 Yn yw'r cyfnod, yw'r cyfnod? First of all, what is state aid? On the screen now you'll see a quote from article 107A of the Treaty of the Functioning of the European Union. State aid is any public resource given selectively to an undertaking which could potentially affect competition and intra-community trade. So why do we control state aid? There are several reasons. First of all it ensures a level playing field across Europe and prevents any distortion of competition. Second of all, it prevents stagnation in industry. If a company knows it's going to get a healthy support from a government it's less likely to restructure or innovate leading to higher prices for consumers. It avoids a subsidy race. If Germany offers a million euros to a company to move to Baden-Württemberg whilst to stop Spain offering the company two million euros to move to Catalonia the company isn't better, it just has more money. Finally though, it does allow state aid in some instances where either there is a market failure or it feels more support is needed. A good example of these are support for small and medium enterprises support for training and support for research and development. As there's less money available for public support the aim of the state aid regulations is to ensure the money is spent more effectively. So how do we know when something is or isn't state aid? There are five criteria which need to be met for state aid to be present. The first is that the aid is granted by the state or through state resources. The second is that the aid confers an advantage upon the recipient. The third is that the aid favours certain undertakings or the production of certain goods so it's selective. The fourth is that the aid distorts or has the potential to distort competition. And finally that the aid impacts or has the potential to impact upon trade within the EU single market. We'll be going on to discuss each of these five conditions in a minute but before we do that there are two things I'd like to share with you. First of all, what is economic activity? This is something we just heard about and we will be talking about in a little bit. Economic activity is an activity which relates to the provision of goods and or services where there is a market and where the private sector either do or have the potential to offer the goods and or services for a profit. This is an evolving concept. A recent example is a refuse collection. Ten years ago this was not seen as an economic activity however now, given that recycling is becoming increasingly lucrative it's more of a grey area. So what is an undertaking? An organisation is classified as an undertaking through its activity rather than its status. If an organisation is undertaking economic activity it will be considered an undertaking. So we go back to the first of the five tests. Aid granted by a member state or through state resources. Member states don't just include the UK government they can also include devolved administrations and regional or local authorities. You'll see we talk about through state resources. These can be things like structural funds administered via WFO as well as lottery money which is administered through state controlled bodies. So what counts as an advantage? These aren't just grants these can also be relief from charges which an organisation normally has to bear things like tax relief, rates relief subsidised services such as reduced rent reduced land taxes, reduced utilities and subsidised land purchases. Finally it can also be an advantage which is given for free or without adequate consideration. So what counts as selectivity? This can be a showing favour to certain sectors for example the mobile phone sector can be showing support to certain types of companies for example one manufacturer over another one. It's going to be showing favour to individual companies if you support one company over another you're automatically providing them with an advantage. Even certain regions a scheme which is well as wide would be considered selective because it doesn't cover England, Northern Ireland and Scotland. Next the distortion or the potential to distort competition. This has a very wide interpretation by the commission. This is aid which strengthens the competitive position of a beneficiary relative to its competitors. Distortion does not need to be significant even a small amount can be considered distorting the market. The size of the beneficiary does not matter either. The main exception to this is de minimis funding. This is funding which is considered by the commission to be too small to have an effect on the internal market. For more information about de minimis regulation speak to the state aid team. Finally impact on trade between member states. Again this is a very wide interpretation and the threshold has been set very low in legal terms. It is sufficient that the product or service is traded across member states even if the recipient of the aid does not trade it themselves. There is possibility of a local argument but this is case-based and something we'll come on to in a second. So we talked about local activities. What do we mean by this? If we're going to argue that something is local only we need to find existing case law which supports this. Some examples are on the screen now. Firstly we see the urban guidelines guidelines which have now been withdrawn by the European Commission. The urban guidelines did provide us with useful examples of local activities. These are things such as garages, hairdressers, small cafes. It also differentiated between one-man band operations and franchises the latter of which are not considered local. Secondly you'll see Teremitica. This is a water park in Benidorm that argued that its small size was sufficient for it to be considered a local activity. The Commission argued that because it was in a destination location, Benidorm, and its website was available in several European languages that it could not be considered a local activity. The final example we'd like to use is that of Batavia Worth shipyards in the Netherlands. These were successfully able to argue that they were a local activity as they could prove that between 75 and 85% of their visitors came from within a 75 kilometre radius. Finally, I just want to show you again the five tests. All of these have to be met for state aid to be present. The aid has to be granted by the state or through state resources. The aid has to confer an advantage upon the recipient. The aid must favour certain undertakings or the productions of certain goods so be selective. The aid must distort or have the potential to distort competition. The aid must act upon trade between member states. So, what are your next steps? Now that you've read this, look at your project. Are all the tests for state aid met? If the answer is no, then you can proceed but keep a record of why you do not consider the support state aid should the Commission decide to investigate. If the answer is yes, use the state aid rules to identify appropriate cover.