European State Aid Law and Policy

Conor Quigley

• Publisher: Hart Publishing
• Year: 2009
• ISBN:
  9781847317988
• Edition: 2
• Topic: Diritto
• Subtopic: Antitrust

This new edition of Conor Quigley's book (originally 'EC State Aid Law and Policy'), offers the most comprehensive and detailed examination of this fast developing field of Community law. The book is designed to provide practitioners and Commission officials with a definitive statement of the law and practice across the many sectors where issues of State aid come into play. At the same time, placing State aid law and policy in its commercial and industrial context, the book fully explores the concept of State aid and its function as a tool of Community law and economic development. All of this is achieved by means of the most thorough available examination of the jurisprudence of the European Courts and the decisions of the Commission in declaring certain aid compatible with the common market. The Commission's supervisory powers as well as the means of enforcing State aid law in the courts are also fully explained. From reviews of the earlier work: 'The chapters summarize and synthesize a large and complex body of case-law readably, clearly, interestingly, thoroughly and concisely...practical and comprehensive in approach...The book is well produced and very good value. The book satisfactorily passed the key test: it told us what we needed to know in certain current State aid cases more clearly than in other books consulted.' Asger Petersen, J Temple Lang, Common Market Law Review 'The practitioner will find the chapters dealing with particular types of state aid extremely helpful. The book has an excellent index that makes any legal textbook much more user friendly, particularly to someone who is not an expert in the field. Speaking from personal experience I can say that the book is invaluable; in recent months it has spent as much time on my desk as on my bookshelves. I am sure others will find it equally useful' Christopher Vajda QC, International Company & Commercial Law Review

Part I

STATE AID AND ARTICLE 87 EC

Chapter One

THE NOTION OF STATE AID

1.1 THE NOTION OF STATE AID

Aid granted by the State Pursuant to Article 87(1) EC, the notion of State aid applies to any aid granted by a Member State or through State resources in any form whatsoever. Although the notion of aid is not further defined in the EC Treaty itself,¹ it has come to be regarded, through the case law of the European Court of Justice and the Court of First Instance, as entailing an intervention by the State or through State resources encompassing a financial burden borne by the State that results in an advantage for an undertaking by mitigating the charges which are normally included in its budget.² An advantage will be gained where, as a result of the aid, the beneficiary’s net financial position is improved or, even if there is no actual improvement in the beneficiary’s financial position, where, without the aid, that position would have deteriorated. State aid is most commonly granted by means of a subsidy from public funds, either by way of direct grant or through a reduction in tax liability.³ State aid may arise in the context of commercial transactions involving a public authority, in so far as the counterparty is dealt with on terms which are more favourable than the market would normally offer. For example, a loan at a reduced rate of interest granted by a public body, which enables the recipient to avoid having to bear the full costs on the open market, entails a benefit to the recipient of the difference between the reduced rate of interest and the market rate.⁴

Whereas direct financial grants self-evidently bestow a gratuitous benefit on the recipient, identifying the criteria for establishing State aid may involve more complex considerations where it arises through the tax system or in the context of commercial transactions. State aid may be defined as a departure from a benchmark set of rules, or from a normal burden, which confers an advantage.⁵ Where there is differential treatment of undertakings in the application of charges, the element which constitutes aid is established by determining the normal application of the system of charges in relation to the nature or general scheme of that system.⁶ In order to determine whether a State measure in the context of commercial relations constitutes aid for the purposes of Article 87(1) EC, it is necessary to establish whether the recipient receives an economic advantage which it would not have obtained under normal market conditions.⁷

Broad interpretation of the notion of State aid The putting in place and maintaining of a system of free undistorted competition, within which the normal competitive conditions are ensured and on which, in particular, the rules in the field of State aid are based, constitutes one of the essential objectives of the EC Treaty.⁸ In early cases concerning the ECSC Treaty, the ECJ declared that the common market was based on the principle that conditions of competition between undertakings must result from their natural and undistorted production conditions, and that the artificial effects of State aid contravened that principle.⁹ State aid, being a payment by someone other than the purchaser or consumer, made it possible to fix or maintain selling prices which were not directly related to production costs and thereby to establish, maintain and develop economic activity which did not represent the most rational distribution of production at the highest possible level of productivity.¹⁰ In the light of these considerations, Article 87(1) EC was from the outset to be given a broad interpretation favouring a wide range of application of the notion of State aid covering much more than that of a subsidy.¹¹

Whilst a subsidy is normally a payment in cash or in kind made in support of an undertaking, the ECJ observed in Steenkolenmijnen v High Authority that the notion of aid places emphasis on its purpose and seems especially devised for a particular objective which cannot normally be achieved without outside help. The notion of aid is, therefore, wider than that of a subsidy because it embraces not only positive benefits, such as subsidies themselves, but also interventions which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, without being subsidies in the strict meaning of the word, are similar in character and have the same effect.¹² There is, moreover, no hierarchy as between subsidies in the strict sense and other benefits having the same effect. In Salzgitter v Commission, it was argued that the Commission should prove that the mitigation of charges which normally might be borne by an undertaking had the same effect as a subsidy in the strict sense. This was rejected by the CFI which held that once it had been proven that a State intervention measure mitigated the charges which should normally be included in the budget of an undertaking, that measure must be classified as State aid and, by virtue of that very classification, had the same effect as a subsidy, so that no additional evidence need be adduced.¹³

State aid in any form whatsoever The notion of State aid encompasses, for the purposes of Article 87(1) EC, aid granted in any form whatsoever. Whilst the most common form of awarding State aid is by means of financial grants, now more than 40% of all aid takes the form of exemptions from taxes or social security.¹⁴ In addition, other measures may be less readily identifiable as aid.¹⁵ For example, aid may be granted by the State selling goods to an undertaking at a reduced price;¹⁶ through the provision of a State guarantee on terms better than those available on the market;¹⁷ through reimbursement of part of the cost of goods or services;¹⁸ by a loan at a rate of interest below normal commercial rates;¹⁹ through the acquisition of a holding in the capital of a company on non-commercial terms;²⁰ by waiver of a debt in exchange for valueless consideration;²¹ by the provision of market research and advertising activities or logistical and commercial assistance at reduced rates;²² by payment satisfying legal or commercial obligations of a company such as outstanding wages or redundancy costs;²³ by exemption from the normal application of insolvency rules allowing companies owing debts to public bodies to continue trading;²⁴ by measures protecting certain industries from the effect of currency fluctuations;²⁵ or by an over-allocation of emission trading allowances.²⁶

The notion of State resources is very broad, covering all public funds, whatever their source and whatever their destination,²⁷ and includes financial assistance granted by regional and local authorities²⁸ and by other public authorities and public bodies, including publicly owned companies.²⁹ No distinction is drawn between measures which grant a temporary advantage and those which are permanent in nature,³⁰ so that aid may be granted through interest-free deferment of the purchase price for goods or services³¹ or by extension of the period within which tax or social security contributions must be paid.³² Indeed, it is not necessary for there to have been an actual or immediate transfer of resources from the State to the beneficiary, since aid may be deferred to a future contingency, such as through the provision of a State guarantee which might only entail an additional burden for the State budget in the event of implementation of the guarantee.³³

State aid by reference to national benchmark It is important not to confuse the criterion of advantage arising out of a gratuitous benefit with that of selective advantage which favours certain undertakings. Thus, the notion of economic or financial advantage arising out of State intervention, which is a defining characteristic of State aid, must be distinguished from the criterion of a selective competitive advantage resulting from differential treatment as between competing undertakings, the fulfilment of which is necessary for establishing that a particular State aid falls within the scope of Article 87(1) EC.³⁴ In this respect, the ECJ held in Spain v Commission that the notion of an advantage must be determined by comparison to the general system applicable to undertakings in the same Member State and not to undertakings of other Member States.³⁵ This is a particularly important distinction where aid is granted through the tax system, given that taxation is a national phenomenon applicable within the boundaries of each Member State. As noted by the CFI in Stadtwerke Schwäbisch Hall GmbH v Commission, a general tax exemption constitutes an economic advantage granted through State resources in so far as the State renounces the right to levy the tax otherwise chargeable, even though it does not fall within Article 87(1) EC where it is available to all undertakings and is, accordingly, not selective.³⁶ Similarly, in Netherlands v Commission, a scheme allowing for the tradability of emissions allowances was held to constitute an advantage for the undertakings concerned, but was not selective as it applied to all relevant undertakings.³⁷

Grant of State aid Aid being granted entails an advantage being conferred on the recipient.³⁸ The relevant criterion for determining that State aid has been granted is the adoption of a legally binding act.³⁹ Generally, the Commission considers that aid is put into effect not by the action of granting the aid to the recipient but rather by the prior action of instituting or implementing the aid at a legislative level. Aid is, therefore, deemed to have been put into effect as soon as the legisl...