Brussels (Brussels Morning) – EU Commission orders Czechia to retract investment aid for large agricultural companies due to breach of EU State aid rules.
The European Commission has ruled that Czechia’s investment aid granted to specific large Czech agricultural companies in 2017 and 2018 is not in string with EU State aid regulations. The commission states that Czechia must now retrieve the incompatible State aid, including interest.
The Commission’s inquiry In January 2021, the Commission extended an in-depth investigation to evaluate whether aid granted by Czechia to certain large agricultural businesses in 2017 and 2018 for investing in irrigation and the restructuring of orchards was in line with EU State aid regulations, in particular with the 2014 Procedures for State aid in agriculture, forestry and rural areas.
According to the Press of the European Commission, the 2014 Agricultural Guidelines allow Member States to give investment aid in favour of enterprises of all sizes, subject to specific conditions. When investment aid is given to large enterprises, due to its potential distortive results, certain additional conditions are required to be met to ensure that possible match distortions are minimised. The Commission had suspicions that the Czech aid in favour of the large agricultural businesses complied with those conditions.
Violation of Aid Regulations
The Commission’s assessment Established on its in-depth investigation, the Commission discovered that the concerned large agricultural companies had acquired aid based on Czech schemes that were block-exempted under the Agricultural Block Exemption Regulation. These schemes were unrestricted only to small or medium-sized enterprises (SMEs), but the Czech authorities erroneously permitted some of the beneficiaries that accepted aid in 2017 and 2018 as SMEs, while they were large enterprises. Hence, the aid the concerned large companies received could not be compatible with the block-exempted schemes.
In addition, because the concerned large corporations had received investment aid under conditions developed for SMEs, the aid granted to these companies also did not concede with the specific conditions for large companies set out in the 2014 Agricultural Guidelines. EU Commission Urges that Czechia must now recover the conflicting aid, plus interest. As a matter of principle, EU State aid rules demand that incompatible State aid is recovered without hesitation to remove the distortion of competition produced by the aid. There are no fines under EU State aid rules and the objective of recovery is to restore the condition which existed in the internal market before the aid was paid.
By delivering back the unlawful aid, the beneficiary forfeits the benefit which it has enjoyed over its competitors. Czechia will identify all enormous companies which received aid based on the block-exempted schemes and choose the amount to be recovered, in line with the Commission decision embraced. Therefore, the total aid amount to be retrieved is not known at this stage.
EU Commission’s Criteria for Agricultural Investment Aid
Given the often reduced financing possibilities of farmers, the Commission’s 2014 Agricultural Guidelines encouraged Member States to support investments carried out by businesses in the agricultural sector. When investment aid was given to large enterprises, due to its potential distortive effects, certain additional requirements, not required for investment aid to SMEs, had to be met to guarantee that possible competition distortions were minimised.
In particular, investment support to large enterprises had to: (i) have a natural incentive effect, meaning that the inheritors would not carry out the investment in the lack of public support; and (ii) be kept to the minimum necessary based on detailed information. Investment aid granted based on the Agricultural Block Exemption Regulation can only be given to SMEs, as defined in Annex I to that Regulation. The same Regulation clarifies that SMEs typically have difficulty in obtaining capital or loans, given the risk-averse nature of specific financial markets and the limited collateral that they may be capable of offering. Their limited resources may also limit their access to information, notably concerning new technology and potential markets. Because of the aid’s limited effect on competition, SMEs do not need to fulfil certain conditions, set out for large enterprises.
