In a decision of 17 July 2013, the Commission came to the conclusion that financing the multifunctional International Congress Centre in Katowice (“ICC”) by the European Fund for Regional Development (under the Regional Operational Programme of the Silesia Province) and the City of Katowice was compatible with the internal market pursuant to Article 107 (3) (c) TFEU as necessary and proportionate.

The case

In 2011-2015, a new International Congress Centre was built in Katowice, Poland. The new structure was a multifunctional congress centre designed to accommodate conferences, exhibitions and cultural, educational and sporting events. The total number of conference seats in the ICC is 12,000, with the multi-purpose hall capable of accommodating around 8000 persons for conferences, a banquet hall for 1000 persons, a banquet hall foyer for 300 persons, an auditorium for 600 persons, conference rooms for 1200 persons and exhibitor offices for 100 persons, with the total exhibition space of 12,600 m2. The multifunctional character of the infrastructure enables the operator to organise any event, including spectator sport events such as tennis, boxing, volleyball or equestrian competitions.

The ICC construction was funded only with public money – by the European Fund for Regional Development under the Regional Operational Programme of the Silesia Province for 2007-2013 (73.3%) and the City of Katowice (26.7%). Public funding covered only the development of the infrastructure. The facility belongs to the City of Katowice and is run by an independent private operator. The operator rents out the facility to various users (both professional and non-professional), with no main or captive user. All users/organisers of events at the ICC pay market- oriented fees determined by the operator. The intention of the City of Katowice was that it would organise free events in the facility (within the scope of no-fee days reserved for the City in the ICC). In addition, all such events (e.g. cultural, educational, entertainment and sports) were to be addressed to the general public at no cost or at low cost, and their vast majority was to be non-commercial and intended for non-professional users (inhabitants of the City of Katowice and the region).

Commission’s opinion

The Commission analysed whether the funding of the ICC constituted state aid within the meaning of Article 107 TFEU.

The Commission acknowledged that the criterion of the measure granted through State resources and attributable to the State was fulfilled. The construction of the ICC had been fully financed with public funds (ERDF and City of Katowice funding). Financing through the ERDF programme is attributable to the State as the allocation of the funds is administered under the supervision of the Polish authorities. The State funding of the ICC could constitute aid if it led to a selective advantage for specific economic activities. However, in this case, the facility was designed to be used to provide services on the market, hence for the ends of an economic activity. The project would not be carried out without public funding as a facility like the ICC was not sustainable for private investors.

The Commission found that the facility would be placed at the disposal of a commercial operator who would rent it out to various users against remuneration. Although the operator would not receive any public funding and was to pay a fixed fee for his operating license at the rate to be determined through a tender for the right to use the infrastructure, the Commission recognised that an advantage that the operator would have when tendering could not be excluded. However, the Commission assumed that aid to both the operator and users would be compatible with the internal market and decided to refrain from definitively declaring involvement of public aid.

The Commission accepted Polish explanations to the effect that public financing of the construction of the ICC with the aim of offering the venue, in part, to commercial events was compatible with the internal market pursuant to Article 107 (3) (c) TFEU as it pursued a policy objective of common interest, and was necessary and proportionate and did not cause undue distortion of competition.

As the facility was to provide universal access to culture, education and sports, and there was no capacity or other such facilities in the region, the State was fulfilling its responsibility to the general public by making the project possible. The Commission resolved that the realization of the facility must therefore be regarded as satisfying policy objectives of common interest.

The Commission was of the opinion that Poland had shown the lack of capacity, at least for certain types of events, and that the ICC would become a complement (larger or multifunctional – combining congress and exhibition features with cultural and sports functions) rather than a substitute to the existing or newly developed facilities in the region. In the Commission’s view, the new facility was also likely to contribute to increasing the types of events that can take place in the region.

The important factor, according to the Commission, was that the ICC would not be developed had it not benefitted from public funding. The ERDF funding was limited to the necessary minimum. Poland explained that the analysis of the admissible co-financing level had been made using the funding gap method and that the calculation of the funding gap received a positive opinion during a project assessment conducted for the purpose of confirming the financial contribution by the Directorate General for Regional Policy.

Commentary

As the decision shows, the main factors considered by the Commission when finding the measure compatible with the Treaty were: (i) policy objective and (ii) the necessity of public funding.

The Commission clearly stated, referring to point 67 of the decision made in case C4/2008 Netherlands, Investment in Ahoy sports palace by Rotterdam, that the construction of venues for sports and other public events and supporting different types of activities which benefit the general public are considered a State responsibility towards the general public. The Commission, basing itself on the Amsterdam Declaration on Sport and Articles 165 and 167(4) TFEU, underlined the social significance of sports and of the contribution to the promotion of cultural diversity as a Union policy objective. In connection with the lack of capacity or adequate facilities in the region, this factor served as a key indicator of the funding’s compatibility.

Furthermore, the Commission accepted the gap-funding-based financial analysis as an argument supporting the necessity of public funding. According to the decision, the funding gap was calculated on the basis of applicable national and regional guidelines, as well as publications from the Commission’s Directorate General for Regional Policy (Handbook “Cost benefit analysis of investment projects: a Guide” prepared by Evaluation Unit, Directorate General for Regional Policy, European Commission (see the Guide of the Directorate-General for Regional and Urban policy for the 2014-2020 perspective); “Guidelines for the methodology and conducting cost benefit analyses”, European Commission, Directorate-General for Regional Policy; and “Management of Project Cycles”, European Commission – publication of the Ministry of Economy and Labour 2004). The Commission accepted the explanation that the funding gap method aims to determine the level of eligible expenditures, pursuant to Article 55(2) of Council Regulation (EC) 1083/2006, which on one hand guarantees that the project will have sufficient financial resources for its implementation, and on the other makes it possible to prevent granting undue benefits to the recipient, namely providing more financing than necessary.

Marcin Kulesza
Wardynski & Partners

 

 


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