On 20 December 2011, the European Commission (Commission) adopted a revised package of measures setting out the application of the EU state aid rules to the financing of services of general economic interest (SGEI).  The main elements come into effect at the end of January 2012.

This follows a public consultation in 2010 on possible updating of the package of SGEI rules which were put in place in 2005. The 2005 rules were adopted in response to the ECJ judgment in Altmark which set out the conditions for establishing when compensation for public services did not amount to state aid under what is now the Treaty on the Functioning of the European Union (TFEU).

The revised package comprises:

  • a new Communication on the application of the EU state aid rules to compensation granted for the provision of SGEI (the Communication);
  • a revised Decision on the application of Article 106(2) TFEU to state aid in the form of public service compensation granted to certain undertakings entrusted with the operation of SGEI (the Decision);
  • a revised Framework for state aid in the form of public service compensation (the Framework); and
  • a draft Regulation on the application of Article 107 and 108 TFEU to de minimis aid granted to undertakings providing SGEI (the de minimis Regulation).

In addition, the Commission has adopted a Quality Framework for Services of General Interest in the EU.  During the 2010 public consultation it became apparent that greater clarification was needed of the distinction between services of general interest (which encompass both non-economic and economic services) and SGEI.  Only economic services – SGEI - are subject to assessment under competition law.

The Communication

The Communication clarifies the key concepts underlying the application of the EU state aid rules to public service compensation.  It explains the notions of aid, SGEI, economic activity, and of the convergence between public procurement procedures and absence of aid.

The Decision

The Decision extends the exemption from notification from hospitals and social housing to a much wider range of social services, regardless of the amount of compensation received.  For all other SGEI activities, the Decision lowers the notification threshold from €30 million to €15 million to take into account concerns that the previous ceiling removed very sizeable contracts in important areas from the Commission's scrutiny.  The Decision will replace the current 2005 Decision from 31 January 2012.

The Framework

The Framework clarifies the conditions under which compensation not covered by the Decision (because it is of a higher amount and more commercial in nature) will be compatible with the EU state aid rules.  It introduces a more precise methodology to determine the amount of compensation, a requirement for Member States to introduce efficiency incentives in compensation mechanisms, a requirement to comply with EU public procurement rules and equal treatment of providers of the same service for determining compensation.  Moreover, under the Framework, the Commission may require Member States to adopt measures to reduce the anticompetitive effects of certain compensation which presents a particularly strong potential for distorting competition within the EU's internal market.  The Framework will replace the current 2005 Framework from 31 January 2012. 

The de minimis Regulation

The draft de minimis Regulation provides that public service compensation will no longer constitute state aid if the amount granted by the public authority does not exceed €500,000 over three years (currently €200,000).  The de minimis Regulation is expected to be adopted in April 2012, following a final round of consultation.

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The original publication date for this article was 03/01/2012.