The principle of the territoriality of aid is no longer under challenge in the new proposal for rules on state aid for films and other audiovisual works. However, it is considerably restricted in practice. This threat to European cinema is denounced by a group representing the industry, which is pressing for more flexibility to help the EU sector "maintain a critical mass of activity".

The industry's common position rejects the approach outlined by the Commission in the communication discussed by the College of Commissioners on 22 October on rules for state aid to this sector, which will replace the 2001 framework that expired at the end of 2012. The EU executive is now considering the threshold of 80% of the production budget (a member state that grants aid may require 80% of the production budget to be spent on its territory), but subjects it to the condition that aid remains below 50% of the film production budget. This rules out the possibility of a territorial requirement for up to 100% of the aid granted, as practiced previously. The signatories of the common position point out that it is vital to maintain the possibility of placing this condition on 100% of the budget because "the development of dynamic production activity in the country that grants different types of support constitutes the main justification for aid by the state to its creative sector".

The industry also rejects the argument that any restrictions on the origin of goods and services must be prohibited because they would infringe the principles of free movement of goods, services and workers in the EU. Germany, for example, makes its public subsidies conditional on the production using goods and services produced in the national territory, for example electrical installations or contracts with extras. The sector finds that the case law of the 2005 Laboratoires Fournier case (C-39/04) on which the Commission bases this requirement is not applicable to cinema in the light of the need to...

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