2019 EU State Aid Considerations in Research, Development & Innovation
0 likes133 views
In September 2019, KTI partnered with legal firm Ronan Daly Jermyn to deliver a series of talks on the topic of State Aid in the context of R&D and Innovation. These talks marked the publication of the KTI Practical Guide to State Aid Considerations in Research, Development & Innovation which is available to download on www.knowledgetransferireland.com along with the full suite of KTI Practical Guides.
2019 EU State Aid Considerations in Research, Development & Innovation
- 1. Connect at knowledgetransferireland.com 1 State Aid Considerations in Research, Development & Innovation Galway 17th September 2019 Cork 18th September 2019 Dublin 19th September 2019
- 2. State Aid Considerations in Research, Development and Innovation Knowledge Transfer Ireland State Aid Roadshow 息 Ronan Daly Jermyn 2019 Disclaimer: This presentation is intended for general guidance only and does not constitute legal advice.
- 3. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Todays presentation is about condensing this... 3
- 5. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E State Aid In the News . 5
- 6. Relevance for Research, Development and Innovation
- 7. What is State Aid? Prohibition on discriminatory internal taxation Abolition of customs and tarrifs Free movement of goods, people, services and capital Competition Law rules applicable to businesses Regulation of State Aid 7
- 8. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Purpose of State Aid is to avoid MS from championing national economies or individual businesses 8
- 9. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E State Aid - A rule for Member States but with big consequences for State aid recipients 9
- 10. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Articles 107 & 108 of the TFEU provide the basic rules on State Aid Art 107(1): Incompatibility of state aid with the IM Art 107(2) 3 categories of aid that are compatible with the IM Art 107(3) 5 categories of aid that may be compatible with the IM. Art 108(1) Commission monitors all state aid Art 108(2) Procedure for investigating state aid Art 108(3) MS must notify all state aid Art 108(4) Legal basis for regulation s relating to categories of aid declared exempt by Council under Art 109 10
- 11. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E State Aid Basic Analysis Step 1: Does the measure constitute aid within the meaning of article 107(1)? Step 2: Does it fall within an exception? Step 3: Notifiable State Aid - notify to the Commission No State Aid Yes No NoYes 11
- 12. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Art 107(1) the basic rule Step 1: Does the measure constitute aid within the meaning of article 107(1)? Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market. 12
- 13. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Core elements of Art 107(1) Aid from public funds granted by MS or through State resources. Beneficiary(ies) of that aid are undertakings Aid confers advantage Aid is selective to certain undertakings or production of certain goods. Aid affects trade between MS and distorts competition. Criteria are cumulative, not alternative. All elements must be present. 13
- 14. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Step 2: Exceptions Step 2: Does it fall within an exception? Save as otherwise provided by the Treaties Regulations on De Minimis Aid General Block Exemption Regulation Article 107(2) social aid granted to consumers, aid for damage caused by natural disasters, aid for areas affected by the division of Germany Article 107(3) types of aid that may be compatible with the internal market (underdeveloped regions, European projects, culture and heritage) Article 42: Agriculture Article 93: Public transport Article 106(2): SGEI Maximum 200,000 over any three year fiscal period. No notification required. Certain sectors excluded (i.e. fishery and aquaculture, coal, agriculture) A block exemption for certain categories of aid (including research and innovation) meeting conditions set out in the regulation Aid must be transparent and have an incentive effect MS still required to report on use of GBER 14
- 15. Application of State Aid Rules to Research, Development and Innovation
- 16. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Generally most State funding to the HE sector is for non-economic activities Education Independent R&D Distribution of Research Results Knowledge transfer activities 16
- 17. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Indirect State Aid May arise where the industry party indirectly benefits from the States financing of the RO/RI non-economic activity (or ancillary economic activity). Examples of indirect aid: Services at below market rates; Access to or use of facilities at less than market rates Favourable/below market rate access to IP generated from publicly funded research. Elements for indirect state aid State funding of RO/RI (non- economic activity) + Advantage or benefit indirectly conferred on a third party undertaking 17
- 18. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Contract Research v Collaborative Research Important distinction between Contract Research and Collaborative Research Contract Research/Research Services Collaborative research The provision of services or access to research infrastructure industry party specifies the terms and conditions Industry party carries the risk of failure Industry party often owns the results Pursuit of a common objective based on the division of labour where the parties jointly define the scope, participate in its design, contribute to its implementation and share its financial, technological, scientific and other risks One party may bear the full cost Collaboration Agreement must be concluded prior to the start of the project 18
- 19. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Avoiding Indirect State Aid in Contract Research Pay a market rate 19
- 20. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Avoiding Indirect State Aid in Collaborative Research Fully-Funded Industry Project Non-IP results disseminated and IP fully allocated to the RPO Allocation of IP based on work packages, contributions and respective interests Payment of market price for IPR 20
- 21. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Avoiding Indirect State Aid in Collaborative Research Scope and nature of research project who is leading the design of these? Contract Research is expressly excluded. Collaboration Agreement covering the terms and conditions of a collaboration project must be in place prior to commencement of the research project. Terms to be covered include: contributions to costs the sharing of risks and results the dissemination of results access to and rules for allocation of IPR. 21
- 22. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Establishing a Market Price in Contract Research The price charged will be regarded as market price where the research is carried out for the first time, is unique and it can be shown that there is no market for it. If there is no market price: Cost plus margin or show that the prices is the result of arms length negotiations covers at least its marginal costs If ownership of, or access rights to intellectual property rights (IPR) remain with the RO/RI, their market value may be deducted from the price payable for the services concerned. 22
- 23. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Indirect State Aid Establishing a Market Price (Collaborative Research) 1 Competitive sale procedure 2 Independent expert valuation 3 Arms length negotiations to obtain the maximum economic benefit while considering its statutory objectives 4 Right of first refusal where RPO solicits third parties offers that are matched by the industry party 23
- 24. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Conclusions - Key Lessons & Things to watch 24 Source of funding State aid rules apply to activities or infrastructure funded from government resources Plan to avoid indirect aid GBER cannot be relied upon if funding programme does not rely on it initially De Minimis can be difficult to rely on practice Grant agreement may contractually require you to avoid indirect aid Research project design Distinguish between contract research (at market rates) and collaborative research (4 possible options for avoiding indirect aid). Market price should be charged for: Contract research Consultancy services Access to facilities and/or equipment Licensing of intellectual property rights (IPR) Establishing market rates Requirement for documentary evidence to support conclusion reached.
- 25. C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E Thank you Questions? Diarmaid Gavin, Partner Diarmaid.gavin@rdj.ie