Application Of State Aid Rules Research Articles

RECENT DEVELOPMENTS IN STATE AID LAW CONCERNING FREE TRADE ZONES

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.

Working with the EU: How Discourses Shape the Application of EU State Aid Rules

AbstractState aid rules are an important part of the European Union's (EU) competition policy that aims to ensure a fair competition in the common market. These rules directly affect national and sub‐national governments of member states, which are sometimes confronted with different and opposing claims about what to do. The question is how implementing civil servants interpret and resolve these claims in practice. In this article, discourse analysis is applied to identify how civil servants apply and interpret state aid rules based on empirical research in the Netherlands. The main finding is that, even within the existing regulatory framework of one member state, the application of state aid rules is understood differently based on the discourses we identified. We describe the content, dissemination amongst civil servants and the relationship of these discourses with compliance. The article shows that discourses matter and help to understand how state aid rules are applied.

Article: State Aid Through Arbitration Awards: EU Law as a Ground for Non-enforcement

The relationship between international investment law (IIL) and EU law is not without problems as evidenced by the Achmea ruling. These tensions have become more evident in the Micula case in which the commission resorted to the state aid rules in order to attack arbitration awards arising from intra-EU Bilateral investment treaties (BITs) (deeming its enforcement as state aid). Despite its two rulings relating to the Micula saga, the Court of Justice of the European Union (CJEU) has not yet validated (or not) the application of state aid rules to the enforcement of intra-EU awards. Hopefully, the upcoming general court’s judgment shall rule on the merits of the Micula case thereby dispelling doubts. Nevertheless, it is foreseeable that further clarifying judgments will be required concerning the recognition and enforcement of intra-EU awards in non-EU jurisdictions. This article reviews the current situation to show that, while state aid rules could adequately prevent the enforcement of an intra-EU award within EU borders, they lack effectiveness for blocking enforcement beyond its borders. Arbitration award, intra-EU BIT, State aid, Tax benefit repeal, Damages, Award recognition, Award enforcement, Public policy, Micula, Achmea, ICSID Convention, New York Convention.

The Agreement on the Withdrawal of the UK from the EU and Euratom and its impact on the future application of state aid rules in the UK

The Agreement on the Withdrawal of the UK from the EU provides that EU state aid rules will apply to the UK until the end of the transition period and to the trade of Northern Ireland at least until 31 December 2024 and from that date for as long as the agreed arrangements receive ‘democratic consent’. This article considers whether the Agreement may incentivize the UK to apply EU state aid rules in the rest of the UK. It concludes that the UK is likely to align itself to the EU’s regime.

State Aid Rules and Public Financing of Infrastructure. The Case of Autostrada Wielkopolska S.A.

Abstract The operation of a toll road typically involves an economic activity for which State aid rules apply. However, if the construction and operation of the road infrastructure is bundled and they are tendered out together, they usually fall outside the State aid regime. The reason for it lies in the fact that the use of competitive procurement procedures aim to increase the efficiency of public expenditure and to ensure a level playing field for private operators to compete for public contracts. Nevertheless, based on the European Commission’s decisional practice, it transpires that an economic advantage for a concession holder cannot be ruled out automatically, in particular when there are amendments made to the original agreement. On the example of the Autostrada Wielkopolska S.A. case, critical State aid issues are discussed, among others, the application of State aid rules to public financing of infrastructure, the amendments made to a concession contract in the light of the risk assignment problem, as well as the existence of State aid in the form of overcompensation for a concession holder. The considerations are carried out on the canvas of a concrete case; however, they are enriched by the analysis of relevant legal provisions as well as conclusions from the EU courts and the European Commission decisions made in similar cases.

The Application of State Aid Rules to Markets Subject to Legal Monopolies · Case C-385/18 P Arriva Italia · Annotation by Federica Maldari

The Case at issue provides a guidance on the notions of advantage and distortion of competition for the purpose of classifying a State intervention as State aid, and a clarification on the application of the State aid rules to markets which are subject to legal monopolies. The Case arises from the Italian government’s intervention for the benefit of a State-owned operator in a serious financial situation, active in the railway and transport services sectors. In particular, the intervention concerns (i) the statutory allocation of € 70 million for the benefit of the operator and (ii) the transfer of the entire shareholding of the government in that operator, for no consideration, to another State-owned operator of the national railway infrastructure to restore the financial viability of the transferred company. Other public providers having an interest in the transferred company challenged the legality of those measures, arguing that they constitute State aid. Therefore, the Italian Council of State asked the Court of Justice for a preliminary ruling concerning the interpretation of Articles 107 and 108(3) TFEU in respect to the afore-mentioned measures. Keywords: Legal Monopolies; Exclusive Rights; Transport Sector; State-Owned Operator.

State Aid Support to Financial Institutions and the Question of Systemic Importance in the 2008 Financial Crisis: Time for a New Approach?

What is or is not a systemic important bank in times of financial crisis? Such a question is not easy to answer when the demise of even peripheral financial institutions in one country may trigger financial turmoil in others via a domino effect. From a State aid perspective, the question of systemic importance was not adequately addressed during the 2008 financial crisis as the Commission and Member States sought a flexible solution to a complex problem. This solution manifested itself via the continued transfer of taxpayers’ money to insolvent financial institutions simply to maintain the financial stability of other financial institutions. Therefore, the aim of this Paper is to critically assess the Commission’s application of State aid rules to the banking sector and propose a new systemically important test for financial institutions that is rooted in the State aid law domain. As part of this process the level of aid that should be provided to a financial institution deemed systemically important will also be examined as will the need for new competition distortion safeguards to ensure that supporting an insolvent but systemically important bank does not undermine the market position of long-term viable competing financial institutions. The overarching objective of this research is to formulate a future State Aid Crisis Framework for the banking sector that strikes the correct balance between maintaining financial stability and protecting taxpayer resources. In conjunction to this the paper also seeks to examine how a new State Aid Crisis Framework will interact the Bank Resolution and Recovery Directive and whether a new approach could be designed to maintain financial stability in a financial crisis while also ensuring that Member State’s resources are not continually at the beck and call of recipient financial institutions.

The application of State aid rules: shortcomings and improvement proposals

The application of State aid rules: shortcomings and improvement proposals

The application of state aid rules in various fora: the role of economic analysis

The application of state aid rules in various fora: the role of economic analysis

Italian Court Awards Damages to Beneficiaries for Unlawful Implementation of Aid ∙ Court of Appeal of Cagliari of 13 June 2017 ∙ Annotation by Francesco Maria Salerno and Federico Macchi

The case in comment illustrates the application of State aid rules by a national court. Moreover, the case deserves to be brought to the attention of a wide readership because it concerns a rare case of award for damages to the beneficiary of the aid. By adjudicating in favour of the beneficiary, the Italian court recognized the peculiarities of the case at issue. At the same time, the ruling raises general questions of consistency with EU law, which are likely to become even more salient as the cooperation between Commission and national courts in the enforcement of State aid rules increases. Keywords: National courts; Damages; State liability; Legitimate expectations.

The Rebus of Selectivity in Fiscal Aid: A Nonconformist View on and Beyond Case Law

The application of State aid rules to tax measures has become highly controversial, particularly in the last decade; a number of theoretical difficulties and a fierce criticism surround this topic today. The conceptual framework currently deployed by the State aid legal doctrine is insufficient to address the phenomenon of fiscal aid in its entirety. This has resulted in a case-by-case approach by the courts that has generated inconsistencies and legal uncertainty. The author shares his views on how the current legal standards should be revised, also in terms of law policy, e.g. by taking the underlying objectives of the Treaty into full account. The goal being to foster the development of a new approach to assess fiscal aid, built on the distinction between truly macroeconomic measures and measures that (also or mainly) pursue more specific goals. To this end, some broad categories of fiscal measures are discussed. Drafted in a deliberately concise manner, this opinion article does not provide an exhaustive account of the European Union (EU) case law or the decision-making practice of the Commission. Rather, also considering the number of appeals currently pending against Commission decisions and the General Court’s judgments on these issues, reference to specific cases is limited to what is necessary to provide examples of the broad categories of fiscal measures under discussion.

‘All Bad Things Must Come to an End’

This article examines the new EU rules on the resolution of banks and their conformity with Article 107 TFEU. Normally, state aid rules apply to national measures. However, EU law that came into effect on 1 January 2016 extended the application of state aid rules to the decisions and actions of the Single Resolution Board. This article argues that, although compliance with Article 107 TFEU by the Single Resolution Board will make its decisions more complicated, it will also bring about much needed uniformity in the resolution of banks across the EU.

The ‘Market Economy Investor Principle’ to Evaluate State Aid

The MEW has traditionally played a central role to establish whether State measures entail a selective advantage under Article 107 TFEU. However, it is not completely clear whether the MEW can be considered a ‘principle’, or a ‘test’, since both definitions are currently utilized by practitioners and scholars. The thesis put forward here is that the MEW is an interpretative principle composed of the private investor test, the private creditor test, and the private vendor test. The application of the MEW has witnessed a constant evolution over the years, which brought about an increased relevance of the principle. In this respect, it is interesting to consider whether the major changes in the application of state aid rules triggered by the financial crisis have somehow affected the MEW and its traditional features. The analysis carried out on this specific point shows the MEW has maintained substantially unmodified its functional role and centrality.

Fiscal State Aids, Tax Base Erosion and Profit Shifting

In this article, the author describes the application of State aid rules in reviewing EU Member States' tax measures for multinationals providing possibilities for tax arbitrage (Base erosion and profit shifting - BEPS). The author provides examples of measures favouring tax arbitrage which are identifiable as State aid if analysed from that perspective and explains how the application of State aid rules is theoretically justifiable and even more appropriate from an EU perspective rather than the use national anti-abuse rules. The author suggests that State aid review is a more effective instrument to tackle abusive tax planning in the EU, because a supranational regulator, subject to EU judicature control, manages it. The author considers that the power of the tax administrations to correct the taxpayers' determinations of their taxable income and fix them on the basis of independent criteria is intrinsically discretional and that transfer-pricing corrections may be cast into legal uncertainty. Accordingly, a new procedural framework is required to restore legal certainty to an area of State aid control which puts into question the proper implementation of the transfer-pricing power of correction by the competent tax administrations. With the grant of an advance ruling a tax administration provides advance certainty about the acceptable determination of the taxable income that a taxpayer should follow; which the author considers to be a sui-generis special right within the meaning of Article 106(1) TFEU. The article accordingly suggests that the Commission adopts a directive under Article 106(3) TFEU to define the conditions under which individual rulings can be granted in respect of undertakings enjoying special rights such as the multinationals being the recipients of transfer-pricing adjustments.

A Critical Analysis of the Application of State Aid Rules to Sport

This article examines the application of state aid rules to sport and sport infrastructure. Sporting activities and their public financing fall within the scope of Article 107(1) TFEU when such activities are economic in nature. The article examines under which conditions sport is an economic activity. The public funding of sport infrastructure such as stadiums and arenas raises state aid issues at four levels: The owners of the infrastructure, the constructors, the operators, and the users. This article examines the conditions under which state aid is either removed or made to be compatible with the internal market.

Towards Decentralization of State Aid Control: The Case of Services of General Economic Interest

The prospect of decentralization in State aid control has been traditionally viewed with scepticism, mostly due to the high potential of political influence at the national level. It has also been regarded as a threat to the consistency and uniformity of the application of State aid rules. In that relation, the European Commission has been granted an institutional 'monopoly' with regard to the assessment of compatibility of State aid measures. While national courts perform some, albeit limited, role in State aid control, national competition authorities have not been vested by EU law with any tasks with regard to examination of State aid. In the area of services of general economic interest, however, there are signs that the decentralization process is already under way. The adoption of the Altmark judgment, and more importantly, the increasing role of Member States in examining State aid compatibility under Article 106(2)TFEU show that, in the future, national authorities could exercise a more substantial and active role in the enforcement of State aid rules.

Application of State Aid Rules in Hungary (Individual Commission Decisions 2004-2012)

The aim of this article is to summarize and comment on the most important individual decisions of the European Commission after accession. Eight years after the accession of Hungary to the European Union, it is time to take stock and to look at the application of state aid law so far.

The New Commission's Communication on the Application of State Aid Rules to Short-term Export Credit Insurance

The new Communication on the application of State aid rules to short-term export credit insurance, which will apply for five years from 1 January 2013, provides a welcome degree of transparency and a strengthened level playing field in this sensitive area.

EU State Aid and National Taxation: Moving Towards Harmonization

Freedom of the Member State to set up their own tax systems and pursue different tax policies is strained by the Treaty provisions. Various tax measures may distort competition in the internal market and thus constitute State aid. This article explores the application of State aid rules to national tax provisions and establishes a link between the wide interpretations of selectivity criterion in the State aid definition on the one hand, and the Commission's aim to combat harmful tax competition between Member States on the other. In the wake of the ongoing financial crisis, national governments are forced not only to exercise expenditure cuts and fiscal discipline, but also to impose tax increases. However, the current interpretation of the Commission and the European Court of Justice enables almost any tax measure to fall into scope of State aid provisions, which leads to legal uncertainty and opening up the floodgates of the EU State aid supervision. The article submits that this tendency is due to aim to tackle harmful tax competition between the Member States. However, State aid provisions are not an adequate tool for such a task. Recent case law of the Court will be analyzed and it will be argued that different interpretation of the selectivity criterion will not solve the Court and the Commission's overly wide application of the State aid rules. Instead, especially after the Gibraltar case, the Court is telling us that the next step should be harmonization of direct taxation.

State Aid Modernization: Institutions for Enforcement of State Aid Rules

The European Commission has embarked on a reform of State aid rules. One of the objectives of this reform is better application of State aid rules in the Member States. This article examines how the problem of incorrect application of State aid rules can be solved. If their application can be improved, the Commission is willing to expand the scope of the General Block Exemption Regulation so that fewer measures are notified for approval. This would result in considerable savings in administrative costs. The article proposes a system of institutional certification similar to those that exist in other policy areas such as the common agricultural policy and structural funds. A fundamental component of such certification is the establishment of transparent institutional procedures to cover all types of funding, not only those that may contain State aid. It will then be easier for competitors to identify and challenge non-notified aid or aid that is incorrectly applied.