Aid to the audiovisual sector

In the audiovisual sector, member states have well-rooted promotional legislation. Until the enactment of the 2013 Cinema Communication, national measures dictated to foster film production were generally assessed under Article 107(3)(d) TFEU, while schemes directed to postproduction were mainly assessed under Article 107(3)(c) TFEU. Small amounts to sustain cinemas (usually rural and art-house cinemas), or preliminary work for film promotion were often covered by the De minimis Regulation (European Commission, 2013h).4

The assessment of the notified state aid schemes under Article 107(3)(d) TFEU was based, following a Commission decision of 3 June 1998, which approved a French aid scheme aimed to subsidise international co-productions and to strengthen the role of independent producers,5 on specific criteria. These criteria were formalised in the 2001 Cinema Communication, which explicitly acknowledged the double nature (economic and cultural) of audiovisual works and their role in shaping European identities. According to the 2001 Cinema Communication, a state aid measure, in order to be approved by the Commission under Article 107(3)(d) TFEU, needed to respect a 'general legality' criterion, and four specific conditions. First, support was to be directed to a cultural product. Second, the producer should be free to spend at least 20 percent of the film budget in a member state other than that providing the aid, without suffering any reduction in the amount of the aid granted. This criterion referred to 'territorialisation' clauses. These clauses, inserted in national aid schemes, provide that, in return for state aid granted, part of this aid or of the film budget must be spent in the territory where such funding scheme is located or administered, and/or is itself funded by taxes and/or other public resources, and/or is intended to contribute to achieving certain cultural and/or economic policy goals related to film and audiovisual production (Brettell et al., 2008). Third, aid intensity should be limited to 50 percent of the film budget, except for 'difficult' and low budget films or, when necessary, for films coming from geographic areas whose language and cultures have a limited circulation within and outside the EU market. Fourth, aid supplements for specific film-making activities were not allowed in order to ensure a neutral incentive effect and consequently, avoid the attraction of those activities (e.g. post-production) in specific member states.

During the period of validity of these criteria, the Commission authorised a variety of schemes, mainly aimed at promoting national and regional film production (Psychogiopoulou, 2010), generally favouring audiovisual support schemes (Psychogiopoulou, 2006: 10; Zagato, 2010). However, the assessment of the compatibility of the aids reviewed with the first criterion (i.e. the cultural content of the aid) became, especially after 2006, stricter (Psychogiopoulou, 2010). In particular, the Commission evaluated in a more stringent manner the existence of a 'verifiable' national system to validate the cultural nature of the aided audiovisual content, and indirectly determined what could constitute such 'verifiable' criteria.

A screening of the Commission practice between 2010 and 2013 confirms these trends.6 The Commission approved several national or regional schemes, taking the view that the positive net benefits of targeted state aid for the audiovisual sector were likely to overcome the potential distortion of competition. However, it attended to the fact that the 'cultural criteria' laid down in the national measures concerned verifiable aspects of the supported cultural content, and generally viewed positively the performance of a 'cultural' assessment by ad hoc independent bodies, composed by qualified experts.7 It must be noted, nevertheless, that the strict approach and rigorous evaluation of the 'verifiability' of national cultural criteria are counterbalanced by a far less severe assessment when the national measures are an extension of existing, already approved, schemes8 (in compliance with the simplified procedure laid down in Commission Regulation 794/2004, see European Commission (2004b)). In such instances, the Commission limits itself to recall the evaluation that has already been carried out, without raising any objections.

In the period 1998-2012, the Commission also encouraged the audiovisual sector via the use of Article 107(3)(c) TFEU. As highlighted by Zagato (2010), before 1998, the Commission assessed the compatibility of film aid schemes mainly under this provision. After the French decision of 3 June 1998, by contrast, the Commission assessed the schemes aimed at fostering specific commercial post-production activities almost exclusively under Article 107(3)(c) TFEU.9 As the 2001 Cinema Communication only applied to production support, the Commission applied the rules by analogy in cases regarding support for film distribution or aid to cinemas. However, it assessed (and generally approved) schemes directed to finance projects linked to the commercialisation of audiovisual works under Article 107(3)(c) TFEU. An illustrative example is the Basque scheme for the promotion of dubbing and subtitling of movies in Basque.10 In that case, the Commission underlined that, besides promoting the use of the Basque language, the scheme was supporting commercial activities, subject to international competition. On the one hand, the Commission acknowledged that as a whole, the measure did not satisfy the restrictive interpretation warranted for the application of Article 107(3)(d) TFEU. On the other hand, in assessing the aid under Article 107(3)(c) TFEU, it valued the cultural goal of the measure (i.e. the promotion of the Basque language) as a common interest objective, balanced it with the need to safeguard the internal market, and concluded that the aid was necessary and proportional.

In November 2013, the new 2013 Cinema Communication entered into force. Its main goal is to create an updated framework to face the profound changes that the audiovisual sector has undergone in the past few years, especially with the introduction of digital technology in all areas of the audiovisual value chain. Although it is too early to detect the effects of this Communication on the Commission's state aid assessment practice, it seems useful to sketch out the main distinctive points of the Communication, and to predict some of its likely outcomes.

First, this Communication clarifies the scope of activities that may be supported and extends it to include all phases of audiovisual creation, from initial concept to the delivery of the work to audiences. Notably, the Communication covers aid to cinemas, to trans-media and crossmedia projects (insofar as such projects are linked to the production of a film), even though it keeps an ambivalent attitude towards mere postproduction activities. The result of this widened scope is likely to reduce the Commission's assessment of schemes under Article 107(3)(c) TFEU, and to broaden the reach of Article 107(3)(d) TFEU.

Second, the new rules state explicitly that the definition of cultural activities remains primarily the responsibility of the member states, in line with the subsidiarity principle. The Commission 'acknowledges that its task is limited to verifying whether a member state has a relevant, effective verification mechanism in place able to avoid manifest error' (European Commission, 2013g: para. 25). This acknowledgement is a reaction to the criticism raised to stringent checks on the existence of 'verifiable' national criteria as regards the cultural nature of the aided audiovisual products. It remains, however, uncertain how the Commission will exercise its 'external' control, and whether or not it will engage in 'self-restraint'.

Third, the Communication slightly modifies the criteria concerning aid intensity. The applicable aid intensity for film production continues to be 50 percent of the overall budget. However, there is no limit set for aid to scriptwriting or development. Co-productions funded by more than one member state can receive aid of up to 60 percent of the production budget. Commercially 'difficult' works (e.g. short films, films by first-time and second-time directors, documentaries, low budget works) are excluded from these limits. The Communication leaves the definition of difficult films to each member state according to national parameters.

The 2013 Communication maintains a positive attitude towards territorialisation clauses. Even though territorial spending obligations constitute a restriction of the internal market (Brettell et al., 2008), they might be justified in view of promoting 'cultural diversity and national culture and languages' - objectives which constitute 'an overriding requirement of general interest capable of justifying a restriction on the exercise of the fundamental freedoms' (European Commission,

2013g: para. 30). The new Communication tries to ensure that territorial obligations remain proportional to the aid granted. Member states are allowed to require, as an eligibility criterion, that a minimum of up to 50 percent of the production budget, and up to 160 percent of the aid amount granted, be spent in their territory. As mentioned in the 2001 Communication, however, the territorial spending obligation cannot go beyond 80 percent of the production budget.

Overall, the 2013 Communication seems to constitute another attempt on behalf of the Commission to integrate the cultural dimension as a vital element in its state aid assessment. Further to this Communication, the Commission has also included rules on audiovisual aid in the 2014 General Block Exemption Regulation,11 in order to make even more concrete its attempt to mainstream cultural diversity in its state aid policy.

 
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