered "state-aid free" (e.g. transport infrastructure). The courts held that the construction of infrastructure that is inextricably linked with its subsequent economic use constitutes an economic activity in itself and therefore EU State aid rules apply to the financing. The General Block Exemption Regulation (GBER) allows Member States to carry out many aid measures without notifying them to the Commission. GBER sets out a number of general provisions and provisions applicable to each category of aid. Aid which falls under the GBER and complies with these provisions is automatically considered to be compatible with the internal market. Nevertheless, for large aid measures (above the notification thresholds), notification is still required due to the potential of such measures to distort competition. It is up to the Member States to assess and decide upon whether a certain aid measure falls under GBER. To carry out this task effectively and efficiently Member States and Managing Authorities in particular, need to have adequate resources and know-how (administrative capacity). Overall, the GBER shifts more responsibilities to Member States. 3 Judgment of the General Court of 24 March 2011 (Joined cases T-443/08 and T-455/08) and Judgment of the Court of 19 December 2012 (Case C-288/11 P). 4

6 The scope of GBER was significantly enlarged as part of a major initiative to modernise State aid rules (State Aid Modernisation programme). Most parts of the modernisation measures entered into force on 1 July 2014, at the beginning of the programming period. The increase in scope is significant: 90 % of aid measures and 2/3 of total aid amounts granted by Member States are now covered by the 2014 GBER. (The corresponding figures under the old GBER were 60 % of aid measures and 30 % of aid amounts granted). 2.3 Persistent problems The European Court of Auditors (ECA) has been criticizing for years the high error rate in the application of State aid rules in the context of cohesion policy. According to ECA infringements of State aid rules is one of the main sources of error for Economic, social and territorial cohesion (next to ineligible expenditure/projects and public procurement). In 2016, ECA published a comprehensive review of State aid rules in cohesion policy (Special Report No 24/2016) which concludes that the level of State aid non-compliance remains significant. According to the Special Report, for the period 13.5 % of the estimated errors in cohesion policy was attributable to State aid. For ERDF/CF projects with State aid relevance, the State aid error rate was 20.9 %. Audit authorities in the Member States detected infringements at a far lower rate than either the Commission or the EU auditors. During the period, both the number of projects with State aid relevance and the share of projects affected by State aid errors, increased. However, the increase concerned mostly errors without a financial impact on the amount of funding of the EU budget. 5

7 The categories and significance of detected State aid errors are shown below. Based on its analysis ECA makes several recommendations to the Commission to reduce non-compliance with State aid rules. One of the ECA recommendations concerns the administrative capacity of Member States: the Commission should follow up every two years on Member States capacity to comply with State aid rules [...]. The Commission should use these exercises for monitoring purposes and to direct support activities such as providing training to the Member States where they are most needed. 4 4 European Court of Auditors. Special Report No 24/2016, p. 10 6

8 2.4 Ex-ante conditionalities The Common Provisions Regulation (CPR) introduced ex-ante conditionalities (ExAC) to ensure that the framework conditions are in place for the efficient and effective investments of the ESIF. One of the general ExACs requires the existence of arrangements for the effective application of EU State aid rules in the field of ESIF. Thereby, the ExAC on State aid provides a mandate for the Commission to request improvements to the administrative capacity of Member States with persistent weaknesses in this area. The criteria for the assessment of the ExAC on State aid are the following: 1) Arrangements for the effective application of EU State aid rules; 2) Arrangements for training & dissemination of information for staff involved in the implementation of the funds; 3) Arrangements to ensure administrative capacity for implementation and application of EU State aid rules. At the time of the adoption of the Partnership Agreements five Member States (Czech Republic, Croatia, Italy, Romania and Slovakia) declared in their self-assessment that they did not fulfil the ExAC for State aid. They committed to an action plan to fulfil the ExAC by end 2016 at the latest. Some of positive actions implemented under the action plans are shown in the table below. Criterion 1 Criterion 2 Criterion 3 Set up of a central state aid electronic register connecting all granting authorities (HR) Ensure data transfer between ESIF central monitoring system and state aid central register (CZ) Organisation of at least 2 training sessions per year (IT) Preparation of a training strategy in cascade, including number of staff trained per administrative unit (IT) Strengthening of administrative capacity of the central state aid coordinator by % (SK) 3 PREVIOUS ACTIONS AND OUTPUT The main actions realised so far under the 2015 Action Plan and their main output are described in the following. The full impact and results of the actions cannot be yet assessed due to the time lag in reporting on the relevant indicators (reduced number of irregularities; reduced error rate; reduced number of illegal State aid). 3.1 Identification and dissemination of good practices This action consisted in preparation of a study by an external expert on best practices in application of State aid rules linked to the management of the ESIF. The study had two main objectives: 7

9 To describe and analyse different organisational arrangements and tools existing already in MSs which are aimed at ensuring that State aid rules within management and implementation of ESIF are duly taken into account. To provide conclusions and recommendations stemming from case studies. Output: The final study ('Inventory of organisational arrangements and effective tools existing across Member States to ensure compliance with State aid rules in the European Structural and Investment Funds' management system') was submitted in March The study identifies five stages 5 of ESIF management at which compliance with State aid rules needs to be ensured and it presents good practice tools for each stage. Based on detailed case studies in preselected countries (Estonia, Germany, Poland, Portugal, Romania and Slovenia) it concludes that well functional information dissemination systems, networking, working groups are essential to ensure compliance with State aid rules and procedures. The study makes a number of recommendations to improve State aid compliance in ESIF management. For example, it recommends strengthening the competence of national State aid authorities and the inhouse State Aid expertise of Managing Authorities and Implementing Bodies. It recommends an early involvement of State aid authorities in the development of State Aid schemes and ad hoc State aid. Basic State aid screening (in the form of a standardized decision tree) and Stat aid registries can also be very efficient tools in streamlining State aid assessments. 3.2 Country-specific seminars For Member States which did not fulfil the ex-ante conditionalities on State aid (HR, RO, CZ, SK and Italy) specific training was offered in Interactive country-specific seminars were organised in Croatia, Romania and the Czech Republic (joint seminar for the Czech Republic and Slovakia). For Italy, the Italian authorities developed a specific training programme, which was implemented in cooperation with DG COMP. In addition, a country-specific seminar was organised in Bulgaria. 6 DG COMP experts gave at each seminar a practical introduction to the State aid Modernisation programme. When requested by a Member State thematic workshops (e.g. infrastructure, environmental infrastructure, SMEs etc.) were held as well. DG REGIO presented good practices of dealing with State aid in the daily ESIF management and its main audit finding related to State aid. Target group: Practitioners involved in the management, implementation and control of ESIF (e.g. Managing Authorities, beneficiaries and Audit Authorities). Output: Four seminars with around 100 participants per event, plus a training programme with Italy. All training material is publicly available on the Inforegio website. 5 The five stages are: drafting OPs, drafting SA schemes/ ad hoc SA, granting SA, implementation of projects with SA and controlling. 6 Bulgaria did fulfil the ex-ante conditionalities on State aid but its system had some serious bottlenecks. 8

10 3.3 Thematic expert seminars The objective of the thematic expert seminars is to disseminate State aid knowledge on specific topics/issues. Output: In 2016, four thematic seminars were organised. The thematic areas covered were: transport, regional aid and SMEs, energy and Research, Development and Innovation (RDI). Target group: Specialists from all MS in certain sectors with ESIF background and State aid expertise. Set up and programme: more interactive, discussion on case studies. Average: 75 to 100 participants. Location: Brussels. All training material is publicly available on the Inforegio website. 3.4 Training of ESIF practitioners By February 2017 three 2-day training sessions on 'State aid in the management of the ESIF during programming period' took place in Brussels, at the premises of DG REGIO. The training sessions were organised by the European Institute of Public Administration. The training offers a systematic introduction into the principles of State Aid. Topics of particular relevance, such as the General Block Exemption Regulation and the Regulation on De Minimis Aid, are presented in some detail. Target group: Practitioners involved in the management, implementation and control of ESIF. Taking into account the high interest, more training sessions are planned for All training materials, including podcasts, are publicly available on the Inforegio website. Output: In 2016, two training sessions were held. Overall, 75 people from 25 Member States were trained. (Only Malta, Cyprus and Ireland did not participate.) 3.5 PEER 2 PEER exchanges The P2P programme supports direct exchanges between stakeholders in different Member States on specific topics. Output: By February 2017 seven P2P exchanges on State aid took place (4 study visits, 2 expert missions and 1 multi country workshop; see Annex for details). 3.6 High-level meetings Meeting of senior management (at the level of Deputy Director-Generals and Director Generals) of DG REGIO and DG COMP to exchange information, identify bottlenecks and explore common solutions with regard to State aid. Output: Between 2015 and 2016 three meetings took place (30 June 2015, 4 April 2016 and 20 October 2016). 9

11 4 PROPOSED ACTIONS Most of the actions proposed for are a continuation of the work that was done and proved successful in previous years. A new type of action is the setting up an expert pool providing advice on State aid issues. Progress of the proposed actions will be monitored on a recurring basis. The Action Plan and progress reports will be published on the InfoREGIO website. 4.1 Strategic training programme Thematic expert seminars Objective The objective of the thematic expert seminars is to disseminate specialised State aid knowledge on particular topics/issues. The topics should be relevant for the implementation of ESIF and pose specific State aid questions. The seminars will include case studies and extensive question and answer sessions. The topics proposed for 2017 are: Research, Development and Innovation (RDI), broadband. The reason why we propose another seminar dedicated to RDI is twofold. Firstly, the initial thematic seminar on that topic in 2016 was largely oversubscribed. Further, RDI is a topic with increasing significance for ESIF due to the volume of funds allocated to the relevant thematic objective and to the importance of smart specialisation strategies for an efficient ESIF implementation. Broadband is proposed as it forms an important part of the Commission's Digital Single Market strategy and due to the volume of funds allocated to the relevant thematic objective. Target group Practitioners from all Member States involved in the management, implementation and control of ESIF in one of the selected topics. The groups shall not exceed 90 participants in order to allow for optimal interaction. Timing One thematic seminar will take place in the 2 nd quarter of 2017 and the second one in the 3 rd or 4 th quarter of Organisation The organisation of this action will be outsourced. The content is provided jointly by DG COMP experts, and independent expert. All thematic seminars take place in Brussels. 10

12 4.1.2 Training of ESIF practitioners Objective The objective is to raise general awareness of ESIF practitioners regarding State aid issues linked to management and implementation of ESIF. Attending this training session should help the practitioners to deal with the increased responsibility of Member States in the field of State aid management as a consequence of extended use of the General Block Exemption Regulation. As a result, they should be able for example to detect presence of State aid e.g. in support schemes and design of calls for proposal accordingly. The session should also help them to guide beneficiaries through State aid issues. The training also aims at encouraging networking and informal exchanges among participants. Target group Practitioners from all Member States involved in the management, implementation and control of ESIF. Each session will have a maximum of 35 participants. In case of oversubscription participants will be selected as to achieve a representative mix of Member States. Timing Three training sessions are planned in 2017 (29-30 March, May, 4-5 July) in addition to the three sessions organised between November 2016 and February Organisation Organisation and content of the training sessions is done by the European Institute of Public Administration. DG COMP will participate in the training sessions and will be available to answer questions of the participants. The trainings sessions will take place at the premises of DG REGIO Training of auditors Objective The objective is to train auditors on State aid issues that are of particular importance to the control of ESIF. Target group Personnel of national audit authorities and auditors in DG REGIO. Timing One training session by the end of Organisation The format of this training will be similar to the one organised for ESIF practitioners. 11

13 4.2 Exchange of good practices PEER 2 PEER exchanges Objective Continue using PEER 2 PEER exchanges for expert visits, study visits or small scale workshops. The peer exchanges should not only help to promote good practices in specific areas but also to help Member States in searching for peer solutions to their concrete issues. Possibly, these exchanges could create a basis for a longer term cooperation among participating institutions e.g. in a form of a "community of practitioners". Timing Ongoing activity not limited in time based upon a concrete request coming from Member States. Organisation Within the framework of the TAIEX REGIO PEER 2 PEER tool Round tables for good practices Objective Expert level discussion of State aid issues with high relevance to ESIF. The objective is to discuss the selected topic in depth and issue a note summarising the (common) position and recommendations of the experts. Selected topics could be new developments (e.g. Commission decisions, judgment by European courts) or issues of practical relevance to all/most Member States (e.g. simplified cost option). The outcome of the round tables should provide further good practice guidance and provide ideas to Member States on lessons learnt so far. Target group Recognised State aid experts from Member States and independent experts (from academia, law firms). Timing One pilot event by the end of If the format proves successful two more round tables could be organised in Organisation The organisation will be outsourced. Preferably the round tables should take place in Brussels. 12

14 4.3 Other High-level meetings Objective Meeting of senior management of DG REGIO and DG COMP to exchange information, identify bottlenecks and explore common solutions with regard to State aid. DG REGIO will collect and present specific State aid problems faced by Managing Authorities and other ESIF bodies. DG COMP will inform on significant State aid decisions and Court rulings which are relevant to ESIF. In case a Member State has a weakness in designing State aid schemes and/or complying with State aid rules the senior management will identify and evaluate options to remedy the problem. Target group Director-Generals, Deputy Director-Generals and Directors of DG REGIO and DG COMP. Timing 2-3 meetings a year between Director-Generals and Deputy Director-Generals. Regular meetings between Directors. Organisation Organised jointly by DG REGIO and DG COMP Improved communication of key developments in State aid Objective Raise awareness of key policy developments in State aid rules (e.g. adoption of the GBER review). Disseminate practical guidance material on State aid issues (e.g. infrastructure analytical grids, guidance note on financial instruments), which are of relevance to ESIF practitioners. Target group ESIF practitioners in all Member States and DG REGIO staff. Timing Activity not limited in time. Organisation DG REGIO and DG COMP will jointly explore possibilities to use each other's standard communication channels to disseminate information on State aid relevant to the implementation of ESIF. DG REGIO could communicate such information through InfoRegio, REGIO Flash and EGESIF. DG COMP could publicise State aid information relevant for ESIF through its own communication channels Better use of estate aid WIKI Objective The objective is to raise targeted awareness about the estate aid WIKI and to promote the dissemination of information communicated through this tool. The estate aid WIKI is an IT-tool by which DG COMP 13

15 provides answers to abstract questions on the interpretation of the State aid rules from and the Member States. 7 Designated users 8 should be encouraged to inform ESIF practitioners about the tool and to actively disseminate relevant information to them. ESIF practitioner should be made aware of the tool and of the possibility to contact designated users(s). The competent bodies in the Member States should be encouraged to grant reading rights to ESIF practitioners. Target group Designated users of the estate aid WIKI, ESIF practitioners and competent bodies in the Member States. Timing Ongoing activity not limited in time. Organisation Awareness raising for the estate aid WIKI can be done at thematic seminars and at trainings for ESIF practitioners. DG COMP could encourage designated users (e.g. in bilateral contacts and in the working group on SAM Implementation) to disseminate relevant information on the platform. The compilation of estate aid WIKI questions and replies into a single, user-friendly document should also be considered Pool of thematic experts Objective Offer direct support to national bodies in designing and implementing State aid schemes or individual aid, if required by the national authorities. National bodies could ask for assistance when faced with State aid issues they are unfamiliar with. The emphasis should be on advising how to best achieve a given objective within the State aid framework. Geographic units in DG REGIO have reported that municipalities and regional bodies often refrain from designing State aid schemes that involve more difficult State aid questions but rather opt for simple but potentially inefficient solution (e.g. de minimis aid). REGIO's State aid expert matrix also identified this problem and endorsed this action. The pool of experts should not duplicate any existing structure. This action should be implemented through existing structures (e.g. JASPERS, hiring of AMI-list experts). At first, as a test phase a few State aid experts could be included in the AMI-list to heck the demand for the pool of thematic experts. Such experts should ideally cover sectors/areas of expertise not sufficiently covered by JASPERS. The choice of experts for each individual assignment, at the request of national authorities, would depend on expertise and availability. Further, it has to be made clear to the Member States that any advice by such a pool of thematic experts cannot bind the Commission (DG COMP) in its own State aid assessment. 7 The interpretations provided are informal guidance and as such do not bind the Commission as an institution. 8 Access to the estate aid WIKI is limited and only designated State aid specialists can upload questions. Limiting the number of people with full access rights is necessary to keep the quality of the questions high and the work associated with answering them reasonable. 14

16 Target group National bodies (especially municipalities and regional bodies) which lack sufficient experience in designing State aid schemes or individual aid measures. Timing Find and include 4-6 thematic State aid experts into the AMI-list by the end of Organisation The AMI-list will be organised by DG REGIO. Contacting JASPERS will be done jointly by DG REGIO and DG COMP. 15

17 5 ANNEX PEER 2 PEER exchanges Topic Type of exchange Beneficiary Provider of expertise Date State Aid Rules in the Transport Sector State Aid Monitoring, Control and Assessment State Aid Auditing State Aid Rules in the Implementation of the European Structural and Investment Funds State Aid for Universities and Research Organisations State Aid Control in Public Infrastructure Projects Workshop on State Aid and European Structural and Investment Funds Implementation Expert Mission HR: Ministry of Maritime Affairs, Transport and Infrastructure SI: Ministry of Finance Jun-15 Study Visit BG: Ministry of Finance LV: State Aid Control Department Jan-16 Expert Mission Study Visit Study Visit Study Visit Multi country Workshop LV: Audit Authority, Ministry of Finance CZ: Ministry of Regional Development LT: Ministry of Education and Science LT: Central Project Management Agency DE: Ministry for Economic Affairs and Energy of the State of Brandenburg PL: Polish Information and Foreign Investment Agency EE: Ministry of Finance ES: Agencia de Innovación y Desarrollo de Andalucía, Seville EL: Ministry of Economy, Development and Tourism ES/IT/PT Mar-16 Mar-16 Jul-16 Jan-17 Feb-17 16

18 Schedule for proposed actions Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Strategic training programme Thematic expert seminars 1 1 Training of ESIF practitioners Training of auditors Exchange of good practices PEER 2 PEER exchanges Round tables for good practices demand driven 1 demand driven 1-2 Other High-level meetings 1 Better use of estate aid WIKI Pool of thematic experts 1-2 communication 4-6 experts 2-3 demand driven 9 The schedule for the year 2018 is a first indication and will be reviewed at the end of

19 EUROPEAN COMMISSION Directorate-General for Regional and Urban Policy Directorate E Administrative Capacity Building and Programmes Implementation II Unit E.1 Administrative Capacity Building and European Solidarity Fund Contact: Pascal Boijmans regio-e1-administrative-capacity@ec.europa.eu European Commission B-1049 Brussels

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