Third Report of Session 2013-14 - European Scrutiny Committee Contents

18   Application of EU State aid rules



COM(12) 725

Draft Council Regulation amending Regulation (EC) No. 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (now Article 108 TFEU)

Legal baseArticle 109 TFEU; consultation; QMV
DepartmentBusiness, Innovation and Skills
Basis of considerationMinister's letter of 13 May 2013
Previous Committee ReportHC 86-xxvi (2012-13), chapter 7 (9 January 2013)
Discussion in Council29 May 2013
Committee's assessmentLegally and politically important
Committee's decisionCleared


18.1  State aid rules are now enshrined in Article 107 and 108 of the Treaty on the Functioning of the European Union (TFEU),[74] whilst more detailed rules of procedure for their enforcement are set out in Council Regulation ((EC) No 659/1999). In the light of the enlargement of the EU to 27 Member States, and the important part played by State aid control in addressing the economic and financial crisis, the Commission brought forward in December 2012 this proposal to amend the Regulation. In particular, it sought to minimise the number of requests for information sent to Member States; to deal swiftly with unfounded complaints; to periodically inform complainants, Member States and beneficiaries about the progress of investigations; and to improve the efficiency and reliability of data gathering.

18.2  As we noted in our Report of 9 January 2013, it proposed:

  • improvements in the handling of complaints, whereby complainants will be required to submit a certain amount of compulsory information in a standard format, and will have to demonstrate that they are 'interested parties', and therefore have a legitimate interest: where these conditions are not met, a submission will not be classified as a complaint, and will instead be registered as market information, with the Commission then under no obligation to adopt a formal decision;
  • where a complainant draws attention to aid which has already been granted, and which therefore constitutes a potential illegal aid, there would be express provision that national courts should have a right to obtain from the Commission information for the purposes of applying Articles 107 and 108 TFEU, and to ask for its opinion on questions related to State aid rules: and it would have the right to make submissions to national courts in written or oral form, acting on the basis of the European Union public interest (as amicus curiae);
  • in order to ensure the effective and reliable gathering of market information, there should be a new right for it to require information from entities other than the Member States concerned after the opening of a formal investigation: together with a new power for it to issue fines or penalty payments for a failure to respond or provide complete information at its request (though this will not apply to Member States or public authorities, and the level of fines and penalty payments available would be limited, as would the periods for their imposition and enforcement); and
  • on view of the need for a reinforced horizontal investigation in cases which appear to raise issues linked to a specific sector in several Member States, it should have a new power to launch investigations into sectors of the economy and into types of aid measures (as opposed to specific items of state aid notified or subject to a complaint).

18.3  Our Report also noted the Government's view that the ability for the Commission to correspond directly with entities within Member States as part of its investigations should reduce the administrative burden on Member States, and not have any impact on the essentially bilateral nature of the state aid procedure between the Commission and the Member State. However, it suggested that the market information provisions — though not thought to exceed EU competence in this area — would represent significant new powers for the Commission, and that the details of the proposals (in terms of the types of entities which may be compelled to provide information, levels of fines and penalties, and the safeguards in place to limit the burden on the entities affected) would need to be considered from a better regulation perspective. Thus, although the UK was not opposed to these powers in principle, it saw the proportionality criterion as crucial in preventing an undue burden on businesses.

18.4  We commented that the Commission's aim of streamlining the State aid procedures was welcome in principle, and in many ways would not appear to give rise to any major practical issues. However, given the concerns about some of the provisions on the supply of market information, which the Government was examining, we decided to hold the document under scrutiny, pending further information.

Minister's letter of 13 May 2013

18.5  We have now received a letter of 13 May 2013 from the Minister for Employment Relations and Consumer Affairs (Jo Swinson), in which she says that the implications of the market information provisions were very carefully considered by Ministers, weighing up the possible burdens this would create against the benefits of the better reasoned and faster Decisions, and also having regard to the fact that the provision would only be used in some formal investigations, and its effect thus likely to be limited.[75] In addition, they recognised that the information in question could be crucial to a full assessment of a particular aid measure, and the need to be sure that measures are considered in as robust a fashion as possible. On balance, therefore, it was decided to support the proposal, but to seek in negotiations to ensure that these provisions are used proportionately.

18.6  The Minister reports that a number of important amendments have now been made to minimise the burden on third parties as far as possible. Thus:

  • it has been made clear that the provisions will be used in the most complex cases;
  • that third parties will be asked for information only if that already provided by the Member State has proved insufficient: also, in seeking this information, the Commission will have to be mindful of proportionality, particularly in relation to small and medium sized enterprises (SMEs), although the Minister adds that these are unlikely to be involved in complex cases ;
  • that Commission will only be able to ask an undertaking for information at its disposal, and cannot therefore request information which would require research or effort to retrieve; and
  • that the Commission must tell the Member State concerned what has been asked for and the criteria used to select respondents, thereby allowing it to ensure that a particular sector or particular type of company is not being singled out.

18.7  The Minister concludes that the potential burdens arising from the market information provisions have been removed, adding that, according to the Commission, these would only have been used in around 15 cases in 2011, and should thus be seen as the exception rather than the rule.

18.8  The Minister also comments on the provision allowing the Commission to impose fines on companies which do not provide information. She says that, whilst this should be possible when a company wilfully refuses to give information, the Government has been at pains to ensure that it is done proportionately, and, as a consequence, there will now be a requirement on the Commission to take account of proportionality and appropriateness, and have particular regard to SMEs. Also, it will be able to waive any fine or penalty if the company eventually provides the information.

18.9  Finally, the Minister addresses the need for a complaint form to be completed before the Commission can investigate, which she says could have been burdensome, and where the Government considered that an overly complex form could be an active disincentive, particularly for SMEs, to lodge complaints. She says that the UK has now secured text which specifically says that, in order not to act as a disincentive to complaints, the demands on complainants should be taken into account, and the Commission has also assured Member States that the complaints form will be the subject of a wide consultation.

18.10  The Minister concludes by saying that the Regulation is due to be adopted at the Competitiveness Council on 29 May, and asks if we are able to agree that the text now has sufficient safeguards to ensure that any burdens on business are kept to an absolute minimum, and can thus clear the document from scrutiny.


18.11  We are grateful to the Minister for this update, and, in the light of what she has said, and the previous indication that the UK is not opposed to the proposals, we confirm that we are now content to clear the document.

74   Article 107 defines State aid, and the grounds on which it may be considered compatible with the internal market, whilst Article 108 sets out the main procedural principles governing the Commission's action to ensure Member State compliance. Article 109 allows the Council, acting on a proposal from the Commission and after consulting the European Parliament, to make regulations for the application of Articles 107 and 108. Back

75   The UK has historically had very few such investigations, there being, for example, only four in the period since 2007. Back

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