RECENT DEVELOPMENTS IN STATE AID LAW CONCERNING FREE TRADE ZONES

Abstract

This article examines a recent ruling alongside EU legislative advancements concerning the application of EU State aid regulations to free trade zones. The correct application of state aid rules to free trade zones is crucial for several reasons, encompassing legal, economic, and political dimensions. State aid rules help to maintain a level playing field for all market participants. By ensuring that state aid is applied correctly in free trade zones, unfair advantages or disadvantages are minimized, promoting fair competition among businesses. The correct applicability of state aid rules aligns with international trade agreements and standards. It ensures that a region or country is in compliance with broader economic and trade practices which could affect international relations and trade partnerships. Further, State aid rules aim to prevent market distortions that could arise from improper subsidies or aid. By applying these rules correctly in free trade zones, economic efficiency can be better achieved, and resources can be allocated more optimally. Lastly, predictability and legal certainty are essential for investor confidence. When state aid rules are correctly applied, investors have a clearer understanding of the legal and economic environment, which may lead to increased investment and economic growth.One of the most recent case-law of the European Court of Justice (“ECJ”) is the ruling of September 21, 2022, in the case T-95/21 concerning the Madeira Free Zone State aid scheme. The ECJ affirmed that the Europeans Commission’s (hereinafter: Commission) conclusion, which stated that the implementation of the Madeira Free Zone State aid scheme (Regime III) did not adhere to the approved conditions, was accurate. The scheme was not implemented according to State aid law, and therefore it must be recovered. The primary objective of the scheme was to enhance the economic development of Madeira through tax incentives. Consequently, the General Court dismissed Portugal’s appeal against the Commission’s decision (KPMG et al., 2022). The authority however, which was involved in granting the State aid, was not only Portugal but also Região Autónoma da Madeira (Autonomous Region of Madeira, Portugal, hereinafter “RAM”) and therefore, it decided to appeal the Commission’s decision, as individual applicant. Same as Portugual, RAM which seeks annulment of Articles 1 and 4 to 6 of Commission Decision (EU) 2022/1414 of 4 December 2020 on the aid scheme SA.21259 (2018/C) (ex 2018/NN) implemented by Portugal in favour of the free zone of Madeira (Zona Franca da Madeira - ZFM) - Scheme III (OJ 2022, L 217, p. 49). Therefore, on June 12, 2023, the General Court was required to render a judgment on the same subject matter as its decision on September 21, 2022 (Case T-131/21 Região Autónoma da Madeira v Commission, 2023). The only distinction is that the current applicant is different from the previous case.