Introduction
The Temporary Framework [TF] that was introduced in March 2020 expired on 30 June 2022. However, two provisions of the TF remain in force until 31 December 2022. They are investment support for sustainable recovery [section 3.13 of the TF] and solvency support [section 3.14 of the TF]. In the former case, individual aid must be granted before 1 January 2024, while in the latter case, individual aid must be granted before 1 January 2023.
In March 2022, France notified a scheme to the Commission whose purpose was to support economic recovery by incentivising research and innovation [RDI]. In April 2022, the Commission approved the scheme under number SA.102230.[1]
The total budget of the measure was EUR 700 million, with an annual budget of EUR 350 million. This measure is complementary to the scheme SA.58995 for RDI which was implemented in 2021. Scheme SA.58995 succeeded scheme SA.40391 that was in force in the period 2014-20.
The aid would be provided in the form of grants, repayable advances and possibly low-interest loans. Aid in the form of tax allowances and guarantees was excluded.
The scheme copied all the relevant rules of General Block Exemption Regulation [Regulation 651/2014] and the RDI Framework. Most notably, the scheme contained all the exclusions laid down in the GBER and RDI Framework such mandated use of domestic products, limitation of eligibility to domestic companies or limits to where the R&D results could be exploited. The scheme, also in compliance with the GBER and the RDI Framework, excluded companies in difficulty and companies subject to an outstanding recovery order.
Companies of all sizes were eligible for aid. Subsidised projects could be for fundamental research, industrial research or experimental development. Feasibility studies could also be funded by the scheme.
The research topics that could be funded were mainly in the areas of energy transition and environmental protection and digital transition. Collaborative projects and projects with research organisations were eligible for funding and actively encouraged through the granting of bonuses on top of the standard rates of public support.
The eligible costs were those defined in the GBER and the RDI Framework. The maximum aid intensities were also those laid down in the GBER and the RDI Framework. However, aid applicants had to prove that the amount of requested aid was necessary for the corresponding project.
Interestingly, instead of the GBER notification thresholds of EUR 40 million, 20 million, 15 million for fundamental research, industrial research, experimental development and feasibility studies respectively, the specified notification thresholds in the Commission decision are, EUR 60 million, 30 million, 22.5 million and 11.25 million, respectively. That is, all thresholds were raised by 50%. [See paragraphs 40-43 of the decision.]
The increase in the maximum aid intensity was in compliance with paragraph 97 of the Temporary Framework. “(97) Member States may also consider setting up or amending existing schemes under the rules applicable to environmental research projects, namely the Environmental and Energy Aid Guidelines or the Research, Development and Innovation Aid Framework to support the sustainable recovery of the economy. […] The Commission will consider such aid schemes or amendments of existing schemes to be compatible where the applicable thresholds for individual notifications are exceeded by up to 50%, provided all other provisions of the applicable guidelines are complied with, the Commission decision authorising the measure is taken before 1 January 2023, and the individual aid concerned is granted before 1 January 2024.”
Existence of State aid
The notified scheme satisfied all of the criteria of Article 107(1) TFEU. Therefore, it constituted State aid.
Compatibility of aid with the internal market
The Commission assessed the compatibility of the aid on the basis of the RDI Framework and the conditions that were adopted following the judgment of the Court of Justice in case C-594/18 P, Austria v Commission (Hinkley Point C).
Condition 1: Development of economic activities
Identification of economic activities: The economic activities to be subsidised are clearly identified.
Presence of incentive effect: That is, the aid must have be capable of promoting the development of the identified economic activities. This is also required by point 62 of the RDI Framework. The scheme complied with the requirements of the RDI Framework and the Commission found that it would promote more research activities, with expected additional private spending between a minimum of 50% up to a maximum of 75% of the cost of the aided projects.
The aid is not contrary to EU law: None of the provisions of the scheme were contrary to EU law.
Condition 2: No affectation of trade contrary to the common interest
Positive effects of the scheme: Following an evaluation of scheme SA.58995, the current aid scheme is expected to lead to an increase of the number of researchers and an increase in research expenditure, turnover, value-added and number of patent applications. The positive effects were reinforced by the requirement for FRAND licensing of research results to SMEs that would contribute to knowledge dissemination. [FRAND: fair, reasonable and non-discriminatory]
Need for state intervention: There are well-recognised market failures in the field of research. In this particular case, France highlighted the impact of the scheme on dissemination of new knowledge in the presence of asymmetric and imperfect information and coordination problems.
Appropriateness of the aid: State aid should be more effective than other policy instruments that cause less market distortion. The Commission considered that grants and repayable advances were more effective than other instruments in promoting cooperation and dissemination of knowledge, on the one hand, and additional risk taking, on the other. Regulation would not be effective, if at all. Tax incentives could have positive effects for companies but would not be effective to encourage research organisations to collaborate with companies.
Proportionality of the aid: No aid may be granted in excess of the maximum allowable aid rates. The Commission explained that in the case of non-notified aid, proportionality is ensured when: i) R&D projects are correctly defined, ii) eligible costs are correctly calculated, iii) aid intensities are not exceeded and iv) the cumulation rules are respected. In addition, the Commission noted positively, that aid would be limited to what was strictly necessary according to business plans that aid applicants had to submit. However, in the case of individually notified aid, the thresholds were raised in accordance with paragraph 97 of the Temporary Framework.
Undue negative effects?
Then the Commission examined the possible presence of undue negative effects. It confirmed that such effects were absent for the following reasons:
- The scheme contained no sectoral exclusions.
- No more than 30% of the budget of the scheme could be devoted to any specific thematic area or sector.
- No company group could receive more than 10% of the budget of the scheme.
- No aid would be granted if it would create or strengthen a dominant market position.
- No aid would be granted if it would lead to overcapacity in a declining market.
- The amount of aid would be limited to the minimum necessary for each project.
Manifestly negative effects?
The Commission also confirmed the absence of any manifestly negative effects that would make the aid incompatible with the internal market.
The scheme did not mandate the use of domestic products, it did not limit participation to only domestic companies, nor did it limit the geographic area where the R&D results could be exploited.
In view of the above, the Commission concluded that the positive effects of the aid outweighed the negative effects and that aid was not expected to have any undue negative effects on trade and the common interest.
[1] The full text of the Commission decision can be accessed at [only in French]:
SA_102230_0019F080-0000-C560-BE9D-E813792CFAB6_54_1.pdf (europa.eu)
