26.06.2014 | KPMG Law Insights

State aid law: new notice on important projects of common interest

Dear Readers,

Unfortunately, the German version of the Union Framework was published somewhat too close to the editorial deadline. Due to time constraints, it was not possible to discuss its contents and amendments in this issue, in particular in connection with the so-called 20% clause. In the next issue – probably designed as a special edition – we will, however, deal with the version in detail, we promise!

However, so as not to deprive you of the joys of EU state aid law, we report on the EU Commission communication from May 2013 on important projects of common European interest, which among other things also deals with major R&D funding measures. In the future, in order to be classified as compliant with EU state aid rules, these must either be of a significant innovative nature or represent important added value for R&D, taking into account the state of the art in the sector concerned.

In addition, we do not want to withhold from you the extremely explosive decision of the Administrative Court of Gelsenkirchen in terms of higher education law: It is about the fate of the university admission laws for medical studies of all federal states!

In the May 2014 issue, we promised readers with an interest in public procurement law that we would report on the Federal Administrative Court’s decision on the “HIS” versus “Datenlotsen” case. This decision has been published in the meantime and provides exciting information on the horizontal in-house contract award.

Sincerely yours

Public Sector Team of KPMG Rechtsanwaltsgesellschaft mbH

Mathias Oberndörfer Dr. Anke Empting

State aid rules: new Communication on important projects of common interest adopted

On May 13, 2014, the EU Commission adopted new rules for the funding of important projects of common European interest, which relate to R&D measures, among other things. In the Commission’s view, support for such projects enjoys a special status under state aid law because, although distortions of competition may occur as a result, these must be accepted as an exception due to the special importance of the supported projects for the EU’s internal market.

The criteria of the new Communication do not lead to the automatic exclusion of aid at the factual level. Rather, they are only applied in the context of a notification procedure. To qualify as an eligible project under the new Communication, a given action must be particularly large either in terms of its scale or scope and/or involve a high level of risk or financial commitment.

The project must also be precisely described and it must contribute in a concrete, clear and identifiable way to one or more Union objectives and have a significant impact on EU competitiveness, sustainable growth, addressing societal challenges or adding value across the Union. The promotion of the European Research Area is also considered an important goal.

The project shall involve more than one Member State and shall benefit not only the Member States providing the financing but also, to a significant extent, the Union. The project must also include co-financing by the grant recipient. Moreover, the project’s impact must not be limited to the sector in question.

Finally, implementation must respect the principle of phasing out environmentally harmful subsidies, as referred to in the EU’s Roadmap to a Resource Efficient Europe and in several Council decisions. Repayable advances, loans, guarantees or grants may be provided. Also, in justified cases, government funding can be up to 100% of the project’s funding gap.

Significance for the R&D sector

According to the new Communication, in order to qualify as EU compatible aid, large R&D support measures must either be of a significant innovative nature or provide important added value to R&D, taking into account the state of the art in the sector concerned. They must also enable the development of a new product or service with a high research and innovation content and/or the introduction of a fundamentally innovative production process. Excluded are regular updates without an innovative dimension of the existing facilities and the development of new versions of already existing products.

The situation is different for aid for the first commercial use of an R&D project, such as for the expansion of pilot plants and the test phase. Such aid falls within the scope of the new communication and, on this basis, can be classified as compliant with state aid after appropriate examination by the EU Commission.

Under scrutiny: Admission regulations of the federal states for medical studies

The Administrative Court of Gelsenkirchen has referred to the Federal Constitutional Court the question of whether the admission to medical studies regulated in the respective university admission laws of the federal states are compatible with the Basic Law insofar as they provide for a selection procedure in which, in fact, approximately 80 percent of the study places are awarded solely or predominantly on the basis of the Abitur grade and 20 percent of the study places are awarded on the basis of waiting time. This is because admission to medical school is essentially based on the selection criterion “Abitur grade”. This criterion is not initially met by a large proportion of applicants. Applicants must then reach their goal of a study place by “improving their grades” through waiting time.

The Administrative Court of Gelsenkirchen considers a restriction of the waiting period to achieve the selection criterion “Abitur grade” to be indispensable, otherwise the fundamental right to freedom of occupation granted to every university applicant as well as the principle of equality would be unlawfully interfered with. The fundamental right of freedom of occupation results in the free choice of the educational institution as well as a right of the applicant to participate in state-created educational capacities.

Selection according to Abitur grade and waiting period

Whenever the state has limited resources to distribute, the principle of equality protected by the Basic Law intervenes. Accordingly, the distribution criteria must be measured against the standard of the principle of proportionality. Accordingly, it is necessary to differentiate between the interested parties under consideration according to appropriate objective criteria with a “fair chance for each applicant”. According to supreme court rulings, a combination of performance, suitability and social criteria is considered appropriate in this sense.

Baccalaureate grade levels are inconsistent across the states. Even within a single state, there are divergences in the level of schooling and the grading system specific to each school. If different levels are not compensated by appropriate measures or at least corrected by another selection criterion, an unjustified unequal treatment between the individual applicants will result.

If “Abitur grade” and “waiting period” are used as selection criteria, the court is of the opinion that the waiting period must be limited to the maximum duration of a “normal course of study”.

Until a final court decision is made and, if applicable, a necessary change in the legal situation, however, there is no compelling need for the universities to take action.

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