STATE AID/AUDIOVISUAL POLICY : TERRITORIALITY OF AID FOR CINEMA CALLED INTO QUESTION.

The European Commission is adamant: at the risk of provoking a clash with cinema professionals and several member states, it plans to amend the territorial-based system of public support for films and audiovisual productions in its November communication that revises the rules for this sector. The text previewed by Europolitics reneges on a key provision of the existing system, which according to the EU executive, contributes to the fragmentation of the European cinema sector. The majority of stakeholders condemn its position.

The main bone of contention of this revision of the system in use since the 2001 communication on cinema is the condition being applied at present whereby at most 80% of the budget of a publicly-supported film or TV production must be spent on the territory of the state providing the aid. This requirement assures the continuity of qualified professionals and adequate technical infrastructure for cinema and audiovisual creation in the state concerned. For the Commission, this territoriality condition is disproportionate because "it limits the aid beneficiary's choice of origin of goods, services or persons and can therefore obstruct internal market fundamental freedoms under the treaties, namely the free movement of goods, services and workers in the EU". It of course acknowledges that a condition of territorial expenditure can prove necessary to take account of this sector's extreme mobility, but wishes to limit it.

NEGATIVE IMPACT

The executive finds that its 2008 impact study on the effects of territorial conditions did not "demonstrate enough positive effects to justify keeping the levels of restrictions applicable at the time". To justify the change of conditions, it bases itself on theaEuropean Court of Justice ruling against France for its refusal to grant a research tax credit to Fournier pharmaceutical labs (case C-39/04) on the grounds that the research expenditure had not been carried out on French territory.

The Commission therefore introduces a relation of proportionality with the amount of the member state's real financial commitment by replacing the figure of 80% of the production budget with the possibility to territorialise expenditure of up to 100% of the amount of aid granted, provided it remains below 50% of the production budget. This measure calls into question the multiplier effect of aid: the capitals widely support cultural productions precisely because they expect an economic impact greater...

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