 The stated purists among you will already crown upon the title of this presentation because the commission procedure to keep at the cost of review of the system of state aid is in the plural why there is only one previous statistician to keep existing aid under control. And why is that so? Because we are today speaking of existing aid in a very non-technical way. Existing aid is defined in the procedural regulation, article one of the procedural regulation, as aid that has either been approved or that is block exempted or that has become existing aid because of the elapsing of the time period for recovering such aid. Well today we would speak about existing aid in a factual sense. So all aid that is de facto out there, not in a technical way. That's why the procedures become plural and the other reason for them becoming in the plural is that the first procedure we will be talking about is actually not the procedure which is the monitoring exercise that the commission runs every year on block exempted and approved aid which is not proceduralized in any way or form, it's completely outside the procedure. So let's see at the list of the procedures. So we will look briefly into the legal basis of the power of the commission to look into existing aid procedures and in cooperation with the member state and then as said the first thing we will be looking into is the non-procedure. So it's the monitoring exercise that the commission runs every year. Then the second one will be the procedure for looking in something that does not qualify as existing aid under the procedure regulation so into illegal aid and again we will be referring very quickly to the procedure for misuse of aid which is as you will see one slide. We finally get to the only procedure for looking into existing aid which is the so-called existing procedure and finally we touch upon sector inquires which is as referred to earlier a novelty of the procedure regulation as from 2013. So moving on the legal basis. Article 108.1 provides the legal basis for our discussion today. So article 108.1 provides that the commission in cooperation with the member state shall keep under constant review all system of aid existing in all members. And then since we are talking about existing aid in a broader sense in a factual sense rather in a legal sense there is also reference to article 108.3 which is the one basically the standstill clause the one containing the standstill clause that is the one violated by all aid that is then to be considered illegally. Article 108.1 is not the only treaty provision that is relevant in this context. There is also article 4.3 of the treaty on the European Union which provides that member states and the commission must loyal cooperating in carrying on all the tasks that they have to do under the treaty. And of course enforcing stated law is one of those tasks. So the the courts have already said it many many times under stated law since stated is one of the pillars of the treaty one of the pillars of the internal market and therefore one of the pillars of the treaties. This duty of cooperation is a reinforced duty of cooperation between the commission and the member states. And when we say between the commission and the member states we say between the commission and all ramifications of the member states including the judiciary of course. Speaking of which it was rendered in another in another context actually in the criminal law context but already in the late 80s the court of justice said that the duty of loyal cooperation is a reinforced duty between the commission and the courts because the national courts are actually EU courts of first instance and that's very relevant when it comes to this role of national courts which we'll discuss today later in enforcing stated state. Let's move to secondary legislation and here is the article of the procedure regulation that makes direct reference to article one or eight one as I said is the this article is basically also the legal basis for the real existing procedure under the procedure the procedure regulation but reading it broadly and we have done so lately it's also the article in the procedure regulation that gives us a legal basis for more for running the annual monitoring. So once we have quickly seen the legal basis the general legal basis for the subject matter of our discussion this morning we move to the first of these procedures the slash non-procedure which is more. As I've already mentioned earlier monitoring has become important in recent years the actually the court of auditors already in 2011 so as you will recall from the discussion earlier this morning before some was even put forward in the communication of 2012 already at that time the court of auditors told the commission you should step up your efforts because there is a lot of aid which is not looked at upfront but it's a way but it's given by member states and you should really step up your efforts in looking at that aid and being sure that that aid is compliant with union law. In the wake of that in the opinion given by the parliament on the stated modernization communication the parliament explicitly said that the other side of the coin of stated modernization particularly of broadening the jibber is that the commission should also broaden monitoring meaning giving more power to member states meaning giving more freedom leeway to member state had as a countervailing measure the fact that the commission should look really closely at how these measures are in the end implemented in the in the relevant members. Just to give you a bit of a bit of a flavor in 2002 we were we had some 2600 measures out of 3800 which were block exempted so you see that the court of auditor already at the time had a point in saying there is a lot of aid which is given under the block exempted regulation and in 2015 which is the last year for which we have complete data because we are almost always one year behind because we need to get the data from member state we have 30650 block exempted measures out of 4550. When we are given these numbers what we are talking about is not the measures implemented in that year but it's all the measures under which member states report expenditures in that year so it might be that the measure is 10 years old but the member state is still spending on it so if you think about that you see that this number this proportion is only going to increase because of course you have a huge stock of all measures which could not be block exempted under the new block exempted regulation to which you add the newer measures and that's also why the the second line here the red line hasn't increased as dramatically as the blue line because when you introduce a measure you will start spending on that measure the year thereafter sometimes two years thereafter so if you look at 2015 measures the expenditures that were possible on new jibber measures which was introduced just one year or one year and a half before was not that much so we are expecting actually we know already that new measures are almost 90% under jibber and we are expecting also that this red red line would go in the region more of 70% in the in the next years so we are talking about about huge numbers and numbers that cannot go undetected because the overall impact on the market of those number is quite quite simple. The size covers both approved measures and block exempted measures for the approved measures we have under the procedure regulation a reporting obligation on the member states which is in article 261 of the consolidated regulation of the qualified regulation and there is also provision which I put up there but if not very much use I cannot actually recall one instance in which it was used which allows the commission to carry on onsite expressions to see onsite how in a sort of antitrust way our decisions are implemented as I said it's not I'm not sure it has ever been used and that's the legal basis for monitoring or actually for having the information then to monitor approved measures. The legal basis for having the information to monitor block exempted measures is contained in the block assumption regulation itself and it provides that members say it must submit reports we will they must submit an info sheet 20 days after implementing implementing the measure under the block assumption informing the commission what the measure is about what they spend it to sell what type of beneficiaries are to be covered by measures and what is the expected overall and annual budget of the measure and then this is the source of the information that we have seen in the first graph yearly they have to report the expenditures under each individual measure so that red line was basically the cumulation of all this information which is reported yearly by by members. On the basis basically of this earlier report then the commission selects the cases that are to be monitored each each year so basically we look at all all measures so we have seen what we would look at in 2015 is some 45 100 measures both approved and block exempted we go through the list of all measures that have expenditure that has been reported and then we try in that list to find significant number of cases that would cover all or almost all member states but every two years we cover all member states it is very rare that we lack more than one or two member states per year it happens with very small member states you can't really monitor every year more because you would monitor in the same scheme always you have to have some flexibility on that and also all types of aid and all types of aid measures the principle is that to be meaningful we monitor mainly many schemes on decisions we can monitor also individually but it's very rare that we do for practical reasons well for one practical reason is that usually when an individual aid is found to be particularly problematic there would be at that point a monitoring clause in the decision approved itself so that's outside the monitoring exercise but it's monitoring done under the decision itself so there would be enhanced reporting obligation under that scheme is the case for example of most of the banking price cases in which banks had to undergo a sort of audit for a certain period of time to certify that they would comply with the with the commitments that they gave in order to be able to to get in the first place so that's why there is this sort of difference between normal monitoring and monitoring then once we have a list we will be doing two types of monitoring each year the classical one that we have been doing since 2006 meaning we look at the legal basis and we look at how the legal basis has been implemented as from some as from 2014 actually as from 2015 monitoring exercise we have also added what is called a real-time monitoring exercise why so again much more leeway in the ends of the member state much more responsibility in the ends of the member state that has not only corresponded to an increased monitoring but also in an increased availability of the commission to cooperate with member states in ensuring that the beneficiaries would enjoy legal certainty under the schemes and that the schemes are implemented correctly that from for what concerns us here in the monitoring means that we would monitor schemes that are in a very early stage of implementation in which expenditures are not yet reported which increases the number of schemes that we look at from 4500 to actually 7000 and look at whether the legal basis is written in a way that could prevent problems later so we would just look at the legal basis look at whether it's correctly sorry implementing the the jibber so as to prevent that any illegal aid is granted under that national legal basis it was mentioned before just to give you a flavor the other way the other two ways the commission is helping member states in implementing jibber is one these comfort letters which are from time to time requested by member states to be sure that the the measure that they have in mind is actually jibber conform or replying to questions on the jibber itself just to give you an idea we have replied so far to some 750 questions on the jibber which means that it's an easy piece of legislation on particular parts of the jibber even more i think the aid environmental part of jibber has reached more than between 250 and 200 questions so far back to monitoring so how does it work we write to the member state we tell them look this year this scheme has been selected for for being monitored for being part of the monitoring exercise please provide primary and secondary legislation implementing the scheme and also a list of all beneficiaries in which to which aid was granted under the scheme in er minus two so two years back and minus three we normally receive that information so the first thing that we do is to look into the legal basis and that is common to the classical the classic and the real-time monitoring and then we look at the list of beneficiaries and then randomly select a number of beneficiaries to then prepare the second request of information in which we would request the member state to provide us all the documentation of aid granted to those individual beneficiaries under the monitoring scheme depending on how complex is the assessment of the individual aid granted under the scheme this would take between two three four requests for information but we usually strive to keep this under the year it's usually a yearly cycle and we try to close it within within the year then once we have gone through our two three requests for information we then have a final assessment of of the case and we write a final letter to the member state the most welcome outcome is of course the first one we detected no irregularities in the legal basis and no regularity in the implementation of the scheme so we basically tell the member state good job thanks for having allowed us to monitor the scheme it's perfect to go on like that in some cases we find some irregularities some conditions that are not perfectly clear that are missing but implemented in practice so a number of and we'll come back to that a bit later on the efforts of this a number of small irregularities that are purely procedural and do not impact real compatibility but as the the court of justice has told us in this wellness they do impact compatibility we have another step of irregularity which is wrong provisions in the legal basis it's not really only unclear or some or missing but it's provisions that are really running a fold of the of the block exemption regulation or of the decision and then we ask the member state to change that and if the member state doesn't we take action against them but it's very rare that a member state receiving such a letter does not act upon upon such a such a communication and does not change the legal basis we might then find that those irregularities have given rise to some irregularities in the implementation but not systemic so what we ask again is the member state to correct those irregularities by voluntary recovering any excess aid that has been granted particularly when the regularities affect the aid ceilings or the aid intensities that are allowed under the decision of the constitutional regulation and then if really the issue is systemic we might have to go pay for my for my position against member state so to give you an idea between 2006 and last year we have monitored some 470 schemes we have found irregularities in roughly one third of the cases in some a part was irregularities well there is a portion that is still yet unclear meaning that the cases are still under investigation so we could not take a final view on whether the case was final no some of the regularities are clearly not affecting compatibility other irregularities are a bit more borderline and might affect compatibility what are those irregularities that we have been doing so different types of irregularities can be as we said on the legal basis the most common thing is that there would be some conditions missing in the legal basis and the most common conditions missing in the legal basis is for example the so-called the Degendorf close meaning the close excluding companies that are the addresses of a pending recovering order from getting aid under the block exemption regulation or even under the decision it's of course a condition that even though we are quite attached to very rarely gives rise to regularity in the implementation phase because you need to actually grant aid to a company that has an outstanding recovery orders and there are luckily enough not too many around Europe so statistically speaking it's very difficult that this missing condition actually causes a problem in implementation but still is important there are often missing our references to aid intensities aid ceilings or exclusions of firms in difficulty the fact that those conditions are missing in the legal basis does not automatically mean that they are not implemented in practice that's why we have said there is a big difference between a missing condition and so something that is formal and procedural and something that really affects compatibility of course if you think about it the fact that no reference to aid intensities is there can give rise to a huge problem of compatibility because access aid can be granted so it's potentially affecting compatibility but not as necessarily actually affecting compatibility and sometimes the second sometimes as we said we have wrong provisions and wrong provisions are most often provisions that allow aid to companies as actually sorry to sectors that are excluded from the gibber for example we have heard earlier that some sectors or that impose conditions like the use of local products which again run a full of gibber run a full actually of the treaty and then of gibber again only when the condition is implemented in practice or is enforced in practice it gives rise to compatibility problems if it it's not implemented in practice it's not problematic in the as problematic in the end so those are the conditions that we would consider normally purely procedural but as I said earlier the Court of Justice has told us that even a very very procedural requirement such indicating in the legal basis that the legal basis is implemented under the blockage that actually in that case under all the presented regulation gives rise to compatibility problems because the Court of Justice in the Dillies Wellness Hotel premium ruling has told us that since the rule is you have to notify under 108.3 the gibber is an exception and is an exception that has to be interpreted very strictly Article 3.1 of the previous gibber the 800 2008 explicit said that all compatibility conditions included in the gibber must be complied with for the measure to be covered by the gibber itself article 3 of the current gibber says almost the same thing so we are in the same environment whenever one of the compatibility conditions and under our regulation 800 the mentioning of the gibber is a legal basis one was one of these compatibility conditions whenever one of them is not compliant the eight is not compatible under the gibber it could still be compatible under a guideline but of course requirements of the guidelines are usually much stricter than gibber requirements so you might find yourself in a situation in which it is not compatible on the gibber because of a procedural irregularity and is not compatible under a guideline simply because the guideline is in principle stricter so requires more compatibility requirements than the gibber does those cases would turn to be quite problematic you see that briefly hinting to it we have highlighted a may in the first sentence of article 12 one of the procedure regulation and the shell in the second sentence and that's the novelty exactly the novelty that professor s would be referring to before of the 2013 amendments to the procedure regulations we will see later on what that that means and the other novelty is the new part of what was at the time article 20 and became article 242 which says that interested parties may submit complaints and to do so they have to comply or to fill in compulsory form providing the commission with all the information provided at the time it's not on the slide just to recall it to you who is an interested party is defined by the regulation itself it's defined by article one h of the procedure regulation which as way of an example it's not a closed list says that interest parties are other member states of course beneficiaries competitors and trade associations and by giving a more general description of interest party everybody who is directly affected by the measure is an interested party which is more or less the same definition that the court gives when it looks at standing so moving from from the legal basis to what the legal basis means in practice there are two entry points for the illegal aid procedure one entry point is the so-called exoficial procedure where we have hinted to it many many times this morning all the quite well-known tax cases we have been discussing this morning are exoficial procedure meaning that the commission acts on its own initiative and then it's covered by the first sentence of the first paragraph of article 12 meaning that it may act it has no duty no obligation to act it can pick and choose the cases the commission wants to act upon or based on a complaint on a formal complaint and then we fall under the second sentence of article then what happens as I said if it's an exoficial the commission enjoys a full discretion in whether to act or not meaning that it could look into the matter and decide that the matter is not relevant not interesting that the distortion of competition seems not to be there seems not to be relevant so on and so forth and simply stop there a different story is when the entry point is a complaint at that point if it's a genuine complaint meaning a complaint that is submitted by an interested party who has filled all the fields of the complaint form which is not that difficult to do pointing to the existence of illegal aid at that point the commission is under a duty to act as a wife strongly made clear by the court of justice in the commission Ryanair case in which the commission tried to resist to Ryanair pressure to act by saying that actually Ryanair simply wrote a letter saying actually it was Mr. O'Leary in person writing a letter to the then vice president Almonia telling him Luke there is stated to to what a flag carrier company in a southern country not giving any other type of information that was it I think that's stated and you should do something because it's outrageous the commission tried to say okay but come on this is not really we cannot qualify that that complaint it keeps no information it gives no reasons why as to that measure should be stated and the court clearly said no no no the procedure revelation as it stood at the time said that when you receive a complaint you have to act actually that when you know of illegal aid you have to act on it and you have to act if you have no sufficient information you go to the member state ask for it and investigate it and then conclude it by way of today as I said such a letter we were after jokeling saying that the postcard from the seaside would qualify as a complaint such a letter would not qualify as a complaint any longer there should be information as to what the measure is about why the complainant thinks that measure constitutes stated and also a number of other informations the pieces of information so as I said if the letter that the commission receives qualifies as a complaint the commission must act must investigate it if not what happens is basically that we fall back into an exoficial or a possible exoficial meaning that the commission still has the information in his hands and can decide what to do with it can decide whether you want to act on it it wants to act on it or it doesn't because it thinks that the matter is not relevant so when the commission decides or is obliged to act what happens basically the procedure that the commission has to go through is exactly the same as for notified aid but for some differences so the differences are that when we're in an illegal aid scenario the commission has a bit more power in in its hands and can issue information injunctions can issue a suspension injunction meaning can tell the member state even not having fully assess the measure you should stop it there until i get to my final decision you should not grant any support which i presume being aid at this stage to anybody or in some extreme cases a recovery injunction as you see it's quite an extreme case has never been done so far also because the requirement under the procedure regulations for doing so are quite straight that there must be no doubts as to the aid measure aid nature of the measure serious doubts about compatibility and also there is there should be a sort of periglumimora meaning there should be an urgency to act quite a high threshold normally when you reach that threshold you have enough information to adopt the final decision and you adopt the final decision which is easier you don't adopt two when you can adopt as i said you adopt final decision because as said by the court in 1990 and also repeated by the court in a final that we were quoting before the only way the commission can say final word on this type of procedures is by way of adopting a formal decision what kinds of formal decisions can the commission adopt exactly the same kinds of formal decisions that the commission can adopt at the end of the notified aid process so at the end of the preliminary investigation a no aid decision we looked into it the elements of 1071 are not fulfilled it's no aid we looked into it they are fulfilled but it's clear compatible aid because it complies there are no doubts that the measure is covered by a set of guidelines or is compatible under the treaty or at the end of the formal investigation maybe because the measure has been modified in the meantime or because the information that the commission has gotten in the framework of the formal investigation in which some more formal steps are to be undertaken the conclusion is that again it's no aid or it's compatible aid or it's compatible subject to the member state implementing some conditions or the most extreme which is also the source of my daily work a negative decision or during the recovery of the ilegate i think that ends also logically the section of the procedure for legal aid are there any questions on this no so we move to the next procedure which is the procedure for mid-use of aid the procedure for mid-use of aid so what are we talking about in the first place we're talking about a case in which the wrong doer is not the member state so the member state has done nothing wrong it has given aid to a certain beneficiary based on a measure which was either block exempted or duty approved by the commission so fully in the clear but when it gave the aid to the beneficiary then the beneficiary did not comply with some of the conditions that were attached to the aid did not comply to some of the conditions that were either in the legal basis or in the decision in the national legal basis or in the decision itself in such cases the commission has to do exactly what it would do in a in an illegal aid decision in a legal aid so it follows exactly the same procedure it has to it may decide to open because we are not sorry it may decide to open if it's a exoficial or it has to open if it's a complaint so we are exactly in the same framework as before and then if it's obliged to open or decides to open the investigation the investigation ends exactly the same way as the illegal aid investigation meaning no aid no objection compatible aid conditional decision or negative again with recovery because the aid is not compatible as used by the the venture the trust a bit through this one but the misuse of a procedure is really just a copy paste of the legal aid procedure except from the identity except for the identity of the wrong doer that gives rise to existing aid as i said starting this presentation this is the only procedure for really looking into existing aid and it's sad it's so also because they and then because it's so it's the only article that of the procedure regulation that actually refers to 101 of the treaty so to the obligation of commission and member states to keep under constant control old system of of aid why should the commission and the member state keep control of something that was already controlled before meaning that it was either cleared by the commission because it was approved by by decision or that was considered to be compatible because it was a block exempted before simply because the market change the market changes over time the conditions on the market change so something that could be no aid at one point or could be clearly compatible at one point could become over time no longer compatible with the market or become aid due to the changes in the in the market i will again not go through the various articles of the legal basis i leave them to you to read and go straight to the to the as i said it's a cooperative procedure between the commission and the member state and when the commission thinks that something that is out there and this is out there legally so we are hopefully moving apart from the previous procedure the legal aid and misuse of aid procedure it's out there on its own on right but it has become problematic over over time either because it has become aid or because it has become less clearly compatible when the commission reaches that conclusion it has to inform the member state of its preliminary conclusions and give the member states the opportunity to comment so the the question would be in such a way for example let's say let's take a real life example this sector was once a monopoly it has become liberalized over time it's the story of the telecom and energy sectors over time the opening the european liberalizations of those sectors as as a consequence that some of the financial arrangements between the member state and then monopolist became problematic over time and so the commission can go to the member state and tell yes the way you were remunerating your monopolist was fine when there was no competition on the market i don't think it's still fine now that the market is because of EU legislation fully liberalized the member state can say no i think it's still fine because for example i'm remunerating green energy in a perfectly market conformity at that point the commission would react to the view of the member state and would send a member state a second letter in which either the commission says yep okay we agree you're right there is no problem or we think that there are problems and the scheme as such the measure as such doesn't look compatible with the internal market so we tell you what we think are the amendments to the scheme that can go up until the entire repealing of the scheme that would be necessary to make that measure compatible or to take that measure out of the market because there is no way to to make it compatible that letter the second one in the one pointing to problems can have either of two outcomes the member state shares the view of the commission it accepts basically the remedies that the commission has proposed and tells exactly the commission that then the commission records that agreement it records that agreement also by publishing it on the with a notice on the official journal so that all market operators are aware that the member state has committed to doing something and has committed to certain conditions for making that measure compatible and the member state is bound by its agreement or the member state can of course is fully free to disagree with that with that assessment of by the commission again the only way for the commission then to address this disagreement and moreover to address the fact that it still thinks that the measure is not compatible so that by not acting by the member state not acting the problem on the internal market would stay there and would have to do that opening formal investigation which again would need to end with a decision a decision which can be again sorry you were right it was still no aid yeah you might have also tweaked it a bit in meanwhile and it has become compatible or it was compatible from the very beginning and we were wrong in indicating you some amendments to make it compatible or and that's the outcome that is closest to the the letter that gives rise to this procedure it is compatible provided that you do this that and the third thing which is exactly normally what the first letter says so to make it compatible you need to amend it that way and that would be a conditional decision or there is no way this can be made compatible and so you should discontinue it more or less you would recognize the outcomes it's of course only the second part of the outcome there is no preliminary investigation here the preliminary investigation is the first phase that we have seen the sending of the exchange of letters that's it for the preliminary investigation the commission goes directly to the formal investigation so it's only the last set of outcomes that that we have seen for illegal aid and misuse aid you might have already noticed that in the last bullet point there is a difference though because in the existing aid procedure there is no recovery the aid was existing and it's protected until the commission adopts the final decision so whatever has been granted up until that time is still to be considered existing aid and since recovery is only recovered of legal aid because that's what article 16 of the procedure regulation says there can be no recovery of course there is no recovery as a caveat and the caveat being that the member state is obliged to discontinue the scheme usually within a quite short term if the member state does not discontinue the scheme that scheme becomes automatically illegal and then we're back to square one recovery can come back into space from that from that only from the moment of the decision only from the moment of because only from the moment of the decision all recipients of that aid are put on notice that aid is no longer existing aid if we go back to the first the first part of our discussion existing aid means approved block exempted or but that's a bit residual aid that has become existing due to the elapsing of the time limit period for its recovery it's really about sector inquires are about a situation in which the commission has a reasonable suspicion that something wrong is systematically going sorry that something is systematically growing wrong in a number of member states as regards a sector of the economy or a type of aid measure let's say the easiest way is to use the only sector inquire that has been carried out so far so a sector of the economy in which the commission was not entirely sure that everything was stated compliant in the internal market was the remuneration of capacity mechanism in the energy sector around Europe so the commission had run into a number of this capacity mechanism and prima facie looked like they were not entirely unproblematic uh what happened is that since capacity mechanisms were also a relatively new animal from a real market point of view because they basically are born because of the huge increase in the use of non-reliable rest energy so you need some backup capacity that was not necessary before what the commission decided to do was not to address one by one or not in the first place to address one by one those capacity mechanisms but to get a better sense of what was going on out there on the market and see whether the way these aid measures with this type of aid measures was implemented in a number of member states was compatible with with the market and how does the commission do so basically the commission sends a number of requests for information to the member states to a number of member states normally and the number of undertakings in those in those member states it collects the replies it looks into the replies and draws up a preliminary report even if the word preliminary is not used in the procedure regulation while doing it we found out that this could only be a preliminary report and publishes it publishes it and invites all interested parties in the union to comment at it and meaning all member states who have replied to the questions or even member states that were not the addresses of those questions or same goes for for the undertakings all market operators are allowed to reply then it takes account of all these comments it starts from its preliminary report and then publishes the final one which is basically the sum the summing up of its preliminary findings and the new findings due to the replies to the report as i said in the very beginning this is not formally speaking a procedure it's simply a fact a knowledge gathering instrument in the end of the commission precisely for those situations in which it would be inappropriate to start opening procedures because the knowledge of the market or the knowledge of the aid measures of the knowledge of the behavior of the different member states is truly perceived not to be enough which means that any concrete follow-up would have to be done under one of the procedures that we have discussed before so if member states notify under a notified procedure but mostly it would be under illegal aid procedures under ex-officer illegal aid procedure meaning that from the fact gathering the commission would have in its end information and it might it may decide as provided for by article 12 1 per sentence it may decide to open illegal aid procedures on those on the information that they have on that information that they've got