June 18
2021
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24th May 2021
Competition & State Aid

Analysis: “When does ‘existing aid’ become ‘new aid’ and does it always have to be notified? Some clarifications in the preliminary ruling: Azienda Sanitaria Provinciale di Catania” by Małgorzata Cyndecka

Whether given aid should be considered ‘new’ or ‘existing aid’ is a recurring question in State aid cases. Any ‘new aid’ must be notified to the Commission in due time and not implemented until the Commission authorises it. Aid granted in breach of that ‘standstill obligation’ is unlawful. If the Commission also declares such aid incompatible with the internal market, it must, as a rule, be repaid with interest rate. This is not the case with ‘existing aid’ that may be awarded until the Commission finds it incompatible with the internal market. If so, it may no longer be granted, but there is no obligation of recovery of the already awarded aid.

While the consequences of qualifying aid as ‘new’ or ‘existing’ are clear, determining the character of a given aid measure may raise doubts. On 20 May, the Court of Justice once again elaborated on that issue in a preliminary ruling from the Italian Supreme Court of Cassation in C-128/19.

This case concerned a legislative measure adopted in 1989 by the Region of Sicily, which provided for the payment of compensation to the owners of animals slaughtered due to being affected by certain infectious diseases. The compensation was provided over a few years. Yet, while the 1989 legislation and the statutes of 1997 and 1999 that implemented it were authorised by the Commission, the 2005 statute was not. The question was whether measures based on the latest statute were covered by the Commission’s authorisation and thus qualified as ‘existing aid’. If not, one had to consider a breach of the notification obligation.

Article 1(c) of Regulation 659/1999 defines ‘new aid’ as ‘all aid … which is not existing aid, including alterations to existing aid’. Alterations to ‘existing aid’ are defined in Article 4(1) of Regulation (EC) 794/2004 as ‘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 [internal] market’. When considering the case in question, AG Tanchev provided a useful overview of case law in which the Court found alterations that were not of a ‘purely formal or administrative nature’: the widening (or the restriction) of the range of beneficiaries of an approved aid scheme (point 40); the extension of the duration of that scheme (point 41); increases in the budget allocated to the scheme (point 42). Importantly, ‘an increase in the original budget of an existing aid scheme by up to 20% shall not be considered an alteration to existing aid’ and does not require notification to the Commission (Article 4(1)-(2) of Regulation (EC) 794/2004).

In the present case, while the 2005 measure had the same objective as the 1997 and 1999 measures, it provided for both an increase of well in excess of the 20% threshold and a prolongation of the compensation-refinancing period. Those were not alterations of a ‘purely formal or administrative nature’. As the Court recalled, prolonging the period for application of an authorised aid scheme, whether or not combined with an increase in the budget allocated to that scheme, gives rise to new aid. This is an important reminder for Member States.

Still, even though the 2005 measure constituted ‘new aid’, it could be exempted from the notification obligation pursuant to both Regulation 702/2014, that is the Block Exemption Regulation for aid granted in the agriculture and forestry sectors, and the de minimis Regulation 1408/2013 in the agriculture sector. Both Regulations apply to aid granted before their entry into force if such aid fulfils all the conditions laid down in these Regulations.

 

Dr Małgorzata Cyndecka is Associate Professor at the Faculty of Law, University of Bergen. She is also Associate Editor of European State Aid Law Quarterly.

 

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