by Martina Maier and Philipp Werner

On December 20, 2011, the European Commission adopted a new legislative package on the application of State aid rules on services to public services – known as Services of General Economic Interest (SGEI).  EU Member States spend billions of euros each year on SGEI, so any rules concerning the assessment of these compensations under EU State aid rules have a huge political and economic impact in Europe.

Background

The principle of EU State aid law is that it prohibits the granting of State aid by EU member states to specific companies or industry sectors.  This concerns direct grants as well as other economic advantages such as state guarantees, favorable interest rates or tax breaks.  State aid may under certain circumstances be approved by the European Commission after notification of the aid measure by the member state.

The new package replaces the 2005 package and sends mixed signals.  On one hand, it exempts any compensation for certain social services, regardless of the amount of compensation.  It also provides for a simplified treatment of a wider range of SGEI including, for example, health care services, and de minimis regulation for SGEI, expected to be adopted early next year, may further ease the burden for member states and service providers.  On the other hand, it lowers the compensation threshold for a more in-depth analysis of compensations for such services under EU State aid rules.

The new SGEI package contains rules for aid granted by member states to companies that provide certain social or other services in the public interest.  If these services are (also) provided on the market, they are referred to as SGEI.  As a general rule, compensation for SGEI may be granted if the company has been entrusted with the provision of such services, if the compensation is calculated on the basis of objective and transparent parameters, and if the compensation does not exceed the costs related to the provision of the service.

The New SGEI Package

The new package is comprised of four instruments: a communication explaining the basic concepts of State aid that are of relevance for SGEI, a decision that exempts compensation for certain SGEI from the notification requirement and summarily approves the compensation under EU State aid rules (such as the Block Exemption Regulations in the field of EU competition law), and a framework for the analysis of SGEI compensation that is not exempted under the decision.  It also contains a proposal for a de minimis regulation. The latter could not be finalised in time due to substantial criticism from the member states and is expected to come into force next year. 

The decision sets out the conditions under which State aid in the form of public service compensation granted to companies entrusted with SGEI is exempt from the notification requirement.  This exemption has been extended from hospitals and social housing to a broader spectrum of social services.  It now covers [...]

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