The Interplay Between Industrial Policy and State Aid: Natural Combination or Strange Bedfellows?

Abstract

The system of European Union (EU) State aid control aims to strike a careful balance between European unity and national sovereignty. This entails that, while decisions to provide aid are in principle made by the Member States, the EU legal framework (as interpreted) generates a number of systemic obstacles that can preclude or limit the adoption and application of national industrial policy measures that entail monetary support, in particular, those that are based on the interpretation of industrial policy in a purely domestic sense, although some (types of) measures that are of particular interest from an industrial policy perspective fall outside the scope of application of Article 107(1) TFEU altogether. However, by inviting Member States to provide “good aid”, as opposed to “bad aid”, as exemplified by the recent State Aid Modernisation (SAM) programme, which, in turn, has been informed by the Europe 2020 Strategy, the EU increasingly aims to impact on the economic policy of its Member States. Combined with the creation of multiple supranational funding possibilities which aim to positively contribute to the objectives of said Europe 2020 Strategy, the proposition in this paper is that this enables the Commission to use State aid policy as a public governance instrument to advance positive European industrial policy in the absence of (full) harmonisation. Although this is arguably in line with what Article 173 TFEU on industry prescribes, the Commission’s interventionist use of its discretionary powers under Article 107(3) TFEU raises some doubts as to the assigned distribution between the Member States and the supranational level within the system of State aid control. Keywords: Industrial Policy; State aid; Balancing Public Interests; Discretion; Division of Competences.