The European Commission formally issued its guidance on
Services of General Economic Interest (SGEI) on 15 July 2005.
This note is to raise awareness of some of the most significant
features. The State aid unit s Spring newsletter had a spotlight
on SGEI; this helped define an SGEI, how to determine if you
are responsible for one and a discussion of the Commission s
draft texts.
The Decision
The decision block exempts from notification all aid for SGEI
under 30 million euros and going to undertakings with turnover
of less than 100 million in the preceding two years. This is a
significant threshold and does not include the expected
association with an organisations SME status.
Any funding for any SGEI falling within the thresholds is exempt
from notification. The costs to be taken into account are the actual
costs of the relevant undertaking in the discharge of its obligations.
The aid must cover the costs of providing the service allowing for
a reasonable profit. Any overcompensation is illegal State aid
though a limited amount may be carried forward into the next
years budget. As expected all aid for hospitals and social
housing SGEI is exempt from notification.
So too is all public service compensation for :-
maritime or air transport links to islands if annual traffic in the
two proceeding years does not exceed 300,000 passengers,
ports with annual average traffic not exceeding 300,000
passengers, and
airports with annual average traffic not exceeding 1 million
passengers.
NOTE the maritime cabotage regulations apply to maritime
transport links. The decision does not apply to land transport
or broadcasting.
These measures represent a significant increase in flexibility from
the draft texts previously discussed. However this only applies to
SGEI which have been properly entrusted in keeping with the
guidelines set out in the Decision. Detailed records of aid must be
kept for ten years and aid givers must regularly check that there
is no overcompensation (which is illegal aid). Reports will have
to be sent to the Commission every three years. There will be
a review on the functioning of the Decision within four years.
The Framework
Compensation which does not meet the criteria of the decision
should be notified to the Commission and will be considered under
the terms of the framework. The framework does not apply to
transport or broadcasting. Again the funding allowable will be
the actual costs of performing the SGEI (including infrastructure),
taking into account any revenue that may accrue from this and
allowing for a reasonable profit. There will have to be means in
place to avoid over compensation. Member States may decide
that where activities outside the scope of the SGEI have benefited
from funding received, any profit from these activities should be
used to offset the amount of SGEI funding required. The SGEI
must also be entrusted properly in keeping with the requirements
set out in the framework. The Commission will perform an impact
assessment after four years.
The Commission are proposing that an appropriate measure is
for all our existing schemes for SGEI to be brought into line with
the Framework within 18 months of it being published in the
Official Journal (OJ) of the European Union. The UK government
shall have a month from publication in the OJ to write and confirm
this. If they do not the Commission will presume that they do not
agree.
You should consider whether the terms of the framework differ
greatly from current practice. If you are responsible for an SGEI
that does not meet the terms of the decision and you consider the
terms of the framework, or the timeframe you have to comply,
unreasonable then please let Stuart Strachan know as soon as
possible. .
The Transparency Directive
The financial transparency directive has been amended so that
now all funding for SGEI (whether or not aid) is covered and
separate accounts must be kept.
Documents in full
The links below access the relevant documentation :-
The Commission press release
Commission produced FAQs.
The decision block exempting certain aid from notification
The framework for other aid
Commission directive on the transparency of financial relations
between Member States and public undertakings
Future Developments
In October 2008, the Commission issued an SGEI scoping
exercise to ascertain the amount of aid granted for SGEI in the
reporting years 2006-2007. Upon receipt of this information
from Member States, the Commission will carry out an impact
assessment.