What is state aid?
State aid is any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States (Article 107 subsection 1 of the Treaty on the Functioning of the European Union).
The following criteria must be taken into consideration in identifying cases of state aid:
• The aid is granted from the state, town or local municipality funds;
• The aid measure is of selective nature, i.e., directed to a certain enterprise, group of enterprises or for production of certain goods/provision of a certain service;
• The aid measure gives an advantage to the recipient compared to other producers of the same goods/providers of the same service;
• The aid measure distorts or may distort competition between the European Union Member States.
If an aid measure meats all four criteria, it is deemed state aid. State aid is monitored by the European Commission and Member States are required to notify the Commission of any plans to grant state aid in advance.
Can applying for aid from EIC qualify as state aid?
If aid is granted by EIC to an enterprise, this very likely a case of state aid. Thereat, the definition of an enterprise is functional, i.e., based on the economic activity – if a local municipality body (e.g., in the case of district heating) or a non-profit organisation offers goods or services for a charge, such bodies or organisations are deemed enterprises.
In general, state aid is prohibited and may only be granted under certain strict terms and conditions
The fact that a project matches the activities of an environmental strand funded by EIC alone does not ensure that state aid may be granted to the project. This must be assessed separately.
What should an applicant do prior to submitting an application to EIC in the case of suspected state aid?
• Get acquainted with the issue of state aid prior to submitting the application;
• Consider whether and under which state aid type/measure could the application be classified;
• Explain the above (by an analysis presented in a separate document, if necessary) by stating the characteristics and criteria of the specific type of state aid (e.g., stimulating effect, initial investment);
• Confirm awareness of only being entitled to receive state aid, which is in conformity with the requirements.
Under which circumstances may EIC grant state aid?
See the respective plans of the website of EIC. Please also get acquainted with the directly applicable EU legislation referred to in the plans.
2. State aid covered by a block exemption
3. Aid for services of general interest
Certain services may be considered services satisfying general economic interests. Such services are deemed necessary by the public sector, but the market is unable to provide the services without aid.
In such cases, respective aid may be granted as compensation for provision of the services based on:
- Resolution of the European Commission on services of general interest (practical in the case of large projects)
4. State aid granted based on a special permit issued by the European Commission
Based on the Treaty on the Functioning of the European Union, the European Commission may declare a single project to be in conformity with the state aid criteria. To explain the approach, the Commission has issued guidelines, with the guidelines on environmental protection being the most significant from the perspective of EIC.
If the recipient of aid is convinced that their project is eligible pursuant to the guidelines, the recipient may ask EIC to apply for permission of the European Commission for granting state aid based on the guidelines. Thereat, it should be kept in mind that the application process is time-consuming and the applicant must be prepared to provide detailed explanations about the project and the market to the European Commission.
If an enterprise wishes to build a new plant and such activity (or a part thereof) is eligible for aid from the environmental programme, granting of regional aid covered by a block exemption is possible for building such new plant. Threat, the terms and conditions provided for in the regulation, eligible expenditure and exclusions must be taken into consideration.
If an enterprise wishes to build a sewerage system on the territory of an existing plant, aid cannot be granted for such activity based on the above mentioned regulation of aid for services of general interest, as this is not an initial investment for the purposes of articles 12 and 13 of the regulation. However, de minimis aid of up to 200,000 euros in the course of three years may be still be granted for this activity. The aid may, of course, only be granted if no exceptions specified in article 1 of the regulation are applicable to the aid and the enterprise if has not already received de minimis aid from other sources.
What happens if the criteria for granting state aid are breached?
Establishing of the criteria for granting state aid and the activities related to monitoring are directly under the jurisdiction of the European Commission and regulated by directly applicable EU legislation. Such legislation prescribes that incorrectly allocated or improperly used state aid must be refunded along with any interests determined by the European Commission and no legitimate expectations should rise for the enterprise with respect to incorrectly allocated or improperly used state aid.
Who coordinates the issue of state aid in Estonia?
In Estonia, state aid-related issues are coordinated by the Public Procurement and State Aid Department of the Ministry of Finance. Agricultural and fishery-related aid is mainly handled by the Ministry of Agriculture and the aid to transport by the Ministry of Economic Affairs and Communications.
Where can information about state aid be obtained from?
• On the website of the Ministry of Finance, with the manual on state aid also available.
• Information can also be obtained from the Estonian language subsection of the website of the European Commission.
• Definition of small and medium-sized enterprises is available on the website of Enterprise Estonia.