Important Projects of Common European Interest (IPCEIs)

The Commission can approve State aid to so-called important Projects of Common European Interest (IPCEIs), based on under Article 107 (3) (b) TFEU, and more specifically, a specific set of guidelines, the IPCEI Communication. 

IPCEIs have become, since the adoption of the first IPCEI Communication in 2014, a very important tool for channelling public funding into areas that are considered to correspond to the EU's major objectives, such as the Green Deal, the New Industrial Strategy for Europe, the Health Union and the Digital Decade. 

While there have not been many decisions approving aid to IPCEIs to date, most of those that were taken approved vast amounts of public funding, often several billion euros. It is of increasing importance for companies to be aware of IPCEI initiatives and participate in them – chances are that if one or two IPCEIs have been approved in a particular sector, there might not be a possibility for IPCEI aid for a long period of time, if at all. 

In the Communication's own words, IPCEIs are cross-border projects that overcome market failures and enable breakthrough innovation in key sectors and technologies and infrastructure investments, with positive spill-over effects for the EU economy at large.

IPCEIs need to be important in size, scope or risk, and benefit the wider Union (or the EEA). They are either so-called "single" or "integrated" projects. Single projects are to be clearly defined in respect of their objectives as well as the terms of their implementation, including participants and funding. Integrated projects, on the other hand, encompass a group of single projects inserted in a common structure, roadmap or programme aiming at the same objective and based on a coherent systemic approach. Integrated projects may include individual components or participants that are not strictly necessary for the project but add significant value for the achievement of EU objectives. 

IPCEIs – as the wording reflects – need to be large, important projects. The requirement that they are to be of a cross-border nature has been translated by the Commission into meaning that they must ordinarily involve at least four Member States and its benefits must not be confined to the financing Member States but extend to a wider part of the Union. By "involving" four Member States, the Commission means funding by at least four Member States. Moreover, all Member States must be given a genuine opportunity to participate in an emerging project. Notifying Member States have to demonstrate how this requirement was met.

Compared to other compatibility guidelines, the IPCEI guidelines comprise relatively few "hard" compatibility criteria. Undertakings in difficulty as well as those subject to an outstanding recovery order are excluded. 

There are no predefined maximum aid amounts or intensities, only a requirement to perform a funding gap analysis at the level of each beneficiary. As such, this is a generous State aid instrument, as the maximum aid amount may reach 100 % of eligible costs identified in the funding gap analysis. In practice, the Commission will often require that Member States implement a claw-back mechanism to avoid windfall profits in the event that the project is more profitable than expected. A claw-back mechanism is an ex post profit-sharing mechanism in which additional gains resulting from investments whose rate of return exceeds the beneficiaries' cost of capital should, at the request of the Commission and according to a pre-defined methodology, be distributed in a balanced manner to all project participants. 

Further, IPCEI projects must comply with the "do no significant harm" principle within the meaning of the EU Taxonomy Regulation for sustainable activities. Under that principle, activities that are environmentally harmful will not be eligible for IPCEI aid. The Communication also presumes that new projects identical to State aid measures that the EU Council approved in 2020 in the national recovery plans will not cause significant harm to the environment.

While there are few "hard" compatibility rules, IPCEIs will likely only approved if many of the so-called positive indicators are present.

There are a number of general positive indicators, as well as R&D-specific criteria. 

Among the general positive indicators, involvement of an EU body in the design, selection of the project and its governance is possibly the most important. Co-funding by the EU, as well as important private funding, are also considered as positive indicators. Further, the sheer size and diversity of the project in terms of number of participants, types of participants and Member States can be important, as is the project's contribution to reduce the EU's strategic dependencies. 

The research-specific criteria define in greater detail what kind of research can be supported. R&D has to be of a breakthrough nature in terms of innovation, or constitute an important added value in terms of R&D&I in the light of the state of the art in the sector concerned. IPCEI R&D can also be first industrial deployment as defined in the Communication. 

So far there have been decisions approving IPCEIs that enabled breakthrough innovation in microelectronics (in December 2018), in the battery value chain (in December 2019 and January 2021), in the hydrogen value chain (July 2022 and September 2022), as well as one decision approving an infrastructure IPCEI, namely the Fehmarn Belt fixed rail-road link (in March 2020).

Yes, though this is a high hurdle to overcome. To date, only once has the Commission allowed for the joining of an existing IPCEI. It adopted a separate decision on Austria joining the microelectronics IPCEI. 

Given their scale, IPCEI initiatives are often launched by an EU Institution, a group of Member States, or larger industry associations. From conception to approval, an IPCEI will require a significant amount of work and time and will as a rule require at least one Member State (or an EU institution) steering and coordinating the process. Consequently, industry actors are well advised to approach their national governments early if they consider that they could contribute to devising a project that could be eligible for IPCEI aid. 

After the Commission had approved the first IPCEIs, market participants (and some Member States) frequently complained about a lack of transparency – in the sense that they had not even known about an IPCEI initiative, and had "missed the boat". The Commission responded to this by requiring from 2022 onwards that all Member States be informed about IPCEI initiatives. 

For market participants, however, it remains sometimes difficult to establish whether IPCEIs that could be relevant are being conceived. It is worth finding out if and where in the national government an overarching responsibility for IPCEI coordination is located.

CMS lawyers have represented both public authorities and private companies in IPCEI projects, and have an in-depth understanding of both procedure and substance. Taking this into account, CMS lawyers can help you by with all IPCEI-related questions, including:

• Legally assessing whether a project could be considered an IPCEI; 
• identifying ongoing IPCEI initiatives;
• Setting up IPCEI projects, and assisting in joining an IPCEI initiative;
• Assisting public authorities in notifying IPCEI State aid to the European Commission;Drafting and lodging complaints with the European Commission; 
• Litigation before national and EU courts.

The CMS State Aid Practice Area Group comprises 40 State aid law specialists practising State aid law in 17 jurisdictions located in 20 cities in Europe and beyond – all committed to assist you.

Find your local contact person in our brochure CMS State Aid Group.