14 October 2016

AID TO THE EUROVISION SONG CONTEST WAS NOT ILLEGAL UNDER MUNICIPAL AND STATE AID LAW

On 12 October 2016, the Ministry of Social Affairs and the Interior concluded in a statement that the aid provided through Projektselskabet by the City of Copenhagen and the Capital Region of Denmark to the Eurovision Song Contest in 2014 was legal.

The Ministry's assessment is divided into three parts: First, the Ministry will assess whether aid to an event like the Eurovision Song Contest lies within the local government mandate.  Secondly, the Ministry will assess whether the requirements for financial responsibility have been violated as a consequence of a substantial budget overrun. Finally, the Ministry will assess whether the aid was contrary to the rules on state aid under article 107 of the Treaty on the Functioning of the European Union.

THE EUROVISION SONG CONTEST 2014

The Eurovision Song Contest was held in Denmark in 2014 due to the Danish winner in 2013. The City of Copenhagen's involvement in the Eurovision Song Contest in 2014 consisted, among others, of aid to Projektselskabet ESC 2014 ApS. The object of this company was to carry out assignments in connection with the holding and preparation of the contest. The company also received aid from the Capital Region of Denmark.

In February 2014, it came out that the budget of DKK 34.6 million had been overrun. The City of Copenhagen had provided aid of DKK 23.2 million and the Capital Region of Denmark DKK 60.7 million.

As regards the Capital Region of Denmark, the Ministry found that it appears from the Act on the Ministry of Culture's agreements with municipalities etc. that legally, the region was allowed to contribute to the arrangement.

THE STATE AID TO THE EUROVISION SONG CONTEST 2014 WAS LEGAL

In the statement, the Ministry concludes that the City of Copenhagen's engagement in the Eurovision Song Contest 2014 was authorised by the the local government mandate.

The Eurovision Song Contest was an overall assignment under the Danish Broadcasting Corporation, which is a state-owned institution. In general, the Danish Broadcasting Corporation's assignments are therefore considered state assignments thereby lying outside the local government mandate.

However, a municipality may grant aid to for instance culture under the rules of the local government mandate if the municipality thereby safeguards one or more legal municipal interests. The Ministry finds that there was a legal municipal interest in arranging the Eurovision Song Contest 2014.

The Ministry attaches importance to the following criteria:

  • Arranging music festivals thereby attending to cultural assignment is a legal municipal assignment.
  • Safeguarding the consideration for tourism and industrial development is a legal municipal assignment.
  • Attracting citizens from other municipalities and tourists and drawing attention to the city for the purpose of attracting businesses is a legal municipal assignment.
  • Hosting the event, the City of Copenhagen had a natural interest in the expected effects of the event in relation to culture, tourism and industrial development. This balanced the opposite criterion that the Eurovision Song Contest is an international event arranged on behalf of an international organisation.

The Ministry then considered whether the City of Copenhagen's share of the costs was in reasonable proportion to the municipal interest in the event.

It is the Ministry's opinion that the City of Copenhagen's share of the costs - DKK 23.2 million against the state's costs of a total of DKK 131.1 million - equivalent to approx. 19 % of the state's costs - fulfilled this requirement.

THE CITY OF COPENHAGEN AND THE CAPITAL REGION OF DENMARK HAVE NOT SET ASIDE THE PRINCIPLE ON FINANCIAL RESPONSIBILITY

The municipal principles involve a general obligation for municipalities and regions to act in a financially responsible manner. However, the Ministry emphasises that the municipality and the region are left with a "wide discretion" as to whether the municipality/region has acted financially responsible.

It is the Ministry's opinion that the City of Copenhagen and the Capital Region of Denmark have not set aside this principle. It is the opinion of the Ministry that the budget overruns etc. accounted for the in the government auditors' statement no. 16/2016 do not imply clearly negligent behaviour, and the principle on financial responsibility can therefore not be considered to have been set aside.

THE DANISH BROADCASTING CORPORATION, REDA AND THE EUROVISION SONG CONTEST WERE NOT GRANTED ILLEGAL STATE AID

In connection with the considerations concerning state aid, the Ministry dismissed all allegations that the City of Copenhagen and the Capital Region of Denmark granted illegal state aid to the Danish Broadcasting Corporation, Refshaleøens Ejendomsselskab A/S (REDA) or Projektselskabet ESC 2014 ApS.

The Ministry justifies its opinion as follows:

  • The international organisation deciding which organisation is to hold the Eurovision Song Contest had rules which implied that only the Danish Broadcasting Corporation could become responsible for the Eurovision Song Contest 2014. Consequently, the state aid criterion on the effect on trade was not met.
  • As regards the work preparing REDA's properties to be used for the event, it is assessed that the workers were paid equivalent to the market value of the work performed. Consequently, the state aid criterion on favouring an undertaking was not met.
  • The part of the aid paid to Projektselskabet ESC 2014 ApS, being the City of Copenhagen's undertaking which handled the assignments in relation to the event, was not considered state aid because the only object of the company was to safeguard general and non-commercial interests within the framework of the local government mandate.  The criterion concerning aid to an undertaking engaged in financial activity on a market was therefore not met.

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