State Aid Control in the Field of Risk Finance Investment

EU State Aids (Sweet & Maxwell/Reuters, 5th edition), Leigh Hancher, Pieter Jan Slot, Tom Ottervanger, Editors, Forthcoming

23 Pages Posted: 28 Mar 2016

See all articles by Luis Silva Morais

Luis Silva Morais

University of Lisbon - School of Law. Jean Monnet Chair – Economic Regulation in the EU

Lúcio Tomé Feteira

FDUNL / Nova School of Law

Date Written: March 28, 2016

Abstract

The review of the State Aid legal framework governing risk finance investment should be seen as part of a wider and deeper ongoing reform of EU State Aid rules commonly designated as State Aid Modernisation (SAM). SAM is driven by three main objectives, which have been articulated in the Commission’s 2012 Communication. These are (i) to foster sustainable, smart and inclusive growth in a competitive internal market; (ii) to focus Commission ex ante scrutiny in cases with the biggest impact on internal market whilst strengthening the Member States cooperation in State aid enforcement; and (iii) to streamline the rules and provide for faster decisions. Modernisation in the field of State aid has progressed from the general legal framework – the Enabling Regulation , the de minimis Regulation and the General Block Exemption Regulation (GBER) − to more specific instruments dealing with certain types of State aid.

Risk finance investment or, as it was designated prior to the 2014 Guidelines, risk capital is one of such areas where State aid may be allowed only if proved compatible with the general rules on State aid − starting with Article 107 of the TFEU – and with specific instruments issued by the Commission. In the case in point, the latter are the Commission’s Guidelines on Risk Finance Investment (2014), which replaced the previous 2008 Guidelines on Risk Capital.

The Guidelines on Risk Finance Investment purport to reflect the changes brought about by SAM, particularly as regards the objective of fostering sustainable, smart and inclusive growth in a competitive internal market. This objective is encapsulated in the expression “good aid”, a shorthand for State aid that is simultaneously well-designed, targeted at identified market failures and objectives of common interest and least distortive to the internal market.

In the following sections we will start by reviewing the general justification for State aid in the field of risk finance (section II), namely the underlying market failure that accounts for the need of public spending under the shape of State aid. We will then address the general legal framework concerning risk finance (section III), detailing how the general provisions of the Treaty articulate with secondary EU law and soft law instruments issued by the Commission. In the ensuing section (section IV) we will present the current Guidelines on State aid to promote risk finance investments for SMEs (Guidelines on Risk Finance Investment). Building on the findings of this section we shall be able to offer some tentative concluding remarks on the overall contents of the 2014 Guidelines on Risk Finance Investment and on its wider impact in terms of potential development of this field in the EU (section V).

Keywords: Risk, Finance, Investment

Suggested Citation

Morais, Luis Silva and Feteira, Lúcio Tomé, State Aid Control in the Field of Risk Finance Investment (March 28, 2016). EU State Aids (Sweet & Maxwell/Reuters, 5th edition), Leigh Hancher, Pieter Jan Slot, Tom Ottervanger, Editors, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2755596

Luis Silva Morais (Contact Author)

University of Lisbon - School of Law. Jean Monnet Chair – Economic Regulation in the EU ( email )

Alameda da Universidade, Cidade Universitária
Lisboa, 1649-014
Portugal

Lúcio Tomé Feteira

FDUNL / Nova School of Law ( email )

Travessa Estevão Pinto
Campus de Campolide
Lisbon, 1099-032
Portugal

HOME PAGE: http://www.fd.unl.pt/

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