State aid SA.37963 (2014/NN) (ex 2013/CP) – United Kingdom
Alleged State aid to Glenmore Lodge
State aid SA.38208 (2014/NN) (ex 2014/CP) – United Kingdom
Alleged State aid to UK member-owned golf clubs
This note discusses the Commission’s decision in the State Aid case of Glenmore Lodge (SA 37963) and Member-Owned Golf Clubs (SA 38208). Both of these decisions relate to state aid and public support in the sports sector. These cases are particularly interesting from the perspective of when a sporting situation can be deemed to give rise to cross-border effects for the purpose of Article 107 TFEU and 108 TFEU.
In Glenmore Lodge (‘‘GL’’), GL had received aid in the form of direct grants awarded by the Scottish Government. GL’s parent company Sportscotland (the national agency for sport in Scotland) managed and operated GL as Scotland’s National Outdoor Training Centre, located in Cairngorms National Park.
The primary role of GL was to set up and develop National Governing Body (‘‘NGB’’) qualifications. To achieve this, GL provided training that led to NGB qualifications for coaches, trainers, leaders and practitioners of outdoor sports. In addition, GL offered skills courses for the public. Participants could gain experience with new outdoor sports or improve their skills and knowledge. This activity is secondary to the NGB training and intended to generate extra income for GL.
Member-Owned Golf Clubs (‘‘MOGC’’) concerned a UK tax exemption issue for Community Amateur Sports Clubs (‘‘CASC’’). In short, the tax exemption means that CASC did not have to pay profit tax, provided that the turnover achieved with: (i) trade with non-members (visitors or temporary members) is less than £30,000; and (ii) the letting of real estate to non-members is less than £20,000.
Assessment by the European Commission
In its decision on these cases, the Commission had reviewed the support to GL and MOGC and determined whether this support, i.e. local state aid, has affected the trade between Member States and, if so, to what extent.
The Commission decided that this support was unlikely to have a significant effect on trade between Member States. The Commission, in reaching its decision, did not fully address the other cumulative state aid requirements.
Previously, the Commission had considered the following in respect of determining the effect on Member State Trading:
- i) whether the beneficiary provided goods or services in a restricted area within a Member State and it is improbable that customers from other Member States will be attracted; and
- ii) whether with a “sufficient degree of probability” it is not expected that the measure will have a “more than marginal effect” on the conditions of cross-border investments or establishment.
According to the Commission, the activities of both GL and MOGC were, at most, regional or national in nature. With regard to the training for obtaining an NGB qualification, the Commission referred in this context to the national nature of the qualification. With regard to the skills courses, the Commission noted that these are primarily aimed at local customers. In addition, both the turnover achieved with these courses and the number of participants is limited.
The Commission paid special attention to the courses that GL offers in various European Member States. The turnover achieved with this activity in the years 2011-2013 was limited (between 4% and 7% of the total turnover). Moreover, there were no foreign participants.
The Commission reviewed the CASC rules in relation to the MOGC. These rules meant that the MOGC may not have a profit-making motive and may only be commercially active on a limited scale. If the commercial activities are such that the MOGC attracted foreign customers, the tax exemption does not apply. Furthermore, membership of CASC must be accessible to the public. In view of this, it is very unlikely, according to the Commission, that MOGC that qualify as CASC are able to attract customers from other Member States to a significant extent.
Based on the small geographical area where GL and MOGC offered their services, as well as their limited size, the Commission concluded that both measures are only expected to have a marginal effect on the conditions of cross-border investments or establishment.
General Block Exemption Regulation (‘‘GBER’’)
Although in both cases the Commission concluded that the measures did not have an effect on the trade between Member States, the Commission also reviewed the tax exemption for CASC against the GBER. The Commission considered the tax exemption as support for sports infrastructure and multifunctional recreational infrastructure within the meaning of Article 55 of the GBER and established that all conditions therein were met. If the trade between Member States was affected, the tax exemption would therefore still be permissible.
The courses that GL offered in other European Member States had, by definition, an effect on the trade between Member States. The fact that GL only had British customers with regard to these courses did not alter that. In those Member States where GL organised courses, local providers or providers from other Member States would undoubtedly have offered the same courses. It would have been entirely open to British customers to have turned to these providers as a substitutable alternative. Professionally and recreationally, golf is an international business and there is an abundance of evidence to show a willingness of enthusiasts to travel overseas to play at their desired course.
It seems that the low share in the total turnover of the foreign activity combined with the absence of foreign customers was sufficient for the Commission to assume that the effect of the aid to GL would only marginal. It is also worth noting that the Commission did not take into account the relatively limited volume of sales in its assessment.
With regard to the tax exemption for CASC, it is remarkable that the Commission only considered the turnover achieved with trading and leasing to non-members. According to the Commission, the alleged beneficiaries were local associations of golfers whose non-commercial purpose was to make facilities available to their members and visitors so that they could play golf or otherwise socialise. It could not be inferred from this that trading with and leasing real estate to members was anything other than an economic activity. The decision made it clear that the Commission most probably only wanted to underline the local nature of competition.
Eric Janssen (Kneppelhout)
Paul Henty, and Kyle Sethi (Charles Russell Speechlys LLP)