Cultural Diversity and State Aids to the Cultural Sector

Delia Ferri


In the context of their domestic cultural policies, the member states of the European Union (EU) resort to a variety of funding tools in order to encourage cultural activities, foster the creation and broad distribution of cultural products and ensure the conservation of heritage (Psychogiopoulou, 2006, 2008). The rationale of public funding is that a laissez-faire economy does not guarantee the protection of cultural and linguistic identities and is not suitable to promote the multiplicity of artistic expressions. By reinforcing domestic industries and the production of niche cultural goods at national and regional levels, public funding aims to prevent 'cultural uniformity' (Ferri, 2008).

Funding tools can take various forms, encompassing direct grants, tax rebates, screen quotas, licensing restrictions or soft loans. All these measures come within the scope of the EU state aid rules when they meet the conditions laid down in Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). Article 107(1) TFEU provides that any aid granted by a member state or through state resources, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, is incompatible with the internal market, insofar as it affects trade between the member states. State measures are thus prohibited if the criteria listed in Article 107(1) TFEU are satisfied (Biondi, 2013; De Cecco, 2013; Plender, 2004). However, Article 107(2) and (3) TFEU sets out exemptions to the general ban contained in Article 107(1) TFEU on the premise that markets do not always work properly if left alone, and that some state intervention may be required to raise consumer welfare, and protect specific rights or values. Article 107(2) TFEU specifies a number of cases in which national support measures are permissible. Article 107(3) TFEU states that some other forms of aid may be considered to be compatible with the internal market. Among them, this provision lists 'aid to facilitate the development of certain economic activities' (Article 107(3)(c) TFEU), and 'aid to promote culture and heritage conservation' (Article 107(3)(d) TFEU). While the latter exception is clearly aimed to promote access to cultural goods and services and, more generally, to foster cultural diversity (Ferri, 2008), the exception provided for in Article 107(3)(c) TFEU, better known as the 'industrial' state aid derogation, has allowed the European Commission (Commission) to take into account the necessity of aid measures as a means of achieving cultural policy goals (Psychogiopoulou, 2006).

The EU's supervision of state aid is based on a system of ex ante authorisation by the Commission. This means that state aids are prohibited unless the Commission has been notified of the aid, has assessed it under the scope of Article 107(2) or (3) TFEU and has finally approved it, in compliance with Article 108 TFEU. Aid falling under the de jure derogations set forth in Article 107(2) TFEU must be considered compatible with the internal market. Case law has repeatedly stated that Article 107(3) TFEU, in turn, must be interpreted strictly.1 However, when applying Article 107(3) TFEU, the Commission has significant discretion in carrying out an assessment of economic, technical and policy considerations, and it has quite a wide leeway when evaluating whether the aid is appropriate for, and proportional to, the policy goals pursued. To increase legal certainty, the Commission has passed various guidelines, mainly in the form of communications (§tefan, 2008). For the purposes of this chapter, the most relevant document is the 2013 Communication on state aid for films and other audiovisual works (2013 Cinema Communication) (European Commission, 2013g), which replaced the 2001 Communication on certain legal aspects relating to cinematographic and other audiovisual works (2001 Cinema Communication) (European Commission, 2001a).

Treaty rules and guidelines are complemented by a composite system of secondary regulations.2 Under Article 109 TFEU, the Council of the EU (Council) adopted Regulation 994/98 (Council, 1998), that is, the Enabling Regulation, which empowered the Commission to adopt individual regulations in which it declares certain types of aid to be lawful and exempts them from the obligation of prior notification. After 1998, following the Enabling Regulation, the Commission adopted several regulations that provide for certain exemptions. In 2006, the Commission adopted the De minimis Regulation (European Commission, 2006a) (Berghofer, 2007), recently replaced by a new regulation (European Commission, 2013h). Measures that fulfil the De minimis criteria do not constitute 'state aid' and therefore do not need to be notified to the Commission for approval. From 2001 to 2006, the Commission also passed a series of exemption regulations, consolidated and replaced by the 2008 General block exemption Regulation (GBER), in force till 30 June 2014.3 The GBER covers several categories of aid (i.e. regional aid, investment related to small and medium-sized enterprises (SMEs) and employment aid, aid for the creation of enterprises by female entrepreneurs, aid for environmental protection, aid for consultancy in support of SMEs and SMEs' participation in trade fairs, aid in the form of risk capital, aid for research, development and innovation, training aid, and aid for the employment of disadvantaged or disabled workers); and lays down the conditions under which state aid can be considered to be compatible with the internal market, and exempted from prior notification. Both the De minimis Regulation and the GBER do not include specific provisions on cultural industries or services, but they can be used by member states to promote the cultural sector.

The aim of this chapter is to explore the degree of accommodation of cultural considerations in the implementation of the EU state aid rules. This chapter cannot provide a detailed discussion of the Commission's decisions, which would require a longer and more in-depth analysis. More modestly, building upon the wide legal scholarship on this topic (Bellucci, 2006, 2010; Craufurd Smith, 2008; Ferri, 2008; Germann, 2008; Herold, 2010; Psychogiopoulou, 2005, 2006, 2008, 2010, 2012a, 2013) and some enlightening cases, it aims to detect current trends in EU state aid policy from a cultural diversity perspective. The analysis focuses on state aid to the audiovisual sector, state aid to the publishing industries and state aid designed to enhance heritage protection and management. It also examines how cultural diversity has been addressed in the context of state aid targeting the production and marketing of other 'non-strictly cultural' goods (in particular, video games).

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