Conditions for awarding state aid

The state aid rules set the guidelines for how much funding the Research Council can allocate to companies.

As a general rule, it is prohibited to provide funding support to companies on the grounds that this will distort competition. This is the case regardless of the company’s organisational form, whether it has a financial surplus, etc.

Project support from the Research Council is normally considered to constitute state aid if it is awarded to a company, or “undertaking”. An “undertaking” is defined as an actor that carries out economic activity consisting of offering goods or services on a given market.

Exemptions

There are many exemptions from this general prohibition, however, and these are set out in the state aid rules. When support from the Research Council of Norway is defined as state aid, it must be awarded in compliance with the EU state aid rules. These rules stipulate what types of activities are eligible for support, which costs relating to these activities may be covered in part or in full, and the maximum aid intensity that may be granted for the various activities.

A call for proposals will clearly state whether it is possible for companies to seek funding. Here you will find information about the state aid rules that is important to know when you are applying for funding from the Research Council.

Who needs to know more about the state aid rules

  • Project Owners seeking funding under a call for proposals where companies are eligible to receive support;
  • partner companies that will be receiving a share of the Research Council’s allocation to a project;
  • research organisations that pursue economic activity in addition to their non-economic, primary activity.

The state aid rules

  • describe the types of activity eligible for support, the costs relating to these activities that may be covered in part or in full, and the maximum aid intensities for the various activities. A grant application must meet all the requirements and guidelines set out in the text of the call, as well as satisfy the stipulations set out in the state aid rules.
  • require a clear, formal separation of accounts for economic and non-economic activities, so that an organisation or company may legally receive support for non-economic activity without this comprising state aid.

This means that

  • The Research Council will ask all applicants who receive a funding pledge to provide supplementary information in order to ensure that support is awarded in compliance with the state aid rules.
  • Any support that is in violation of the provisions of state aid rules may be required to be repaid, with interest.

The following provides a more detailed description with information about the provisions of the state aid rules used by the Research Council when allocating funding, some important definitions and links to related documents. The text of the relevant call for proposals will clarify which provision of the state aid rules applies in connection with the allocation of funding.

Economic and non-economic activity

For calls for proposals where research organisations and research infrastructures are eligible to receive support, please note the following:

Paragraph 19 (see fact box below) of the EFTA Surveillance Authority’s (ESA) guidelines on state aid for research and development and innovation defines what constitutes non-economic activity at research organisations:

Research organisations and research infrastructures: economic and non-economic activity (EFTA paragraph 19)

In a footnote to paragraph 19, the EFTA Surveillance Authority specifies that the provision of R&D services and R&D carried out on behalf of undertakings (contract research) are not considered as independent R&D.

Paragraph 21 of the guidelines clarifies that in cases where research organisations or research infrastructures are used to perform economic activities, such as renting out equipment or laboratories to undertakings, supplying services to undertakings or performing contract research, public funding of those economic activities will generally be considered state aid.

Requirements relating to clear separation between the economic and non-economic activities of research organisations

Support from the Research Council that is defined as state aid must be awarded in compliance with the provisions of the state aid rules relating to, among other things, maximum aid intensity.

In order for the Research Council to award support for research organisations’ non-economic activities without it constituting state aid, the research organisations must establish a proper, consistent and transparent separation between their non-economic activities and their economic activities.

Three requirements from the ESA

The EFTA Surveillance Authority stipulates three requirements in this connection, all of which must be satisfied.

  1. First, there must be a formal separation between the economic activities and the non-economic activities. This may be achieved by either organising the economic activities as a separate legal entity or by keeping separate accounts for the economic activities and the non-economic activities. This formal separation between economic and non-economic activities is a mechanism to verify that cross-subsidisation is not taking place. The factor determining whether a research organisation is in fact receiving state aid for its economic activities is whether the support awarded for its non-economic activities is in reality going to economic activities.
  2. Second, there must be a system to ensure that the economic activities of the research organisation pay market price for all relevant inputs. The economic activities of the research organisation must cover all relevant variable costs and an appropriate contribution to fixed costs.
  3. Third, there must be an adequate system of control enabling the Norwegian authorities to monitor that cross-subsidisation between the two types of activities is not taking place. Access to adequately separated and detailed accounts is a key component of such a control system.

Declaration forms

When awarding state aid to a company defined as an “undertaking”, the Research Council must know the size of the company receiving support.

The Research Council cannot award support to an enterprise that is defined as an “undertaking in difficulty” under the state aid rules (see the “Definition of ‘undertaking in difficulty’” below).

Nor can we award support to an undertaking which is subject to an outstanding recovery order for state aid that must be repaid.

We have drawn up a declaration form (Norwegian only, docx) that each company must fill in to confirm that it is not an “undertaking in difficulty” and is not subject to an outstanding recovery order for state aid.

This declaration serves as confirmation that the enterprise is qualified to receive project funding that constitutes state aid. A declaration document must be submitted for each partner that will be a recipient of state aid under a project and this must be done before a contract can be drawn up.

This means that all enterprises benefitting from the Research Council allocation as the recipient of funding for a portion of their own project costs, or of their share of shared project costs via the Project Owner, must fill in a declaration form.

The Project Owner is responsible for ensuring that the declaration forms are submitted together with the revised grant application.

The Research Council will take the final decision regarding grant allocations based on the supplementary information obtained with the revised grant application.

It is not possible to draw up a contract for a project if one of the funding recipients is a company that cannot submit a declaration form.

With regard to the declaration that an enterprise is not an “undertaking in difficulty”, the definition under the state aid rules applies:

Definition of “undertaking in difficulty”

Articles of the Block Exemption Regulation

Different articles apply to different application types

Most of the state aid awarded by the Research Council is granted under the EU General Block Exemption Regulation for state aid (pdf). Various articles under the regulation will apply to different Research Council application types (see fact box above). The text of the call for proposals will clarify which provision is relevant for a specific grant application type or grant award.

Article 25 of the Block Exemption

Article 25: Aid for research and development projects

Important definitions for Article 25:

Additional specifications may be given in the call for proposals.

Article 25 describes the types of activity eligible for support, the costs relating to these activities that may be covered in part or in full, and the maximum aid intensities for the various activities.

To be eligible, all project costs must be allocated to activity that falls within one of the four categories of research and development set out in Article 25(2). Support cannot be awarded for activities that do not fall within one of those categories and the costs for those activities must not be included in the part of the project funded by the Research Council.

If activities under the project extend across several of the categories, for instance both industrial research and experimental development, the Project Owner must maintain an overview to ensure that the costs for each activity are placed in their correct respective categories. This is necessary because the maximum aid intensity for a given activity will depend on the category it encompasses, and the Research Council will specify in the contract for R&D funding that the Project Owner is responsible for ensuring that the correct framework for support is adhered to.

See: Significance of the state aid rules for Innovation Projects for the Industrial Sector (pdf in Norwegian only).

Article 26 of the Block Exemption

Article 26 of the Block Exemption

Important definitions for Article 26

When the Research Council awards support for investment in research infrastructure via the application type “Research infrastructure”, it is important to note the following:

Support for investment in research infrastructure constitutes state aid when a research infrastructure is used to pursue economic activities. In the context of research infrastructure, economic activities include activities such as renting out of equipment and laboratories, supplying services to business undertakings and performing contract research.

Support for investment in research infrastructure that is used to pursue only non-economic activities does not constitute state aid. The primary activities of the research infrastructure are considered non-economic activities.

These include use of the research infrastructure for education, independent R&D, wide dissemination of research results and knowledge transfer activities, subject to the conditions set out in paragraph 19 of the EFTA Surveillance Authority’s guidelines on state aid for research and development and innovation.

When a research infrastructure is used to pursue both economic and non-economic activities, it is only the support for investment linked to the economic activities that constitutes state aid and must consequently be awarded in compliance with the state aid rules.

When the economic activities consume the same inputs (such as material, equipment, labour and fixed capital) as the non-economic activities and the capacity allocated each year to such economic activity does not exceed 20 % of the research infrastructure's overall annual capacity, the funding may fall outside the state aid rules in its entirety.

See paragraph 49 of the preamble to the General Block Exemption Regulation for further information.

The portion of the support for infrastructure awarded by the Research Council that constitutes state aid is granted under Article 26 of the General Block Exemption Regulation for state aid.

Article 22 of the Block Exemption

Only Article 22(3)(c) and Article 22(5) are currently applied by the Research Council, for funding of projects under the Programme for Commercialising R&D Results (FORNY2020).

Article 22 of the Block Exemption: Aid for start-ups

Important definitions for Article 22

Article 28 of the Block Exemption

Innovation aid for SMEs

Only Article 28(2) (b) is currently applied by the Research Council, under the Programme for Research-based Regional Innovation (FORREGION).

Article 28: Innovation aid for SMEs

Important terms in Article 28

De minimis aid

De minimis aid is an exemption from the prohibition on state aid in which funding providers may grant small amounts without having to notify the EFTA Surveillance Authority (which monitors compliance with European Economic Area rules).

The main grounds for this exemption are that the amount awarded is so small that it is deemed not to have any effect on trade and/or to distort or threaten to distort competition.

The Research Council makes only limited use of the de minimis aid exemption. It is awarded primarily when funding does not fall with the purview of the General Block Exemption Regulation, under which the Council normally awards state aid.

Ceiling amount

The amount of de minimis aid that may be awarded to a single undertaking is maximum EUR 200 000 over a period of three fiscal years. Thus to be eligible for financial support, the applicant may not have received more than a total of EUR 200 000 in de minimis aid during a period of three fiscal years (i.e. the year the aid was disbursed and the two preceding years). The disbursement of de minimis aid by the Research Council must not lead awardees to exceed this ceiling.

The currency exchange rate in effect on the date when the funding pledge is granted serves as the basis for calculating the ceiling amount.

What constitutes a single undertaking?

The ceiling amount of EUR 200 000 applies to a single undertaking. For enterprises that are a part of a group of linked enterprises, the ceiling amount generally applies to the group as a whole.

To determine whether an enterprise is considered a single undertaking, see the definition in Article 2(2) of the Commission Regulation (EU) No 1407/2013 below:

Definition of “single undertaking”

Procedures for awarding financial support

The Research Council and other public bodies that award de minimis aid have an explicit obligation to inform recipients in writing that the financial support will be given as de minimis aid and must specify the amount of support to be awarded and refer expressly to the above regulation.

In all funding announcements under which support may potentially be awarded as de minimis aid the Research Council will provide clear information about this and what this entails for the recipient. Prior to disbursement of any de minimis aid, the Research Council will request written confirmation and an overview of all other de minimis aid that the undertaking has received in the course of the three fiscal years in question. For enterprises that are a part of a group of linked enterprises, the ceiling amount generally applies to the group as a whole.

Legal authority de minimis aid