As highlighted in their State Aid Action Plan, the European Commission plans to

review the State aid rules on support to cinematographic and other audiovisual works.

The Commission suggest it may be possible to include cinematographic and audiovisual works under a block exemption (i.e. exemption from the need to notify the aid).

 

They also propose a ‘general’ block exemption which would exempt certain categories of aid from notification to the Commission and a block exemption for film, if introduced, would presumably fall within this general block exemption.

At the end of 2005, a joint UK film notification aimed at supporting the development

and production of culturally British films and television productions, was prepared in collaboration with the UK Film Council, the Art Council of Wales and Scottish Screen, and sent to the European Commission for approval.

In March, the Commission requested further information on certain aspects of the notification. A response has been provided and it is now for the Commission to determine if the proposed scheme meets the eligibility criteria of their Communication on Cinematographic and Audiovisual Works’ - if so, the scheme could

provide a welcome boost to film production in Scotland.

The State Aid Unit recently prepared draft guidance for our colleagues in Structural Funds. The guidance hopes to alleviate general State aid issues

which arise from ERDF applications and came about after discussions with

our European Structural Funds and Strathclyde European Partnership colleagues.

The guidance can be found on our website and can be used by PMEs and Structural Funds applicants to ensure State aid compliance.

        On 19 July, the European Commission published new Risk Capital guidelines,

        highlighting the need to increase flexibility in the application of rules and to adjust

        those rules to reflect the changing situation in the risk capital market. 
        This flexibility includes elements to ensure that profit-driven and professional        

        investment decisions are strengthened to encourage co-investment with the State.

The Commission take several factors into account in determining whether State aid is present at each of three different levels - the investors; the investment fund; and the enterprise invested in. As with previous Commission guidelines, market failure must be present, while the maximum level of assistance cannot now exceed 1.5M Euro per target SME (irrespective of AA status) over a 12 month period - this increases the potential support available across most of Scotland. Other safeguards noted in the new guidelines include :-  

    • Private investors - must provide at least 50% of the risk capital measure (30% for an SME in an Assisted

      Area). The Commission is likely to look more favourably on measures aimed at addressing the difficulty in

      attracting pre-seed and seed stage capital for micro and small enterprises.

    • Business Angels - the Commission now look favourably on the involvement of

       business angels for investments in the seed capital phase 

    • ‘Crowding Out’ - the new guidelines spell out the evidence required from Member States to show there is

       no risk of crowding-out private investment, including - the number of venture capital firms/funds present at

       national level or in the recipient area, and the investments targeted, in terms of the size of the company, the

       growth stage and the business sector.

    • De Minimis - support in the form of risk capital cannot be cumulated with other forms of State aid in

       the same target enterprises for the same eligible costs.

  The next edition of the State Aid newsletter will be available early in the new year -

  which promises to be an interesting period for State Aid. We will keep you up to date on the

  introduction of the 2007-2013 Assisted Areas map and the Commission draft framework for

  research and development and innovation, alongside proposals for an amended de minimis

  regulation and a draft block exemption for regional aid. Watch this space for details...

  .