No cross-border effect of aid measure = no state aid

  • Sebastien Garnier profile
    Sebastien Garnier
    12 May 2017 - updated 7 months ago
    Total votes: 3

Recent case law on purely local housing project in Portugal

On May 10 the European Economic and Social Committee (EESC) held an hearing to brainstorm on the challenges and opportunities arising from the current State Aid rules for services of general economic interest (SGEI).

The EESC will issue an own-initiative opinion on the Application of the Decision on public compensation for the provision of SGEI (2012/21/UE) with the aim of contributing to the upcoming Commission review and analysing the implementation of the SGEI package.

However, during the hearing of the EESC, the Commission’s representative, Ms Monique Negenman, from DG Competition, indicated that too little attention is paid to the fact that aid measures directed at specific social projects at local level do not necessarily result in state aid in the first place according to EU law.

She mentioned a recent Commission decision that clarifies this and which might be relevant in light of the issues discussed on available support measures within the Housing Partnership.

In this case on Alleged State aid to Santa Casa de Misericordia de Tomar (SCMT) the aid was provided for the construction of an assisted living facility for the elderly by the integration of a group of existing buildings (35 rooms, a dining room and lounges) and the European Commission decided that the measure did not constitute State aid within the meaning of Article 107(1) TFEU.

According to Article 107(1) of the TFEU, "save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market". 

The Commission's arguments can be summarized as follows:

One of the conditions to define a measure as ‘state aid’  is that the measure must distort or threaten to distort competition and affect trade between Member States. In that respect, the Commission has in several cases considered that certain activities, due to their specific features, have a purely local impact and no such effect on competition and trade between Member States.

In this regard the Commission assessed:

  1. whether the beneficiary supplied goods or services to a limited area within a Member State and is unlikely to attract customers from other Member States (customer perspective), and
  2. whether it can be foreseen that the measure will have more than a marginal effect on the conditions of cross-border investments or establishment (provider perspective) (see also paragraphs 196-197 of the Commission Notice on the Notion of Aid).

With regard to the customer perspective in this case the Commission found that:

  • the services provided are purely local in nature and available only within a limited geographic
  • The municipality is not located in a border region and not particularly accessible
  • the services offered to elderly people do not present unique, nor highly specialized characteristics that could be particularly attractive for citizens from other Member States.
  • the services were provided in Portuguese only 
  • SCMT has not promoted its services in other Members States

All the elements above render very unlikely that the services envisaged to be provided by SCMT in the social care home would be considered sufficiently attractive by citizens from other Member States to motivate them to move to that municipality to benefit of these services.

The provider perspective looks at the potential effect of the aid measure on the crossborder investments or establishment of undertakings from other Member States in the assisted residence sector in the region concerned. In this regard, there was no indication of relevant cross-border investments in the facilities similar to the ones provided by SCMT in the municipality of Tomar. The low profitability of SCMT's activities also renders rather unlikely that these activities could attract significant investments from other Member States.

Therefore, the Commission concluded that:

  1. the services provided by SCMT in Tomar are of a purely local nature and are attractive to local elderly population within the geographically limited area of the municipality of Tomar; and
  2. the impact of the measure at hand cannot be regarded, with a sufficient degree of probability, to have more than a marginal effect on the conditions of cross-border investments or establishment

Sébastien Garnier

Aedes vereniging van woningcorporaties