On 19 October 2022, the European Commission (the “Commission”) adopted its new State aid Framework for research, development and innovation (the “2022 RDI aid Framework”). This instrument governs Member States’ investment in RDI activities. It is an important response to the 2020 Commission Communication on a new European Research Area for Research and Innovation (the “ERA Communication”), aiming at strengthening investments and reaching a 3% GDP investment target in the field of RDI. The 2022 RDI aid Framework is a revision of the previous version of 2014.

The three most important things you need to know about the 2022 RDI aid Framework are:

  • The Commission’s approval is subject to a set of criteria to determine whether the aid is justified and can be authorised, and compliance with recent EU objectives such as the EU Green Deal and the EU Industrial and Digital Strategies will have a positive influence on the Commission’s assessment;
  • RDI activities now explicitly include digitalisation and digital technologies; and
  • Member States can grant aid for testing and experimentation infrastructures which predominantly provide services to undertakings for R&D activities closer to the market.

Background

Similarly to its previous version, the 2022 RDI aid Framework recalls the instances where RDI aid does not qualify as a State aid and is therefore not caught by the State aid rules. This would be the case where the aid is granted to non-economic activities conducted by universities or where universities, although publicly funded, engage in RDI activities with companies pursuing commercial goals.

Some RDI aid can also be considered as compatible with the internal market where the conditions of the General Block Exemption Regulation (“GBER”) are fulfilled. In such a case, the aid does not need to be notified to the Commission for prior approval. The GBER is currently under revision, notably to introduce specific rules for aid of a limited amount for testing and experimentation infrastructures.

Where RDI aid qualifies as a State aid and must be notified to the Commission for prior approval, to be declared compatible with the internal market, the Commission may examine the aid under its Communication on Important projects of common European Interest (the “IPCEI Communication”, see our blog), or if the project is not an IPCEI, under the 2022 RDI aid framework.  

Compatibility assessment

The assessment of the compatibility of an RDI aid relies on two conditions contained in the Treaty. On this basis, the Commission has devised the following assessment criteria:

  • Under the positive condition that the aid must facilitate the development of an economic activity, the Commission will analyse:
    • the RDI activity or investment which is being facilitated by the measure;
    • whether the aid induces a change of behaviour, to engage in more RDI activities (incentive effect); and
    • the absence of a breach of Union law, such as for instance, the competition rules.
  • Under the negative condition that the aid must not adversely affect trading conditions to an extent contrary to the common interest, the Commission will examine:
    • whether the aid remedies market failures preventing the achievement of an optimal output, stemming from, for instance, imperfect and asymmetric information for private investors in finance projects (necessity of the aid);
    • whether the objective cannot be (sufficiently) achieved by alternative measures given the problem identified (e.g. lifting of access to RDI results, increased investment in education, etc.) or less distortive aid instruments (e.g. repayable advance vs direct grant) (appropriateness of the aid);
    • whether the aid is limited to the minimum necessary, that is a maximum aid intensity possibly increased for cross-border projects or for projects in assisted areas and, for aid available on an individual basis, whether it does not exceed the minimum necessary for the aided project to be sufficiently profitable (proportionality of the aid);
    • whether it is well publicised (transparency of the aid);
    • the avoidance or minimisation of negative effects of the aid on competition and trade, taking into account the specific product and geographic markets that are affected; and
    • whether the positive effects of the aid outweigh the negative ones, which will be presumed to be the case where the aid is aligned with the objectives embodied in Union policies, such as the European Green Deal, the European Digital Strategy, and the New Industrial Strategy for Europe Communications.

Support for digitalisation and digital technologies

The 2022 RDI aid Framework clarifies its application to RDI for digitalisation and digital technologies. Those activities may receive RDI State aid where they consist of the adoption of innovative technologies carried out by electronic devices and/or systems and where they lead to an increase in product functionality, development of online services, modernisation of processes, etc. Aid would not be allowed if those activities merely constitute the replacement of investments, which would point to the absence of its necessity and incentive effects.

Support for testing and experimentation infrastructures

The 2022 RDI aid Framework establishes a new category of aid to support the construction and upgrade of testing and experimentation infrastructures. Testing and experimentation infrastructures – also known as technology infrastructures – are infrastructures mainly used by commercial companies (in contrast to universities) to develop new or improved products, processes or services, as well as to test and upscale technologies. Such infrastructures are closer to the market than research infrastructures and allow companies to advance through industrial research and experimental development.

To grant aid to such infrastructures, Member States must provide detailed and precise information and demonstrate that the aid does not lead to duplication in services already offered by existing structures operating within the EU.

Given their use by companies for research and development activities that are closer to the market, the maximum aid intensities are lower than for pure research infrastructures, with potential “bonuses” for smaller companies running the infrastructure or for cross-border projects.

Where testing and experimentation infrastructures are co-funded by EU funding, public support from Member State and EU sources can reach up to 100% of eligible investment costs, provided that it does not exceed a proven funding gap to avoid any overcompensation.

Photo of Johan Ysewyn Johan Ysewyn

Johan Ysewyn is widely respected as a highly skilled European competition lawyer, advising on complex competition issues, including on merger control, anti-cartel enforcement, monopolisation cases and other conduct investigations. He acts as Co-Head of the firm’s Global Competition group and as Managing Partner…

Johan Ysewyn is widely respected as a highly skilled European competition lawyer, advising on complex competition issues, including on merger control, anti-cartel enforcement, monopolisation cases and other conduct investigations. He acts as Co-Head of the firm’s Global Competition group and as Managing Partner of the Brussels office.

Clients turn to Johan when they need cutting-edge competition and regulatory advice. He has been advising some of the world’s leading companies for over 30 years on their most complex competition issues. Johan is “an exceptional lawyer who is solution-oriented, has a remarkable ability to rapidly understand our business and has excellent reactivity.” (Chambers Global) Johan “attracts considerable praise for his reliable practice, as well as his great energy and insight into cartel proceedings.” (Who’s Who Legal)

Johan represents clients from around the world in dealings with competition authorities as well as in court litigation. He has in-depth knowledge of regulatory procedures and best practices as well as longstanding relationships with key regulators, in particular at the European Commission. He has also an active advisory practice covering a range of areas of interest to corporates, including the interplay between ESG goals and competition law, the impact of competition law enforcement on digital markets and broad strategic compliance issues.

Johan’s experience spans many industry sectors, with recent experience in telecoms and information technology, media, healthcare, consumer goods, retail, energy and transport. He has advised on several of the most major merger investigations in recent years. In addition, he has represented clients in many conduct investigations.

Johan’s practice also has a strong focus on global and European cartel investigations. He has acted for the immunity applicants in the bitumen and marine hose cartels, and acted for defendants in alleged cartels in financial services, consumer goods, pharmaceuticals, chemicals, consumer electronics and price benchmarking in the oil sector. He has acted for the European Payments Council in the first European Commission investigation into standardisation agreements in the e-payments sector. Johan has written and lectured extensively on international cartel and leniency-related issues. He co-authors the loose-leaf European Cartel Digest and lectures on cartel law and economics at the Brussels School of Competition.

Johan is also one of the leading experts on EU State aid issues, working both for beneficiaries and governments. He has advised a number of leading banks and governments, as well as represented major European airlines. From the cases that can be publicly disclosed, he has been involved in the Fortis, KBC, Dexia, Arco, Citadele, airBaltic and Riga Airport State aid cases.

Photo of Sophie Bertin Sophie Bertin

Sophie Bertin is a senior advisor to Covington in their Financial Services and Antitrust practice. Her current focus is on financial services topics, ranging from State aid, implementation of regulations, interplay between various regulations, including the new data protection rules; as well as…

Sophie Bertin is a senior advisor to Covington in their Financial Services and Antitrust practice. Her current focus is on financial services topics, ranging from State aid, implementation of regulations, interplay between various regulations, including the new data protection rules; as well as the impact of new technologies (like Blockchain) on the financial services business models and resulting competition challenges.

Sophie has over 20 years of professional experience and she has broad experience helping banking clients on their strategy, restructuring, reorganization, risk management, regulatory and compliance, back-office operations and automation, as well as, advising on various issues around banking regulation and competition law (most notably State aid).

Photo of Carole Maczkovics Carole Maczkovics

Carole Maczkovics has developed a cutting-edge expertise in State aid law, with a strong background in the economic regulation of network industries (energy and transport) and in public contracting (EU subsidies, public procurement, concessions).

Carole has a proven track record of advising public…

Carole Maczkovics has developed a cutting-edge expertise in State aid law, with a strong background in the economic regulation of network industries (energy and transport) and in public contracting (EU subsidies, public procurement, concessions).

Carole has a proven track record of advising public and private entities, which she successfully represents in administrative and judicial proceedings on complex State aid and regulatory matters before the European Commission as well as before the Belgian and European courts. She also assists clients with the application of the new EU Foreign Subsidy Regulation and UK subsidy control regime.

Carole has published many articles on State aid law and on regulated network industries, and contributes to conferences and seminars on a regular basis. She is a visiting lecturer at King’s College London and at the Brussels School of Competition on the application of regulation and competition law (including State aid) in the railway sector. Carole gives trainings on State aid law at EFE, in Paris. She has been recently appointed as Academic Director of the European State aid Law Institute (EStALI).