Notification – procedural rules
Article 88 (3) EC-Treaty states: 'The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 87, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.’
On 22 March 1999 the Council has adopted the Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 (now: Article 88) of the EC Treaty. This Regulation sets out the procedural rules for the European Commission’s state aid control in accordance with the case-law of the Court of Justice of the European Communities.
On 21 April 2004 the European Commission has adopted the Regulation (EC) No 794/2004 implementing the Council Regulation (EC) No 659/1999 concerning the form, content and other details of notifications and annual reports. Regulation (EC) No 794/2004 includes more than 100 pages of notification forms.
1. ‘new aid’ and ‘existing aid’
The same as the EC-Treaty the Regulation (EC) No 659/1999 differentiates between ‘new aid’ and ‘existing aid’, the procedures for these two different kinds of state aid are different.
new aid – definition:
Article 1 c) Regulation (EC) No 659/1999 defines ‘new aid’ as aid schemes and individual aid which is not existing aid, including alterations to existing aid. Regulation (EC) No 794/2004 puts the second alternative of new aid, the alterations to existing aid, into concrete terms. An alternation to existing aid shall (only) mean any change, other than modifications of a purely formal or administrative nature which cannot affect the evaluation of the compatibility of the aid measure with the common market. Such relevant changes could for example be changes in the eligible costs, a remarkable postponing of a certain project, a remarkable prolongation or delay concerning individual projects e.g. environmental projects. However an increase in the original budget of an existing aid scheme up to 20% shall not be considered an alternation to existing aid. This quite precise definition of alterations of existing aid makes the judgement easier, if the change of an existing aid scheme leads to the obligation of notification.
existing aid -definition:
Following from Article 1 b) Regulation (EC) No 659/1999 especially following kinds of aid are regarded as ‘existing aid’:
aid which existed prior to the entry into force of the Treaty in the respective Member States, that is to say,
Article 2
- still applicable aid, i.e. aid schemes and individual aid which were put into effect before the entry into force of the Treaty and are still applicable; in the new Member States the ‘still applicable aid’ can be found in lists, published by the Commission;
- authorised aid, i.e. aid schemes and individual aid which have been authorised by the Commission or by the Council;
- aid which is deemed to be existing aid because the limitation period to recover aid (10 years) has expired (Article 15);
- cases where the Commission has not taken a decision within the period laid down in Article 4 (5);
- measures that at the time they were put into effect did not constitute aid, and subsequently became aid due to the evolution of the common market and without having been altered by the Member State (liberalisation);
2. Procedure regarding new aid
The Member States must notify new aid and alterations to existing aid arrangements in advance and may not put the proposed measures into effect until the Commission has taken a decision on the case. If state aid is put into effect before the decision of the Commission, the aid is formal illegal (unlawful aid). Competitors injured or threatened with injury through formal illegal aid, can take action before national courts. The prohibition, against granting aid without authorization by the Commission is absolute and categorical and, as such, is directly effective law which can be enforced in national courts.
2.1. Content and form of notifications
In a notification, the Member State shall provide all necessary information in order to enable the Commission to take a decision. The necessary information depends on the kind of State aid that shall be granted. In order to facilitate the preparation of State aid notifications by Member States, and their assessment by the Commission, the Commission now has published ‘notification forms’ for all different types of State aid (e.g. aid for rescue and restructuring a firm in difficulty, aid for research and development etc.) as Annexes to Regulation (EC) No 794/2004. In these ‘notification forms’ the Commission asks for all information, that is (from the Commission’s point of view) necessary for the decision about the special kind of aid. But each form includes under point ‘other information’ the possibility, to add the information, of which the Member State thinks it might be useful or helpful or important for the Commission to know. This part of the notification forms might be used, to give detailed information about the background of the supported project (e.g. in the case of aid for rescue and restructuring a firm in difficulty information about the background and history of the firm, its roots and positive developments in the past).
The ‘notification forms’ shall apply to those notifications transmitted to the Commission after 20 October 2004. Failures to complete these forms correctly may result in the notification being returned as incomplete by the Commission with the consequence that the period of time (2 months, Article 4 (5) Reg. (EC) 659/1999) during which the Commission has go to take a decision does not begin to run (in practice the Commission uses to lengthen this period by regarding the notification incomplete and asking questions concerning the notified aid). Until 31 December 2005 notifications shall be transmitted by the Member States on paper to the Commission, after this date the transmission shall be electronically.
2.2. Preliminary examination
The Commission shall examine the notification as soon as it is received. This examination is not as thorough as the possible formal investigation procedure that might follow; this phase of the notification procedure, the preliminary examination, ends by a decision of the Commission. The Commission shall take this decision within two months after the receipt of the complete notification. The possible decisions (Article 4 Reg. (EC) 659/1999) are:
- The notified measure does not constitute aid
- The notified measure constitutes aid but the Commission finds that no doubts are raised as to the compatibility with the common market (`decision not to raise objections’)
- If the Commission finds that doubts are raised as to the compatibility with the common market of a notified measure, the Commission takes the ‘decision to initiate the formal investigation procedure’
If the Commission takes the decision 1. or 2. the procedure of notification is finished and the Member State is allowed to put the aid into effect. But if the Commission decides to open the formal investigation procedure, the notification procedure steps into a second phase.
2.3. Formal investigation procedure
The Commission initiates the formal investigation procedure if, after the preliminary examination, it finds that doubts are raised as to the compatibility with the common market of a notified measure. The purpose of a formal investigation procedure is to ensure a comprehensive examination of the case by exploring doubtful matters further with the Member State concerned and by hearing the views of interested parties. The decision to initiate this formal investigation procedure summarises the relevant issues of fact and law and includes a preliminary assessment of the Commission as to the aid character of the proposed measure and sets out the doubts as to its compatibility with the common market. The decision to initiate this formal investigation procedure is published in the Official Journal of the European Union. Member States and other interested parties (i.e. any person, undertaking or association of undertakings whose interests might be affected by the granting of aid, in particular the beneficiary of the aid, competing undertakings and trade associations) are called to submit comments. The formal investigation procedure is closed by a Commission’s decision as follows:
- ‘no State aid’: Where the Commission finds that, where appropriate following modification by the Member State concerned, the notified measure does not constitute State aid.
- `positive decision’: Where the Commission finds that, where appropriate following modification by the Member State concerned, the doubts (that existed after the preliminary examination) as to the compatibility of the notified measure with the common market have been removed, the Commission decides that the aid is compatible with the common market.
- `conditional decision’: The Commission may attach to a positive decision conditions subject to which an aid may be considered compatible with the common market and may lay down obligations to enable compliance with the decision to be monitored.
- `negative decision’: The Commission can also come to the conclusion that the notified aid is not compatible with the common market and that it shall not be put into effect.
3. Procedure regarding unlawful aid
Unlawful State aid is such aid, that has been put into effect in contravention of Article 88 (3) of the EC-Treaty, that means that it has been granted by the Member State before a decision of the Commission. Concerning unlawful State aid, the Commission basically follows again the ‘two-step-procedure’ of preliminary exemption and, if necessary, the formal investigation procedure.
But there are some special points that have got to be regarded, if State aid has been granted without a decision of the Commission (‘unlawful aid’): The Commission has got to examine information about alleged unlawful aid immediately, no matter whatever source this information came from (e.g. newspapers or complaints of a competitor of the beneficent). There are basically no time limits for the Commission to be regarded for taking a decision. Until the Commission has taken a final decision on the compatibility of the aid with the common market., there is the possibility that the Commission adopts a ‘suspension injunction’ to suspend any unlawful aid or, if certain criteria are fulfilled, a ‘recovery injunction’ to recover any unlawful aid.
This ‘recovery injunction’ (that is possible but not very common) must not be mixed with the ‘recovery decision’ of the Commission. The first one, the ‘recovery injunction’ is a measure the Commission can take before having examined whether the unlawful aid is compatible with the Common Market, but only if certain criteria are fulfilled.
The second one, the ‘recovery decision’, is the regular consequence, if the Commission finds, that unlawful State aid is not compatible with the common market. The aid to be recovered pursuant to a ‘recovery decision’ shall include interest at an appropriate rate fixed by the Commission. Interest shall be payable from the date on which the unlawful aid was at the disposal of the beneficiary until the date of its recovery. Recovery shall be effected in accordance with the procedures under the national law of the Member State concerned, provided that this law allows the immediate and effective execution of the Commission's decision. If there is any delay after the ‘recovery decision’ (usually the Commission demands information about the execution of the ‘recovery decision’ two month after the date of the decision itself) there is the possibility of the Commission referring the matter directly to the European Court of Justice (Article 88 (2) EC-Treaty).
4. Procedure regarding existing aid schemes
As pointed out under 1. (see above), the Regulation (EC) No. 659/1999 differentiates as well between new aid and existing aid, as the EC-Treaty itself. Existing aid experiences a favourable treatment compared to new aid. This favourable treatment is based in a special procedure in Regulation (EC) No 659/1999, that is applicable to existing aid schemes. This procedure can be divided into three phases:
First, the phase of cooperation, during which the Commission informs the Member State of its preliminary view that the existing aid scheme is not, or is no longer, compatible with the common market and gives the Member State concerned the opportunity to submit its comments. In this phase the Commission and the Member State sort out, if or in how far an existing aid scheme could be not compatible with the common market (e.g. in a certain sector in which an aid scheme existed the capacities could have changed so much, that under the new circumstances the aid scheme is to be regarded as not compatible with the common market).
Second, the phase of the Commission’s recommendation proposing appropriate measures like amending the aid scheme to recreate its compatibleness with the common market or, if this is not possible, the abolition of the aid scheme. This recommendation is not legally binding.
Third, the reaction of the Member State concerning the appropriate measures. If the Member State accepts the proposed measures and informs the Commission hereof, the Member State is bound by its acceptance to implement the appropriate measures. Now the proposed measures are legally binding only because of the acceptance by the Member State. If the Member State does not accept the proposed measures and the Commission still considers those measures necessary, the Commission will initiate the formal investigation procedure. If the Commission closes this formal investigation procedure with the decision that the aid scheme is incompatible and has go to be abolished, this decision gets into effect ex nunc. That means that such aid that has been granted before the Commission’s decision has not got to be recovered.
Further, with Article 4 Regulation (EC) 794/2004 (and the notification form in Annex II to this Regulation) a simplified notification procedure for certain alterations to existing aid has been laid down, that will probably make work a lot easier.