Market Economy Investor Principle Research Articles

The Application of the Market Economy Operator Principle in the Aviation Sector

Economic and financial analysis plays an increasing role in State aid assessments. It is often used to assess whether one of the criteria for State aid to exist is met − namely, whether the State’s intervention confers an economic advantage − as well as specific aspects of whether any aid is compatible with the relevant State aid rules. To determine whether a public measure confers an economic advantage on the beneficiary, the market economy operator principle (MEOP) test is often applied. The rationale behind the test is to assess whether the State is acting in the manner of a private investor. In the aviation sector, the MEOP is applied at various levels, ranging from funding provided by the State to airport owners or operators, to the relationship between publicly owned airports (or those that have received State aid) and airlines. This article provides an overview of the different levels at which the MEOP test is applied in the aviation sector, and its underlying economic and financial principles. Throughout the article, examples are provided to demonstrate how the MEOP test has been applied in practice. Keywords: market economy operator principle; MEOP; market economy investor principle; MEIP; benchmarking; pari passu; profitability analysis

The Use of Economics in Assessing State Aid Cases

This paper discusses the use of economics in assessing some of the important factors of state aid measures. In light of the economic theory and the case law we outline the application of economics for the market economy investor principle (MEIP), and for the assessment of the 'necessity' and 'proportionality' of the aid given. We also discuss the economic interpretation of the concept of a 'well run' undertaking under the 4th Altmark criteria.

PAKS II: State aid for Electricity in Hungary · State aid Case SA.38454 Hungary Paks II nuclear power station · Annotation by Adina Claici and Norbert Maier

This article describes a recent State aid case that advances the boundaries in the analysis of the Market Economy Investor Principle beyond the level of complexity reached in previous cases. In 2017 the European Commission approved the aid to Paks II nuclear power station in Hungary following an in-depth investigation. We highlight the most original pieces of economic analysis and financial modelling that contributed to the decision. Among others, the Commission used multiple benchmarking methodologies to estimate the profitability of the investment and the parameters of the financial model. Furthermore, a complex probabilistic model ensured robustness of the results. Finally, we explain the reasoning provided by the Commission when rebutting some of the assumptions put forward by Hungary. Keywords: State aid; MEIP; Nuclear power; Hungary.

Clarifying the Applicability of the Private Investor Test ∙ Case T-747/15 EDF v Commission ∙ Annotation by José Antonio Rodríguez Miguez

This is an interesting judgement on the applicability of the Market Economy Investor Principle (MEIP). It confirms a second Decision which the EC adopted in 2015 once that its first Decision on the same case was annulled by the GC in a previous judgement, later confirmed by the ECJ in 2012. The main reason of the initial annulment was that the fiscal form of a measure did not exclude the possibility of applying the MEIP to it. France considered that, under the form of a tax exemption, the measure was materially a recapitalization and the EC had simply to look at whether it was materially in line with MEIP or not. The new judgement, however, considers that the EC had still to examine first whether the MEIP was ‘applicable’ at all to this tax exemption (since this, according to the GC, was not decided in the previous judgements). For the GC the ‘applicability’ of MEIP depended on whether France treated at the time that measure as an ‘investment’ by adopting an ex ante evaluation and business plan. The burden of proving this was for the Member State but the EC had to examine the evidence brought to the procedure. Since the GC considered that this was not proved here, there was no legal need to examine whether the MEIP was materially fulfilled or not. Keywords: State aid; Aid granted by the French authorities to EDF; Reclassification, as a capital contribution, of accounting provisions created free of tax for the renewal of the high-voltage transmission network; Decision declaring the aid to be incompatible with the internal market; Authority of res judicata; Private investor test.

Znaczenie testu prywatnego inwestora w ocenie efektywności inwestycji publicznych

Znaczenie testu prywatnego inwestora w ocenie efektywności inwestycji publicznych

Financing of Berlin Brandenburg Airport ∙ SA.41342 ∙ Annotation by Antigoni Lykotrafiti

This annotation focuses on the latest (out of three) European Commission decisions on the financing of the new Berlin airport by its public shareholders. The decision is important because it deals with a case having a great impact on the Single Market. Moreover, it constitutes the first example of application of the private investor test in airport financing cases after the publication of the Commission Notice on the notion of State aid – the jewel in the crown of the State Aid Modernisation initiative. The commentary points to the link between politics, law and economics in high-profile State aid cases, questioning the effectiveness of EU State aid control. Keywords: Market Economy Investor Principle; Airport Infrastructure; Airport Operator; Traffic Forecast; Severability; Predictability.

FIH Holding and FIH Erhvervsbank v European Commission ∙ T‑386/14 ∙ Annotation by Małgorzata Agnieszka Cyndecka

Following the ING case in which the Court raised controversy by ruling on the applicability of the MEIP to an amendment to the repayment terms of aid, the FIH judgment may well become equally debatable. This time, however, the development and refinement of the MEIP may have possibly gone in the wrong direction. This annotation explains how the Commission and the GC dwelled on the fundamental distinction between the applicability and application of the MEIP, and analyses whether their conclusions were correct in light of the existing case law and the logic of the MEIP. Keywords: Market Economy Investor Principle; Applicability; Application.

The Applicability and Application of the Market Economy Investor Principle: Lessons Learnt from the Financial Crisis

The Applicability and Application of the Market Economy Investor Principle: Lessons Learnt from the Financial Crisis

THE MARKET ECONOMY INVESTOR PRINCIPLE: LESSONS LEARNED FROM THECIUDAD DE LA LUZCASE

This article analyses the principles applied by the European Commission in the state aid case Ciudad de la Luz. We first review how Market Economy Investor Principle (MEIP) has been applied in concrete state aid cases. We then briefly describe the market for large studios as well as the facts pertaining to the Ciudad de la Luz. Based on the information gathered by the European Commission during the investigation, we show how it is possible to make use of financial theory to apply the MEIP in that particular case. Given the level of in-depth economic and financial assessment performed by the Commission and the subsequent endorsement received by the General Court of the EU, this decision is likely to set an important standard for future investigations into the Market Economy Investor Principle.

The Applicability and Application of the Market Economy Investor Principle

The Applicability and Application of the Market Economy Investor Principle

The problem of objectives pursued by the state under the application of the Market Economy Investor Principle (MEIP)

The problem of objectives pursued by the state under the application of the Market Economy Investor Principle (MEIP)

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.

The EU Market Economy Investor Principle: A Good Paradigm?

The Market Economy Investor Principle (MEIP) is one of the most fundamental precepts of European state aid law. It is a useful tool at the disposal of the European Commission to assess whether in any given situation state aid might exist. Member states also use it to ensure compliance in funding commercial firms, whether public or private. With continuous clarifications and refinement by numerous Commission text, decisions and the European Court's judgments, it captures the center-spot of state aid assessment practices. But the doctrine has also been severely criticized for its inherent theoretical incoherence as well as complex practical application which sometimes resulted in inconsistent and unpredictable decisions. While government actions are always influenced by public policy objectives and other political factors, is it really practical or effective to compare those with that of private investors on pure commercial criteria? How far is it acceptable to hypothesize the existence of a model 'private investor‘ that may never exist? Lack of a proper market benchmark sometimes results in providing wider discretion in the hands of the Commission. Is it good for a legal principle to empower an executive body to use it as a political tool? The MEIP would certainly be a better paradigm when it could provide solution to many of such questions. Given the legal uncertainty, inconsistency and unpredictability related with the test, considerable care need to be exercised to ensure that 'not every characteristics of the state is imputed to the private investor, otherwise the MEIP is liable to act as a distorting mirror that flatters the image of the States as an investor.'

General Court Confirms Commission's Approach to Applying the Market Economy Investor Principle to Capital Contributions by Public Authorities

General Court Confirms Commission's Approach to Applying the Market Economy Investor Principle to Capital Contributions by Public Authorities

The Application of the Market Economy Investor Principle in the German Landesbanken cases

The Application of the Market Economy Investor Principle in the German Landesbanken cases