DIGITALEUROPE's response to the consultation on the revision of the IPCEI Communication

DIGITALEUROPE’s response to the consultation on the revision of the IPCEI Communication

Our contribution

The instrument of the Important Projects of Common European Interest (IPCEIs) gave a cooperation framework to Member States to invest in EU industrial priorities. The upcoming revision of the original Communication is an occasion to make the best of the lessons learned till now and guarantee the instrument fully supports the internal market and the EU Industrial Strategy soon to be updated. For the IPCEIs to remain relevant in a fast-changing economy, the Commission must simplify their framework while ensuring eligible projects maintain a European character. Such European character should be interpreted as the ability to advance the EU’s green and digital transition. All this should go hand-in-hand with support to a rightly understood technological leadership and level playing field, whereby the EU promotes collaborative leadership allowing its industrial players to reassert their position and promote open markets, European democratic values and international standards.

IPCEIs should have the ability to spur the creation of networks of interdependent and interlinked economic actors, including SMEs and start-ups, generating added value around a product, process or service. Not all industrial projects qualify as IPCEIs. Importantly, the IPCEI framework should continue to apply only to areas where there are market failures or other important systemic failures that would justify state aid within the provisions of Article 107(3)(b) of TFEU.

We identify two main focus areas for the Commission to improve the IPCEIs’ effectiveness and ability to act readily.

Putting the EU’s industrial and economic interests at the centre of the IPCEI

The revised Communication should be an opportunity to strengthen the link of the IPCEIs instrument with the EU’s digital and green ambitions. For that to happen, we recommend the following –

Cost Eligibility:

For those projects justifying the use of the IPCEI tool, eligibility should also encompass costs related to early-stage market uptake, besides those already detailed in the Annex of the Communication.

Funding Synergies:

In areas where European Commission’s analyses prove the existence of a market failure or other important systemic failures, in specific justified cases the IPCEIs could link up with funding available nationally and through NextGen EU.

This could include funding from the Recovery and Resilience Facility to generate joint strategic investments with shared value, in combination with an IPCEI framework that covers the entire project lifecycle approach, embracing research, innovation, deployment/infrastructures as well as procurement activities at regional, national and European level. For such specific areas with market failure or other important systemic failures, where justified an all-encompassing approach to funding will facilitate the articulation of national and European initiatives that will accelerate the recovery of Europe’s economy. Importantly, the Commission should ensure any such funding synergy does not lead to further complexity in terms of project application procedures, accounting or documentation requirements, nor to the distortions of competition in the Single Market.

Project Eligibility:

1. The IPCEIs should bridge the gap between R&D&I and economically viable production. The revised Communication should expand the scope of IPCEIs to smaller, learner projects, whose relevance for European interests and for addressing market failures or other systemic failures should not be underestimated.
2. The revised Communication should also bolster transparency and inclusiveness in the notification process, as suggested by the Strategic Forum for IPCEIs.¹ Industry and Member States should have a chance to express their interest in a possible IPCEI and share their views on its eligibility prior to the common notification to the Commission foreseen in paragraph 48 of the existing Communication. This would add legitimacy to the selection process, without slowing it down.
   

Intellectual Property Rights:

1. The need to ensure spill-over effects and dissemination of research results should be properly balanced against the need of protecting the industrial and technological know-how of beneficiaries. Spill-overs are a relevant eligibility criterion for IPCEIs. Yet focusing excessively on them risks to ultimately undermine the ability of aid beneficiaries to develop disruptive technological solutions to address grand societal challenges of relevance to the IPCEIs, such as addressing climate change.
2. The Commission should also clarify the legal framework for intellectual property with regards to antitrust and merger control rights applicable to cooperation between companies involved in an IPCEI project. This is relevant especially to IPR dissemination conditions as well as necessary and legitimate exchanges of information.

Beneficiary Eligibility:

The revised Communication should maintain the existing approach whereby eligibility of beneficiaries is the result of negotiations between Member States and any interested industrial player willing to contribute to the EU’s industrial capabilities and compliant with EU rules and values.

SMEs and Start-ups Participation:

They are an integral part of the value chain built around large industrial actors. IPCEIs should better plug into their expertise. This requires the Commission to lead efforts on shrinking the administrative burden on applicants, fast-tracking processes and, crucially, providing specific assistance to SMEs in the form of awareness-raising, training and support in proposal-writing.

Governance:

The Industrial Forum should become a platform where to advance an inclusive dialogue on existing and future European industrial ecosystems and value creation networks. It should be part of high-level and permanent governance at EU level to create the necessary supporting conditions to advance key value chains in Europe.

Reducing administrative burdens and speeding-up project selection while ensuring openness and transparency:

The revision of the Communication should be an opportunity to make the IPCEI framework better equipped to deal with the fast-moving technology environment we are in. We urge attention to the following:

Procedures for the selection process:

1. It is key to simplify, adjust and significantly accelerate them without compromising the quality of the compatibility analyses carried out by DG Competition. The IPCEI must be a more industry-friendly tool. In line with the simplified rules for Horizon 2020, we must aim at a time-to-grant target period of eight to twelve months maximum. The Commission should green light eligible projects just once where possible, leaving relevant Member States and industry in the driving seat for all remaining stages in the IPCEI preparation process. It should also harmonise across Member States timelines and notifications for project selection. It must make it possible for national stakeholders from various countries to start cooperation discussions prior to the end of the national selection process. This is critical to allow a quicker formation of transnational IPCEI consortia in relevant and justified cases. While doing so, it should ensure transparency for all interested Member States and businesses
2. A central help desk should support consortium partners during the IPCEI preparation stage. Jointly set up by the Commission and Member States, the help desk should offer guidance on handling paperwork to avoid beneficiaries are drawn into time-consuming administrative tasks that have characterised previous IPCEIs. In addition, for those IPCEIs with specifically justified motives, the helpdesk should play an active role in exploring their synergies with other funding sources, such as Horizon Europe for R&D activities, the Digital Europe Programme and Connecting Europe Facility.

Counterfactual Scenario Analysis:

The revised Communication should better clarify its role. The provisions of paragraph 29 in the existing Communication are challenging to implement. Asking to provide information on how a given sector would fare if IPCEI aid were not received remains a complex endeavour, especially as IPCEIs considered until now have included many project partners. Thus, the Commission should provide further guidance and examples to make the provision of info supporting such analysis as easy as possible for stakeholders.

Funding Gap Calculation:

It remains crucial to simplify, harmonise and make more transparent the methodology to calculate the funding gap, both per partner and per consortium. Ex-ante net extra costs calculations are complex and cannot be anticipated, which is why we recommend further guidance on the latter in order to facilitate as much as possible the provision of relevant information.

Forging an industry-friendly project implementation

Experience in the first wave of IPCEIs shows substantial room for improvement on project execution aspects. The revision of the Communication should consider the following:

Funding Commitments:

Reliable funding commitments are absolutely essential for legal certainty and preventing any possible counter-incentive. We recommend assessing very carefully the validity of any potential clawback provision before implementing it. The aspects below must be duly considered:

1. Funding reclaims must only be based on proven eligibility violations of clear and pre-determined funding rules. Their justification should be continuously evaluated during and at the end of the project implementation.
2. Financial returns from early qualification samples and low-volume (non- competitive) manufacturing must not impact on the level of required funding as long as included in the funding gap calculation (whose methodology needs simplification, harmonisation and transparency as said above).
3. Repayment obligations should not include financial returns from an IPCEI due to faster market uptake of the product/ technology expected at the time of funding gap calculation. A faster time-to-market of the product/technology at issue should be seen as a strong signal of the intention of beneficiaries to meet intended project goals, maintaining or establishing technological leadership and securing highly-qualified employment in Europe.

Grant Disbursement:

It should be timely, predictable and in line with execution schedules, once an IPCEI is approved. Funding certainty will help beneficiaries in project implementation.

Agility and adaptability in implementation:

Flexibility should be an underlying element in the deployment of IPCEIs. Shifting economic and technological conditions make an adaption of monitoring mechanisms, KPIs and multi-year roadmaps fundamental. Agile procedures must be in place to react readily to new market realities and allow the IPCEIs to deliver on time.

Accounting modalities:

1. Aid should be provided on an expenditure basis (instead of cost basis) for capital expenditure (property, plants, buildings). For operating and other expense (personnel costs, third-party services, materials and supplies), the current reference to the cost basis should instead continue to apply.
2. Accounting periods should be proportionate to the size and complexity of the IPCEIs. We recommend a minimum accounting period of at least 45 days, on par with that of other EU funding schemes. Experience in IPCEIs so far points to an excessively short accounting period in some Member States.
3. For the conversion of costs arising in foreign currency, there should be the possibility to use the exchange rate of the day the costs are booked in the accounting system. This would lower the administrative burden and error susceptibility while increasing transparency and comparability.
   

REFERENCES

1 More info here