Brussels, 30/05/2001 (Agence Europe) - As previously indicated, the European Commission adopted, on 23 May, an important communication in which it sets out the way it will in future assess measures intended to promote the growth of capital investment markets in respect of State aid rules. Since the European Council of Lisbon, in March 2000, capital investment growth has been an objective pursued by the Union particularly vigorously, and the Commission acknowledges that public funds may contribute to achieving this. Furthermore, it trusts that State aid will remain subject to strict control within the EU. Rules on State aid generally require such aid to be linked to certain kinds of spending called "admissible costs" (investment in fixed capital, research, training, etc.), while capital investment often only serves to boost working capital of new or developing companies. Another difficulty is that the measures for promoting capital investment do not aim to directly provide funding but rather to encourage potential investors to provide funding. The rules governing State aid are therefore not adapted to it.
In its communication, the Commission recalls that, in order to promote capital investment, the public authorities may take various kinds of measures that do not have the impact that State aid would have. Furthermore, acknowledging that public financing of capital investment measures has a limited role to play to offset market shortcomings, it stresses that intervention carried out to this end may not constitute State aid if public capital is provided under the same conditions as those applying to private investors and consequently does not confer any advantage on the beneficiary.
On the other hand, in the case where public intervention constitutes State aid, the Commission has decided to apply criteria other than the direct relation with admissible costs in order to make assessments in relation to the rules on State aid. It will first of all grant importance to this measure serving to palliate certified market failures, a situation in which economic effectiveness is lacking because of imperfections in the market mechanisms. This condition will be presumed fulfilled in the case of transactions of a reduced amount, that is, not exceeding EUR 500,000, or EUR 750,000 and 1,000,000 respectively in "assisted regions" that can benefit from regional aid in application of Article 87 §3, point c) or a) of the EC Treaty.
When the existence of a market weakness is acknowledged, the Commission will assess the measure in relation to certain criteria such as the size of companies targeted, the existence of safeguards allowing competition distortion to be reduced between investors and the aim of profitability in investment decisions. More specifically: - limiting the measure to small companies or to emerging or innovative companies will be considered as a positive element; - the measure should be geared to a weakness on the capital investment market; - decisions should be motivated by financial gain; - competition distortion between investors and investment funds should also be limited as far as possible; - sectoral State aid will generally be the subject of an unfavourable Commission position; - the existence, for each investment, of an enterprise plan will be considered as a positive element; - the funds and other structures benefiting from public support should only hold a minority stake; - any accumulation of aid in favour of one and the same company should be avoided.
The communication on "State aid and capital investment" may be consulted at the following address: http: //europa.eu.int/comm/competition/state_aid/others/0175_risk_capital_en.pdf