New EC regulation changes could fast-track innovation funding

Posted on 27 Aug 2013

Changes to European Commission regulations that will make certain state aid applications exempt from laborious Commission checks are set to fast-track government funding for innovation projects.

Funding of innovation projects in the UK is likely to take less time to approve following a new state aid regulation that came into force last week.

The Enabling Regulation 733/2013 grants extra powers to the European Commission to issue block exemption regulations for certain categories of aid.

The changes should simplify aid granting procedures for more categories of state aid, allowing them to be processed and awarded more quickly.

A block exemption means that certain categories of state aid that qualify are exempt from the notification obligation to the Commission, in effect they are assumed to be compatible, so fast tracking the aid award. The Member State still has obligations to ensure transparency and the Commission will monitor closely.

The new categories of aid that may benefit from block exemption include certain broadband infrastructure projects and, crucially for manufacturers, certain types of innovation project.

“They call it block exemption regulations but it should really be called ‘block clearance’, because the changes will enable applications in these qualifying categories to be fast-tracked,” says James Robinson, a partner at Eversheds LLP.

The European Commission is now consulting on the compatibility criteria for these exemptions. The consultation is open until September 10. “There is a real opportunity for manufacturers, if they’re quick, to submit to the Commission what should and shouldn’t be exempt from full state aid checks. It is a proper, open consultation,” adds Eversheds’ Robinson.

Block exemptions already exist that cover research and development and innovation within certain parameters, including aid to young innovative enterprises or innovation advisory services for SMEs, for example.

The amount of assistance the changes will give to companies applying for state aid is not clear until the consultation concludes, says Jenny Block, a partner at Pinsent Masons. “The proposed extension of the block exemption to state aid for innovation clusters and aid for process or organisational innovation should be helpful, particularly for SMEs”.

Jenny Block, Pinsent Masons
Jenny Block, Pinsent Masons - Block exemptions to state aid for innovation should help SMEs

She adds: “For companies who think they may be covered by these proposed exemptions, the key questions to consider are – what is the scope of the exemption proposed; whether it is sufficiently generous in terms of the aid allowed, that is, the Aid Intensity and overall ceiling or amount; and whether the costs that are covered are sufficiently comprehensive.”

A second regulation change, the Procedural Regulation 734/2013, while giving the Commission certain new powers to source information from third parties that could delay some aid approval, might make Commission procedures quicker more generally.

Under this revised regulation, the Commission gains the power to request information from sources other than the Member State granting the aid. The Commission can request information only if the formal investigation procedures have been ineffective.

However, the new regulation requires the Commission to request information from an aid beneficiary only if the Member State granting the aid agrees to the request.

The Commission will also have the power to make state aid sector inquiries if a Member State is reluctant to provide information. This action should facilitate qualifying state aid measures.

State aid beneficiaries can now be forced to comply with the Commission’s requests for information or face being fined.

In addition, what they provide must also be copied to the Member State, “so there will be no hiding under the radar,” says Eversheds Diversified Industrials’ team.

The government’s innovation agency, The Technology Strategy Board, and Nesta, said they were unable to comment until the block exemption consultation is complete.

The full list of categories of aid being considered by the Commission for block exemption can be found here.

Further categories for exemption are expected to be included later.

More information on the block exemptions can be found here.