STATE AID CONTROL: EU POLICY AND LAW

1. STATE AID CONTROL: EU POLICY AND LAW (107-109 TFEU, ex 87-89 ECT) Doc. dr. Aleš Ferčič University of Maribor

2. Key sources • TFEU: 107-109 (42, 93, 106(2), 346(1)(b),…), • Regulations – de minimis, block exemptions,… • Transparency directive • Soft law • Note: • http://ec.europa.eu/competition/state_aid/legislation/compilation/index_en.html

3. 107(1) TFEU: general “prohibition” and notion of state aid Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market. Note: Save as otherwise provided in this Treaty,state aid is incompatible with the internal market.

4. The notion of state aid • Five conditions must be met, cumulatively, namely: • An aid in the sense of economic advantage or benefit, • Aid by Member States or through state resources • Selectivity • (Potential) distortion of competition • (Potential) effect on trade between Member States. • Note: • -Private undertaking (investor, creditor, operator,…) test • -Compensation for public services obligations (Altmark Trans)

5. Examples of state aid • Subsidy, • Tax measure (reduction of tax burden,…) • Loan (interest rate is lower than on the market) • Capital injection • Privatization • Public procurement • etc. • Note: only if all five conditions are met.

6. Exceptions to the general “prohibition” • 107(2) TFEU • 107(3) TFEU • 106(2) TFEU • 93 TFEU • 42 TFEU • 108(2)(3-5) TFEU • 346(1)(b) TFEU

7. 107(2) TFEU: “Obligatory exceptions” • The following shall be compatible with the common market: • (a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; • (b) aid to make good the damage caused by natural disasters or exceptional occurrences; • (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division.

8. 107(3) TFEU: “Potentional exceptions” • The following may be considered to be compatible with the common market: • (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; • (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; • (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; • (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest; • (e) such other categories of aid as may be specified by decision of the Council acting by a qualified majority on a proposal from the Commission.

9. 106(2) TFEU: Exception for services of general economic interest • Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community. • Note: • Altmark Trans test

10. Altmark Trans Test Public financing of SGEI / PSO is (merely) compensation and NOT state aid, if: -the recipient undertaking is actually required to discharge public service obligations and those obligations have been clearly defined; -the parameters on the basis of which the compensation is calculated have been established beforehand in an objective and transparent manner; -the compensation does not exceed what is necessary to cover all or part of the costs incurred in discharging the public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations; -where the undertaking which is to discharge public service obligations is not chosen in a public procurement procedure, the level of compensation needed has been determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means of transport so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.

11. Procedure: administrative (and judicial) control • Especially: • 108 TFEU • Regulation 659/1999 (Procedural regulation) • Regulation 794/2004 (Implementation regulation)