P.1 What is State aid?

According to Article 107(1) of the Treaty on the functioning of the European Union, State aid is defined as “…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” and that “affects trade between Member States.

Undertakings are entities engaged in an “economic activity”, regardless of their legal status (they can be public bodies, non-governmental organisations or universities, as well as private firms) and regardless of whether they aim to make a profit or not.

Economic activity is broadly defined as ‘offering goods or services on a given market’. The key question is whether, in principle, a private body could carry out the activity in order to make profit.

An undertaking that receives support from public funding sources, such as Interreg Baltic Sea Region, may gain an advantage over its competitors through this support. Furthermore, the support can distort competition and affect trade between Member States. The EU Treaty wants to prevent such effects on the market and therefore generally prohibits State aid. However, in some circumstances such support is necessary for a well-functioning and equitable economy. Therefore, the Treaty leaves room for a number of measures through which State aid can be made compatible with the rules.

The Programme uses two of these measures, namely the General Block Exemption Regulation and the de minimis Regulation. As regards the first measure, State aid relevant partners can participate in Interreg Baltic Sea Region under the same conditions as partners not receiving State aid. As regards the second measure, State aid relevant partners have to provide additional information.

The following chapters provide further information on the State aid procedure, as well as on the aforementioned State aid measures.