5.4 State aid law compliance for RIS3 implementation

5.4 State aid law compliance for RIS3 implementation
5.4 RIS3 administrative framework conditions logo

State aid law is part of EU competition law and aims at constraining the funding possibilities of public authorities to sustain competition within the internal market, i.e. the 28 Member States. As a rule, State aid is prohibited as it distorts normal market conditions. Nevertheless, the European Commission (EC) can qualify certain public interventions as compatible aid, in case they contribute to the common interest like environmental protection, innovation or investments in underdeveloped regions. In case of S3 implementation, the selection of the appropriate State aid rule is not a difficult task since the main aims of S3 largely overlap with the objectives of compliance with State aid rules (e.g. fostering growth, innovation, SMEs). Similarities can be found between the approach of the EU State aid policy’s common assessment principles and S3 principles. Thus, several objectives of a RIS3 action plan may be aligned to one or more State aid rules, and beneficiaries contributing to the implementation of S3 may be able to receive State aid[1].

Innovation policies can be implemented by means of direct grants or financial engineering measures. Tax incentives can also play a role in the development of certain economic activities and fall under State aid of the European Commission. The understanding and clarity of State aid rules however still constitute a bottleneck for RIS3 implementation in many regions. It is necessary to assess the potential of implementation and the compatibility of the RIS3 action plan with respect to available funding from the OPs and other programmes to achieve
sustainable RIS3 implementation.

Description of the method

The objective of this method is to provide management authorities and RIS3 partners with a better understanding of State aid regulations (and definitions) that affect innovation and that are relevant for RIS3 implementation (e.g. support to SMEs, clusters and research infrastructures). The method helps the user/policy maker to identify if the policy instruments included in the RIS3 policy mix/action
plan are eligible for State aid (see Figure 1).


Figure 1 Logic framework of State aid compliance

Figure 1 Logic framework of State aid compliance

Source: http://s3platform.jrc.ec.europa.eu/state-aid


In the framework for State aid for R&D and innovation (European Commission, 2014), the EC identified a series of RDI measures for which State aid may, under specific conditions, be compatible with the internal market:

  • R&D project aid: fundamental research, industrial research, experimental development, feasibility studies (Article 25 General Block Exemption Regulation 2014-2020 (GBER))[2]
  • Investment aid for the construction and upgrade of research infrastructure (Art. 26 GBER)
  • Investment aid, operating aid for innovation clusters (Art. 27 GBER)
  • Innovation aid to SMEs: aid for industrial property rights costs, aid for the secondment of highly qualified personnel, aid for innovation advisory and support services (Art. 28 GBER)
  • Aid for process and organisational innovation: implementation of a new or significantly improved production or delivery method (Art. 29 GBER)
  • SME access to finance: aid for ‘innovative’ start-ups: either innovativeness confirmed by external expert or R&D costs representing minimum 10% of total operating costs (Art. 22 (5); Art. 2 No. 80 GBER).


State aid
received must remain under a series of notification thresholds to be eligible for GBER (Art. 4 GBER 2014. In the case of RDI aid, the notification thresholds are listed in Table 1 below. 

Table 1 Article 4 GBER 2014 notification thresholds for R&D&I aid


Art. 4 GBER 2014

R&D projects


Fundamental research

EUR 40 million

Industrial research

EUR 20 million

Experimental development

EUR 15 million

Specific provisions

Double thresholds for EUREKA and Article 185 and 187 Joint Undertakings

50% increase for repayable advances

Feasibility studies

EUR 7.5 million

Research infrastructure

EUR 20 million

Innovation clusters

EUR 7.5 million per cluster

Process and organisational innovation

EUR 7.5 million per undertaking, per project

SME innovation aid

EUR 5 million per undertaking, per project

Source:Laiu et al., 2014

In the case of aid for R&D projects, eligible costs include expenditure for land, buildings, instruments and equipment, only to the extent and for the period used for the project. For industrial research projects, laboratory-scale prototypes and small scale pilot lines are also eligible; and there is no ex-post deduction of commercial revenues generated by prototypes and pilots from eligible costs. Moreover, different aid intensities exist varying by company size. In addition, there exist specific compatibility conditions for investment aid for the construction and upgrade of research
infrastructure and innovation clusters.


It is a key part of Cohesion policy for 2014-2020 to increase administrative capacity in MS in the field of State aid. Under the (enlarged and simplified) 2014 GBER framework a large proportion of aid is under the control and responsibility of the Member States (MS); and a lesser share is under the control of the EC with stricter conditions. MS have flexibility on how to set up projects/schemes. For achieving State aid compliance, the Managing Authorities (Simon and Przeor, 2016):

  • Should first discuss with their State aid contact points in national administrations
  • Technical Assistance budget may be used for obtaining expert advice
  • For advice on individual projects, MS may contact DG Competition of the European Commission for pre-notification talks. 


In the case that individual aid goes above the notification thresholds as defined in the RDI framework, an assessment criteria and process is defined focused on evaluation by Member States (Table 2).


Table 2 Assessment principles and approach of large individual aid above the notification thresholds of the R&D&I framework

Assessment principle

Assessment Approach under the RDI Framework (notified projects)

Contribution to increased RDI and need for state intervention (market failure)

Demonstration of general/specific market failure by MS for all notified cases (e.g. through sectoral comparison)

Presumption of absence of market failure where there are similar projects in the market. Presumption of presence of market failure for EU funded projects


To be demonstrated; presumed for EU-funded project

Incentive effect

Aid application before start of works

For large individual aids, MS to support counterfactual analysis of incentive effect with company –and industry-specific elements


Where no alternative project exists: aid must not exceed the minimum necessary to make the project sufficiently profitable

Where a counterfactual project exists: aid must not exceed the net extra costs established by comparing the expected net present values of both alternative investments

Where a counterfactual exists, but is too remote for aided project: hurdle-rate approach may apply

Negative effects

Analysis of distorting dynamic incentives, creation of market power and maintaining inefficient market structures

Source: Laiu et al., 2014

Usability and impact

State aid is perceived as a problem because is often an unknown territory. The EC has highlighted the need to act in State aid, for several reasons[3]:

1.       The application of State aid rules has been identified as a potentially risky area in management of the European Structural and Investment Funds (ESIF);

2.       Most parts of the State aid Modernisation Package entered in force on 1 July 2014, at the beginning of the 2014-2020 programming period, provided Member States with a clear of set rules but also increased the level of uncertainty on how to apply them;

3.       The 2014-2020 period marks a clear shift of cohesion policy resulting in a higher number of projects where State aid is potentially involved.


Several EC guidelines and documents have urged for the need to communicate complex procedures simply. The risk of clawback of state funds must be minimal to ensure confidence among stakeholders on the use of State aid. When aligned to one or more State aid rules, beneficiaries contributing to the implementation of S3 may be able to receive State aid and hence contribute to more efficient RIS3 implementation, particularly in regions with limited funds for policy support.

Required data

The key relevant data sources for design of RDI State aid logic framework are enlisted below:

Relevant data sources

The most relevant existing tool is the eStateAid-WIKI of DG Competition of the European Commission. The ‘eStateAid-WIKI’ is an IT-tool to facilitate informal exchanges on general State aid matters between the European Commission’s services and the Member States and EFTA countries (including the ESA). The eState aid WIKI does not encompass the exchange of information regarding specific cases, i.e. information about specific companies or individuals, for which other formal channels are in place.


Access to the eState aid WIKI is open to a limited number of users only, as controlled by DG COMP of the EC. Submitting a question is limited to a few authorities per Member State, while ‘read access’ is provided more widely. The Wiki represents a useful tool for increasing transparency on the interpretation of State aid rules.


The State aid Scoreboard[4] of DG COMP comprises aid expenditure made by Member States which falls under the scope of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). The data is based on the annual reporting by Member States pursuant to Article 6(1) of Commission Regulation (EC) 794/2004. Expenditure refers to all existing aid measures to manufacturing industries, services, agriculture and fisheries, for which the Commission adopted a formal decision or received an information fiche from the Member States in relation to measures qualifying for exemption under the General Block Exemption Regulation.


As part of the State aid control, DG COMP allows to submit a complaint form online with regards compliance to EU rules and equal application of exemptions across the EU, here: http://ec.europa.eu/competition/forms/sa_complaint_en.html.


Implementation roadmap

The proposed implementation roadmap is the following:


1.       Data collection and analysis: this step includes the collection and analysis of all relevant data and cases related to the RDI State aid framework. This includes all the data listed above in the “Required data” section.

2.       Design of RDI State aid compliance logic framework: based on all State aid rules and regulations, and with the help and assistance of a competition lawyer and DG COMP and DG REGIO experts, a logic framework on the use of State aid in support of smart specialisation will be designed. This logical framework should consider all details included in the regulations and outlined in the section “Description of the method” above.  

3.       Implementation of Online State aid quiz: once the logic framework is built, an online tool will be designed for regional policy makers and RIS3 Managing Authorities. The tool will guide the users through the main characteristics of State aid Law for RDI. It will also provide a question and answer quiz (multiple choice, closed questions) based on the logic framework. The output of the quiz will be a State aid diagnosis that identifies, if any of the policy instruments included in the RIS3 policy mix/action plan is eligible for State aid. It will also give information on ‘next steps’ and ‘what to do next’ to benefit from State aid, including relevant contact points. 


European Commission (2012), State aid – Italy. Measures to encourage risk capital investments in newly created enterprises, Available at: http://ec.europa.eu/competition/state_aid/cases/244253/244253_1373480_139_2.pdf 

European Commission (2014), Communication from the Commission, Framework for State aid for research and development and innovation. Available at: http://ec.europa.eu/competition/state_aid/modernisation/rdi_framework_en.pdf

Laiu R., Grozea C., Von Wendland B. (2014), The General Block Exemption Regulation 2014-2020 (GBER), JASPERS Networking Platform State aid seminar, 8 July 2014. Presentation available at: http://www.jaspersnetwork.org/download/attachments/15433806/Jaspers%20State%20Aid%20seminar%20-%20GBER.pdf?version=1&modificationDate=1405083969000&api=v2

Simon Y., Przeor M. (2016), State aid rules for RDI. Selection of questions received from Member States, European Commission. Presentation available at: http://ec.europa.eu/regional_policy/sources/conferences/state-aid/rdi/ppt03-1045-1215_issues_identified_simon_przeor_rdi_27012016.pdf