Conference of the Office of Competition and Consumer Protection and University of Warsaw State aid in law and practice of the European Union, Warsaw, 21- 22 March 2005

The main assumptions to the EU reform of supporting the enterprises in the United Europe were the lead issues of the conference organised by UOKiK and the Faculty of Law and Administration of the Warsaw University

Neelie Kroes, Commissioner for Competition of the European Union, in February 2005 presented proposals of changes to the EU policy of providing state aid. The basic assumption of the reform discussed in the Member States is a systematic reduction of support and the idea to direct it to increase competitiveness of enterprises. Neelie Kroes also proposed to implement limitations in granting aid by richer EU States to their not so-well-off regions. In her opinion, the support should be focused on spheres that do need State assistance. In the opinion of the Commissioner for Competition, packets saving large bankrupt enterprises should be reduced. Neelie Kroes argued that a possible job loss should not excuse subsidies.

State aid provided to weak, large enterprises without initiatives is helpful only for a short time. This is not a good instrument to achieve what we actually want, said Ms. Kroes in an interview to the Financial Times.

Representatives of the European Commission, attending the conference organised by UOKiK and the Faculty of Law and Administration of University of Warsaw, stressed that the issue of state aid and its amount in some instances is an economic, as well as a political issue.

One thing is certain - the amounts of aid to the regions are too high and it is doubtful if all the aided projects are justifiable, - said Robert Hankin from the Directorate General for Competition of the European Commission. We are convinced that at least in some instances, the provision of state aid was incorrect. Perhaps the proposed reforms are too broad and their implementation is too fast. We have to balance the interests of the old and new Member States. On one hand - the changes may not be too radical, so that permanent growth of such States as Greece, Spain or Portugal is assured as they have seen benefits of regional aid. On the other hand - we must not forget about the most important goal of aid - support to innovations in the economy. The proposed reform is favourable to Poland, says Cezary Banasiński, the President of the Office of Competition and Consumer Protection. Our country should gradually decrease the size of aid and change its direction in favour of small and medium-sized enterprises in order to enhance their innovation strength and competition in the market. On the other hand, we must not forget that we are at such a stage of economic and social development that emergency support to some enterprises and industries seems to be necessary.

Discussing the aid provided to restructured enterprises, stress was put on the one-off character of this type of support, in accordance with the principle one time - last time. The goal of this type of aid is to improve long-term profitability of the company, so that it would not apply any more for public aid once supported.

By definition, public aid is a disturbance to competition and may be allowed only under strictly specified instances, reminded Claes Norgren, director general of the Swedish Antimonopoly Authority. Whenever the tool is used, it is necessary to assess its impact on the market, in short and long-term. This is a delicate mechanism which should balance the interest of those who do need assistance, e.g. restructured enterprises as well as those who want to operate in the market without such State support.

Apart from representatives of the European Commission, competition protection authorities of EU Member States and public administration, the conference was also attended by representatives of academic legal circles and enterprises.

State aid is a kind of support provided by State and self-government bodies to enterprises pursuant to their individual applications or aid programmes. Since 1 May 2004, the intention to provide such aid - as a matter of principle - has to be notified to the European Commission and the aid may not be granted until it has issued its consent. The Commission verifies if the aid to be provided to the Polish enterprise is in conformity with the EU law - the European Community Treaty and the Accession Treaty.

No notification is needed in case of the de minimis aid - that is support of less than EUR 100 000, received by an enterprise over three consecutive years.

The President of UOKiK is the authority monitoring state aid given to Polish enterprises. According to the data prepared by the Office on the basis of information from the institutions granting the state aid, in 2003 enterprises were granted over 27 billion zloty of aid, that is 3.3 percent of gross domestic product and it was almost six times as high as the average from the 15 EU Member States, which in 2002 was equivalent to 0.56 percent of GDP.

Additional information:
Elżbieta Anders, Spokesperson of UOKiK
International Relations and Communication Department
Office of Competition and Consumer Protection
Pl. Powstańców Warszawy 1, 00-950 Warsaw
Ph.: (+48 22) 827 28 92, 55 60 106, 55 60 314
E-mail: [SCODE]ZWFuZGVyc0B1b2tpay5nb3YucGw=[ECODE]