BIO Deutschland Suggests Amending the EU’s Community Framework in the Interests of Innovative SMEs

The European Union’s set of regulations in the Community Framework for State Aid for Research and Development and Innovation (2006/C 323/1), which aims to prevent the threat of distortion of competition caused by cross-subsidisation, is to be evaluated and possibly extended beyond its current applicability until 31 December 2013. The European Commission has called on EU member states and industry to provide positions on the framework. BIO Deutschland published a position paper in February in which it commented on the EU’s plans and called both for an extension of the Community Framework and for the needs of small and medium-sized enterprises (SMEs) as generators of innovation to be taken into account to a greater extent.

Innovative small and medium-sized companies (iSMEs) face difficult conditions in Europe, as EU regulations often prevent state aid to such companies. “Innovative biotechnology companies in particular need state aid. Given the scarcity of private investors – apart from a few business angels – the sector primarily lacks start-up capital. This capital is needed to defend Europe’s leading position in biotechnology,” explained Karsten Henco, Chairperson of BIO Deutschland’s Working Group on Innovation, Entrepreneurship and Jobs. Henco added that there must be better support for linking and transferring ideas from research to business. The forthcoming evaluation of the Community Framework provides an opportunity to significantly improve support to iSMEs without subsidies.

BIO Deutschland therefore calls for sector-specific regulations on state aid, as there are fundamental differences between various sectors and fields of knowledge. For example, IT development does not require as much time and expenditure as the development of medical drugs. A small biotech medical project needs an amount of funding that seems exorbitant to other sectors.

While BIO Deutschland welcomes the comprehensive revision and evaluation of the Common Strategic Framework, particularly the clear division between public funding for scientific and business activities, it also calls on the European Commission to make use of the opportunity and create simpler or more flexible conditions for necessary state aid.

According to Article 107, paragraph 1 of the Treaty on the Functioning of the European Union (formerly Article 87, paragraph 1 of the EC Treaty), state aid is fundamentally prohibited. However, it can be deemed compatible with the common market pursuant to Article 107, paragraph 2 or 3 of the Treaty on the Functioning of the European Union. Subsidies for research and development can be primarily justified on the grounds mentioned in Article 107, paragraph 3, sections b and c of the this treaty. In its Community Framework for State Aid for Research and Development and Innovation, the European Commission laid out its criteria for assessing the compatibility of state aid for research, development and innovation. The Community Framework entered into force on 1 January 2007 and will be applicable until 31 December 2013. Hence, the Commission is currently conducting a public consultation to investigate whether there are grounds for the framework to be amended or extended.

You will find the complete text of BIO Deutschland’s position on the EU’s Common Strategic Framework in German at www.biodeutschland.org/positionspapiere.html