The revised 2022 Union Framework for Research, Development and Innovation

The revised 2022 Union Framework for Research, Development and Innovation

On October 19, 2022, the revised Union Framework for Research, Development and Innovation entered into force.[1] According to EU Competition Commissioner Margrethe Vestager, it aims to facilitate “public-private investment in breakthrough innovation and research, as well as testing and trial infrastructure” to support Europe’s environmental and digital transformation[2]. To this end, the Commission has specifically adapted and supplemented provisions of the 2014 R&D&I Framework.

1. new funding opportunities for research, development and innovation

The new R&D&I Union Framework opens up new funding opportunities for innovation and research as well as for testing and trial infrastructures for EU member states, which the Commission can now declare compatible with the internal market.

1.1. Aid for the establishment or expansion of testing and experimental infrastructures

A new category is aid for the establishment or expansion of testing and experimental infrastructures, cf. marginal 13(d) and marginal 16(ll) of the R&D&I Guidelines.[3].

Testing and trial infrastructures, sometimes also referred to as technology infrastructures, are infrastructures used primarily by commercial enterprises to develop new or improved products, processes or services and to test and optimize technologies. Technology infrastructures are closer to the market than research infrastructures and enable companies to advance through industrial research and experimental development. Aid is mainly used to address market failures due to insufficient and asymmetric information or coordination deficiencies. Since the establishment or expansion of technology infrastructures often involves high upfront costs and the customer base is uncertain, such projects often face special financing challenges.

Since technology infrastructures are used by companies for research and development activities close to the market, the maximum aid intensities are lower than for pure research infrastructures, with bonuses and thus higher intensities for smaller companies operating the infrastructure or for cross-border projects. Access to the funded infrastructures must be granted to users (mostly SMEs and start-ups) in a transparent and non-discriminatory manner and at arm’s length, with user fees that can be reduced in line with requirements of the R&D&I Union Framework 2022 or the General Block Exemption Regulation (GBER)[4] or the de minimis Regulation[5].

1.2. Aid for process or organizational innovation

Furthermore, the 2022 R&D&I Framework has been expanded to include aid for process or organizational innovation.[6] Aid is primarily targeted at SMEs and is primarily focused on market failures related to positive externalities (knowledge spillovers), coordination problems and, to a lesser extent, information asymmetry, cf. para. 13 lit. f) R&D&I Union Framework 2022. Aid intensities of up to 50 percent are permitted for SMEs, and up to 15 percent for large companies, provided there is effective cooperation with at least one SME.

Process innovation” means the application of a new or substantially improved method of production or service delivery (including significant changes in technology, equipment or software) at the level of the company (at group level in the relevant industry in the EEA), for example through the use of new or innovative digital technologies or solutions, cf. rec. 16 lit. cc) R&D&I Union Framework 2022. Process innovation can also include social innovation. In contrast, minor changes or improvements, expansion of production or service capacity through additional manufacturing or logistics systems very similar to those already in use, discontinuation of a workflow, simple replacement or expansion investments, changes resulting solely from changes in factor prices, new customer orientation, localization, regular, seasonal, and other cyclical changes, and trade in new or significantly improved products are not considered process innovations.

“Organizational innovation” is defined according to para. 16 lit. (z) R&D&I Union Framework 2022 defined as the application of new organizational methods at the level of the company (at group level in the relevant industry in the EEA), in the area of a company’s work processes or business relationships, for example through the use of new or innovative digital technologies. Organizational innovation can also include social innovation. Changes based on organizational methods already in use in the company, changes in management strategy, mergers and acquisitions, discontinuation of the use of a workflow simple replacement or expansion investments, changes resulting solely from changes in factor prices, new customer orientation, localization, regular, seasonal or other cyclical changes, and trade in new or significantly improved products are not considered organizational innovation.

2. simplification of regulations

Furthermore, the definitions under para. 16 R&D&I Union Framework 2022 updated.[7] In particular, it clarifies applicability in relation to digital technologies and activities related to digitization (e.g., high-performance computing, quantum technologies, blockchains, artificial intelligence, cybersecurity, Big Data, cloud computing, and edge computing) in order to provide more transparency and legal certainty to promote the digital transformation in the EU. Simplification of rules is also intended to facilitate the practical application of the R&D&I framework and reduce the administrative burden for companies and public authorities.[8] For example, the new rules introduce a simplified mechanism for determining the indirect costs of research and development projects.

3. conclusion

The background to the 2014 revision of the R&D&I Framework was a Commission evaluation of the State aid rules initiated in 2019, in which Member States, business and research associations, interest groups and companies, NGOs, and citizens were able to participate.[9] The results painted a predominantly positive picture of the 2014 R&D&I Framework, which is why the 2020 Commission proposed only selective adjustments that take into account legislative developments, current priorities, and market and technological developments such as the European Green Deal and the EU Commission’s Digital and Industrial Strategy.[10]

In principle, the new R&D&I Union Framework does not differ significantly from the “old” R&D&I Union Framework. The existing and in parts complex system of funding for R&D&I projects was retained and specifically expanded and adapted to the requirements associated with ecological and digital change. Aid for the establishment or expansion of testing and experimental infrastructures and for process or organizational innovations opens up new scope for public funding. The extensions also aim to increase the involvement of SMEs and start-ups. However, it would also have been desirable to simplify the so-called 20 percent clause, which to date has not been finally clarified either by case law of the European courts or decisions of the Commission. Overall, however, the new funding opportunities, clarifications and facilitations are to be welcomed, as they strengthen the EU’s pioneering role in the ecological and digital transformation.

[1] Commission press release, 19.10.2022 (see: State aid for research, development and innovation: Revised Union framework supports green and digital transformation (europa.eu) Retrieved: 27.02.2023).

[2] Ibid.

[3] Commission Communication on the Union Framework for State Aid for Research, Development and Innovation, 28.10.2022 (2022/C 414/01), para.13 c).

[4] Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union (OJ L 187, 26.6.2014, p. 1).

[5] Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid (OJ L 352, 24.12.2013, p. 1).

[6] Commission Communication on the Union Framework for State Aid for Research, Development and Innovation, 28.10.2022 (2022/C 414/01), para.13 f).

[7] Commission Communication on the Union Framework for State Aid for Research, Development and Innovation of 28.10.2022 (2022/C 414/01), para.16 a) – zz) ll).

[8] Commission press release, 19.10.2022 (see: State aid for research, development and innovation: Revised Union framework supports green and digital transformation (europa.eu) Retrieved: 27.02.2023 ).

[9] Commission press release, 19.10.2022 (see: State aid for research, development and innovation: Revised Union framework supports green and digital transformation (europa.eu) Retrieved: 27.02.2023 ).

[10] Commission press release, 30.10.2022 (see: Results of the evaluation of EU state aid rules (europa.eu) Retrieved: 07.03.2023).