New state aid rules could help deliver wave of new sports infrastructure, potential stadium sharing and enhanced community uses, says expert

The Commission is currently consulting on a new General Block Exemption Regulation (GBER II) (11-page / 254KB PDF) which would introduce new categories of state aid investment that could be made by public authorities without the need for approval by the Commission.

Under the plans, which can now be advanced further after a new Enabling Regulation (4-page / 743KB PDF) giving the Commission the power to update its state aid rules came into force last week, public authorities would be able to provide a limited amount of funds towards sport and multifunctional recreational infrastructure projects, subject to a number of other conditions.

State aid is an advantage or incentive granted by a national government to a particular company, and can take a variety of forms including grants, tax reliefs, guarantees, government holdings of all or part of a company or the provision of goods and services on preferential terms. To ensure fair competition inside the EU, state aid is prohibited unless it can be justified for general economic development reasons.

Member states must apply to the Commission for clearance on a case by case basis before they can offer funding or incentives which amount to state aid, and member states can be required to recover illegal aid from companies which have received public support in breach of the state aid rules. However, some types of aid are automatically exempted under the General Block Exemption Regulation.

Under the GBER II proposals state aid towards the construction and upgrade of sports infrastructure will be deemed to be compatible with EU competition rules if, among other conditions, at least 80% of the capacity of the new or upgraded infrastructure facilities are to be used for sporting purposes and if professional or non-professional sports users, other than the predominant professional sport user, use at least 20% of the capacity of the infrastructure annually.

Two financial thresholds would also apply to restrict the level of public investment and size of project that could benefit from the new exemption. Under the rules public funding towards new sports infrastructure could not total more than €15 million or the total project cost more than €30m if the exemption from EU competition rules and scrutiny by the Commission was to be relied on.

Other conditions would also have to be complied with, including that two professional sports clubs using the aided sports infrastructure, such as new stadiums or training academies, do so on "comparable" lease pricing terms that can be referenced in a "register".

Under existing guidelines on state aid for sports infrastructure, public funding of such projects must satisfy three broad criteria in order to meet with European Commission approval.

Under those criteria public authorities have to show that "the type of infrastructure involved is generally unlikely to be provided by the market because it is not economically viable"; that the infrastructure will be multi-purpose built and rented out to tenants at "adequate market based compensation"; and that the facility that it seeks to support the building of is "needed to provide a service that is considered as being part of the typical responsibility of the public authority to the general public".

Sports law expert Trevor Watkins of Pinsent Masons, the law firm behind Out-Law.com, said that the proposals would widen the scope for local authorities to assist football clubs and other professional sports teams in building new or enhancing existing infrastructure.

He said that the plan could help clubs build in Wi-Fi capabilities to their infrastructure and added that local authorities are "well placed" to drive the development of new facilities due to being able to access funding and lend on "at commercial rates". The proposals would also give local authorities greater bargaining power over the type of sports infrastructure projects to support and provide them with scope to influence how they are accessed and used, Watkins said.

"These new rules, if introduced, would create a new form of 'de minimis' criteria that would allow the kind of deals that might not currently meet the existing state aid guidelines for sports infrastructure projects to go through and without the need for European Commission approval," Watkins said. "With pressure on clubs to deliver revenue growth and improve fan engagement, this is a welcome development."

"Whilst the larger projects, such as the redevelopment of entire football stadiums by the biggest clubs, would likely fall beyond the £30m project cost threshold, small and medium-sized stadia developments, individual stand constructions and training complexes may be able to benefit from the new exemption," he said. "Given local authorities have found it increasingly difficult to provide facilities, this is a "win-win" solution. It marks an exciting development that will act as a catalyst for unlocking development."

"With one of the criteria demanding that 20% of the infrastructure being funded be used by a secondary sports partner, the new rules present the opportunity for closer links to be forged between professional sports clubs - particularly those that may struggle to raise sufficient finance to develop new infrastructure on their own - and their local communities by introducing other uses in developments that enable health, education and other priorities to be met. The rules envisage infrastructure sharing arrangements, and thus could help promote stadium-sharing between rival clubs - a concept that has struggled to gain momentum in the UK - and increase the accessibility of new or upgraded facilities for youth teams or other community sports clubs," Watkins said.

"Greater clarity will be needed on issues such as public funding of partial redevelopments and upgrades. Will they count as a single project or will the constructions involved be aggregated for the purposes of assessing compliance with the state aid rules? How long would have to pass before state aid funding within the GBER II criteria for partial redevelopments and upgrades would count as a new project? These issues will only be determined over time," the expert said.