Plenary panel 3: State aid Chair: Isabel Taylor , vice-chair, Law Society Competition Section Speakers: Kelyn Bacon QC , Brick Court Chambers Geoffrey Mamdani , directorate general for competition, European Commission Elizabeth O'Neill , deputy director, state aid, Department of Business, Innovation and Skills George Peretz QC , Monckton Chambers Elisabetta Righini , visiting professor, Centre of European Law, The Dickson Poon School of Law, King's College London
State Aid Modernisation in practice: what has changed? Geoffrey Mamdani DG Competition London, 13 May 2015 Any opinions expressed are personal and do not necessarily reflect the views of the Commission
A lot! • 4 regulations • Enabling regulation, procedural regulation, de minimis regulation, general block exemption regulation (GBER) • 10 sets of guidelines • Broadband, regional aid, short-term export credit, cinema, risk finance, aviation, energy and environment, R&D&I, IPCEI, rescue and restructuring • 2 other documents • Transparency, evaluation
What is "modernisation"? • Self assessment and decentralisation? • SAM is not the younger brother of antitrust modernisation, but its cousin: • Not self assessment, but more block exemption • Not decentralisation, but greater responsibility of Member States • Procedural streamlining • Plus, alignment of compatibility rules to broader EU priorities
Priorities of SAM • Communication on State Aid Modernisation, 8 May 2012: • Foster sustainable, smart and inclusive growth in a competitive internal market; • Focus Commission ex ante scrutiny on cases with the biggest impact on internal market whilst strengthening the Member States cooperation in State aid enforcement; • Streamline the rules and provide for faster decisions
SAM in practice • Extended scope of General Block Exemption Regulation (GBER) • Guidelines aligned to common principles • Better procedures • Transparency and evaluation
Extended scope of GBER GBER extension GBER extension (notification and intensity threshold) • Notified aid GBER • Block-exempted extension ( aid amount) Exemption areas (new types and • De minimis categories) De minimis Type of aid
Extended scope of GBER: impact
Common principles • Contribution to a well-defined objective of common interest • Need for State intervention • Appropriateness of the aid measure • Incentive effect • Proportionality of the aid • Avoidance of undue negative effects on competition and trade between Member States • Transparency of aid
Better procedures • Changes to the procedural regulation • More efficient handling of complaints • Better scope to obtain information (eg sector inquiries). • Further work with Member States on improving cooperation
Transparency and evaluation • Transparency: publication online of state aid grants above EUR 500 000 from 1 July 2016 • Evaluation: GBER aid schemes in certain fields with annual budget over EUR 150 million and schemes under guidelines that are large or novel or where significant changes are expected: • Has the aid achieved its purpose? • Has the aid led to unforeseen negative effects?
Conclusions • Aim of SAM is a faster, more rational, more proportionate system • Major changes have been made, but the key will be implementation in practice, in close cooperation with Member States • For full references, see SAM website: http://ec.europa.eu/competition/state_aid/moder nisation/index_en.html
State aid modernisation in practice: what has changed? Geoffrey Mamdani DG Competition London, 13 May 2015
State aid modernisation Elizabeth O’Neill BIS Legal
Why does effective state aid regulation matter ? • State aid rules bite on state expenditure in key sectors – transport, infrastructure, R&D, energy, services in the general economic interest • This expenditure is legitimate and an appropriate facet of effective public policy • The tax payer – and Ministers - expect swift and effective state action.
What were the key problems? • Slow system • Sometimes opaque rules – and therefore lack of legal certainty • Limited ability of the Commission to investigate/obtain independent information • Some criticism on extent the economic analysis underpinning Commission reasoning
Procedural changes • More levers enabling the state to act swiftly without Commission pre-approval (risk finance, GEBR) • Excellent that the Commission has the means to compel production of independent market information(MIT) • Yet to see an improvement in case-handling speed
Substantive changes • More critical analytical /economic approach in the revised guidelines and in practice – e.g. enhanced emphasis on incentive effective effect • More versatile rules allow lighter touch better honed instruments of intervention • Proposed communication on the Notion of aid brings more clarity on the application of the rules – including gauging what is standard commercial activity by the state
Evaluation and monitoring • Understanding the impact of past measures on the market assists in establishing effectiveness and proportionality of aid • Monitoring and good housekeeping are important, and Member States have a role to play • However – beyond a duty of loyal cooperation - the Member States do not have the Commission’s role (or powers) under the Treaty with respect to state aid
State aid modernisation Elizabeth O’Neill BIS Legal
State aid and Tax – the tax ruling cases and Santander Law Society Competition Section conference 13.5.2015 George Peretz QC Monckton Chambers www.monckton.com +44 (0)20 7405 7211
The investigations www.monckton.com +44 (0)20 7405 7211
Issues • Duration of ruling • Why was TNMM adopted? • Understatement of cost base • Profit-dependent royalty structures • Lack of due diligence by tax authority • “Smoking gun” www.monckton.com +44 (0)20 7405 7211
Spot the difference www.monckton.com +44 (0)20 7405 7211
Case T-399/11 Santander Which is it? www.monckton.com +44 (0)20 7405 7211
George Peretz QC Monckton Chambers gperetz@monckton.com
State aid and taxation – the Aer Lingus and Ryanair cases Law Society Competition Section Annual Conference, 13 May 2015 Kelyn Bacon QC brickcourt.co.uk +44 (0)20 7379 3550
Case T-473/12 Aer Lingus and Case T-500/12 Ryanair brickcourt.co.uk +44 (0)20 7379 3550
Key issues in the cases Determination of the ‘normal’ reference rate of tax Right to reimbursement of the higher rate, rather than recovery against beneficiaries of the lower rate ( Boiron ) Passing on to end-consumers quantification of aid to be recovered brickcourt.co.uk +44 (0)20 7379 3550
The Irish air travel tax 2009 – 2011 € 2 per passenger for flights to destinations 300 km from Dublin airport € 10 per passenger for all other flights brickcourt.co.uk +44 (0)20 7379 3550
Commission investigations Investigation by DG MOVE letter of formal notice to Irish authorities, considering tax to be breach of Regulation 1008/2008 and Article 56 TFEU Irish authorities introduced single rate of € 3 per passenger from March 2011 Investigation by DG COMP under Article 107(1) TFEU in respect of period of differential tax Unlawful State aid, ordered recovery of € 8 per passenger differential brickcourt.co.uk +44 (0)20 7379 3550
Be careful what you wish for ... brickcourt.co.uk +44 (0)20 7379 3550
Arguments in General Court Incorrect characterisation of lower rate as State aid, given that higher rate was unlawful (Ground 1a) Incorrect characterisation of lower rate as State aid, in light of Boiron right to reimbursement (Grounds 1b and 2) Unlawfulness of recovery order, when higher rate liable to be repaid (Ground 2) Failure to take account of passing on of tax to passengers (Grounds 3 and 4) Reasons challenge (Ground 5) brickcourt.co.uk +44 (0)20 7379 3550
Arguments in General Court Incorrect characterisation of lower rate as State aid, given that higher rate was unlawful (Ground 1a) rejected Incorrect characterisation of lower rate as State aid, in light of Boiron right to reimbursement (Grounds 1b and 2) rejected Unlawfulness of recovery order, when higher rate liable to be repaid (Ground 2) not decided Failure to take account of passing on of tax to passengers upheld (Grounds 3 and 4) Reasons challenge (Ground 5) rejected brickcourt.co.uk +44 (0)20 7379 3550
Ground 1a: unlawfulness of higher rate Common difficulty in differential tax cases: what is the ‘normal’ or reference rate? Central argument: since it was a breach of Regulation 1008/2008 and Article 56 TFEU for flights of >300 km to be subject to a higher passenger tax, higher rate could not properly be described as the ‘normal’ reference rate lower rate not State aid. Rejected on basis that higher rate not in itself unlawful. Rather, unlawfulness arose from differentiation, which could be remedied in different ways (e.g. the uniform € 3 rate from March 2011). brickcourt.co.uk +44 (0)20 7379 3550
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