Exploring the new state aid exemptions

August 14, 2014

Huw Williams and Bethan Lloyd examine how councils can take advantage of the new state aid exemptions for cultural, heritage, sports and infrastructure projects.

As part of a wide ranging programme to update and modernise the rules on State aid, a new General Block Exemption Regulation (known as ‘GBER II’) came into force on 1 July 2014. It creates some generous new exemptions which may prove useful for local authorities wishing to promote or assist cultural, heritage, sports and local infrastructure projects.

The State aid treatment of these types of project has hitherto been a source of uncertainty since there were no specific exemptions or Commission guidance available. Although the European Commission has generally adopted a supportive approach when these types of project have been referred for approval, before GBER II the position was less than ideal. Unless one of the more generic exemptions, such as regional aid, applied, it was often a case of either seeking complete certainty by notifying the aid, or relying on a legal opinion that there was no State aid. A notification, of course, had cost and timing implications and there was also the risk that the UK Government would decline to allow the notification to proceed, leaving both aid giver and aid recipient to weigh up the risks of proceeding without a notification.

The new exemptions will help enormously as, provided the terms of an exemption are met, it will no longer be necessary to notify the aid. There are generous new exemptions for the following types of project:

Aid for culture and heritage conservation

This exemption will cover aid for a wide range of cultural purposes and activities including: artistic and cultural venues such as museums, libraries, theatres, and concert halls; tangible heritage such as historic monuments; intangible heritage such as folk crafts; cultural events and performances; cultural education; and the publication of music and literature.
It covers investment aid, such as aid for the construction and upgrade of cultural facilities, and operating aid to help loss making ventures become sustainable.
There is no attempt to define ‘culture’ or ‘heritage’. This could make the application of this exemption uncertain in some cases. For example, is a theme park a ‘cultural centre’? Judging by the number of theme parks up and down the country, this activity is at least as popular as, say, going to the opera. Yet, while we would easily conclude that opera is ‘cultural’, could we be quite so unequivocal about theme parks? A historic re-enactment is surely cultural, but what about a skate boarding display or some other aspect of our youth culture?

Aid schemes for audio-visual works

This exemption covers aid schemes for the development, promotion and distribution of cultural audio-visual works, and will be of interest to bodies providing State funding for the arts.

Aid for sport and multifunctional recreational infrastructures

This covers investment and operating aid for shared-use facilities. Having said that, it is permissible for there to be a primary user, which can even be a professional sports club provided other users account for at least 20% of the overall usage (on a time basis).
Users must be allowed to use the facility on a transparent and non-discriminatory basis, but it is permissible to give preferential access to any user which has contributed at least 30% of the investment costs for the facility.
Any contract to build or run the facility must be granted in a transparent and non-discriminatory way, including in compliance with public procurement rules if they apply.

Investment aid for local infrastructures

This exemption covers aid to finance the construction or upgrade of local infrastructures which contribute to improving the business and consumer environment and modernising and developing the industrial base. The infrastructure must be open to users on a transparent and non-discriminatory basis and not reserved for a particular user.
There is no guidance in the legislation as to what types of project this exemption is intended to cover. It could cover things like improving town centres and trading estates, or to improving the range of facilities in a local area (like helping to establish a café quarter or a business district).
Infrastructure projects often do not involve State aid at all, if they are for the general improvement of the area and do not benefit a particular business. This exemption will allow aid for infrastructure even where it benefits a particular business provided there is also a benefit for the locality. It will be interesting to see the range of projects to which this exemption is applied over time.

There are detailed rules to follow when relying on each specific exemption. Some general guiding principles are:

The advantage of falling within an exemption is that, provided the terms of the exemption and any conditions attached to its use are met, the aid is deemed to be ‘compatible’ and does not need to be notified.
The amount of aid which can be given is generally limited to the ‘funding gap’ – i.e. the amount needed to cover anticipated losses and to allow a reasonable profit to be made by the project sponsor.
It will be necessary to show that the aid has an incentive effect – i.e. the project would not have proceeded at all, or to the same extent, without the aid. However, aid for culture and heritage conservation is presumed to have an incentive effect for these purposes.
Each exemption comes with a notification threshold: if the value of the aid exceeds a specified amount, the exemption doesn’t apply and the aid must be notified to the Commission and authorised before it is implemented. The threshold varies depending on the exemption.
Certain recipients cannot receive aid within the exemptions (such as recipients which are in financial difficulties).
The new exemptions will apply even to aid granted before 1 July provided all the relevant conditions are met.

These new exemptions could prove to be very useful indeed for councils wishing to support culture, heritage, sports or infrastructure projects in their area.

Finally, on a different note, a mandatory State aid complaint form for use when an allegation of unlawful aid is made has been introduced. It was already the case that a complainant had to be an ‘interested party’ (i.e. affected in some way – although this concept has applied quite broadly in practice) in order to be able to complain to the Commission. The new form has made complaining a more onerous and time-consuming process. The complainant must now demonstrate how its commercial interests are affected, and provide an analysis of why the aid is selective, how it may distort competition and affect trade between Member States, and why it ought not to be treated as ‘compatible’.

The purpose of the form is to weed out unmeritorious or vexatious claims, and free the Commission from the burden of having to consider every single complaint. This development may help to reduce the risk of a challenge in some cases, since the mandatory form will help deter complaints which are not motivated by genuine competition concerns or which cannot be substantiated.

Huw Williams is a Partner and Bethan Lloyd is a Senior Associate at Geldards LLP. Huw can be reached on or This email address is being protected from spambots. You need JavaScript enabled to view it., while Bethan can be contacted on 0292 039 1890 or This email address is being protected from spambots. You need JavaScript enabled to view it..