State Aid Policy Research Articles

EU Competition Law and COVID-19

This paper explores how EU competition law enforcement might be affected by the COVID-19 pandemic. Each section of this paper reviews how various components of EU competition law are impacted. The paper evaluates the state of play and, where relevant, it makes policy proposals for how competition law might develop. It suggests that the Commission’s state aid policy is unprecedentedly lax but more tightening up might be welcomed to ensure state funds are not misspent. In the field of antitrust it recommends that competition authorities should be watchful of excessive prices and price discrimination, using interim measures more boldly. Collusion should remain an enforcement priority but a procedural pathway to review agreements that may be in the public interest is proposed, drawing on practices developed in the US in the aftermath of major natural disasters. In merger control, the Commission’s strict interpretation of the failing firm defense is appropriate but, in general, a more skeptical attitude towards mergers may be warranted during this period. Advocacy plays a key role: competition agencies can both point to existing regulations that limit competition and monitor proposed emergency legislation that would harm competition for no good reason.

Az állami támogatási soft law hatása a kedvezményezettekre


 
 
 
 Az Európai Unió tagállamai által nyújtott támogatások legfontosabb ellenőre az Európai Bizottság, az Európai Unió működéséről szóló Szerződés (EUMSz) 107. és 108. cikkei alapján gyakorlatilag kizárólagos hatáskörrel rendelkezik a támogatások belső piaccal való összeegyeztethetőségének elbírálására. Értékelési gyakorlata során a Bizottság saját döntési gyakorlatát alapul véve – annak megszilárdulását követően – iránymutatásokat, keretszabályokat (a továbbiakban: soft law) fogad el, amelyek jogforrásnak nem minősülő dokumentumként meghatározzák, hogy a jövőben a Bizottság mely támogatásokat, illetve milyen feltételeket teljesítő támogatásokat tekint a belső piaccal összeegyeztethetőnek.
 
 
 

Reflecting Environmental Protection Requirements in the EU State Aid Policy

The Member States of the European Union push hard to address modern environmental challenges they face and achieve their environmental targets. However, in doing so, they need to comply with European Union law: the State aid policy and the ‘polluter pays’ principle often seem as obstacles before the Member States to implement their national environmental policies. On the one hand, State aid control is essential to maintain a high level of competition in the internal market, while on the other, environmental protection is among the priority objectives of the European Union. Moreover, environmental protection requirements must be integrated into all policy areas, including State aid. The purpose of this work is to study how the environmental protection and its requirements are integrated into the State aid policy when these two legitimate interests – a competitive economy by controlling State aid and a green economy by promoting higher environmental protection – intersect. (Less)

Državna pomoć i fer tržišna utakmica

State aid (giving economic advantage to certain economic entities or groups of economic entities by granting subsidies and loans under more favorable conditions, state guarantees, tax breaks and tax exemptions, selling public property under particularly favorable conditions, etc.) may be economically justifiable but entails the risk of distortions of market competition. The EU has strict rules in the area of providing and controlling state aid, which aim to minimize state aid while minimizing competition. Fulfilling some of the commitments undertaken in the EU accession process, the Republic of Serbia passed the State Aid Control Act in 2009, which ceased to be valid with the adoption of a new State Aid Control Act in 2019. The share of state aid in Serbia's GDP is substantial but insufficiently transparent, which justifiably raises the issue of its impact on fair competition. The reform of the Serbian state aid policy is necessary, first and foremost, in order to significantly reduce this aid and to properly select the beneficiaries. The starting point for an effective state aid policy is legal regulation and its implementation but, above all, the genuine independence and responsibility of the institutions in charge of controlling its implementation. It is necessary to find modalities that will ensure that the general interest and economic efficiency are above individual interests. This paper aims to promote awareness about the impact of state aid on economic efficiency, to analyze the legal solutions and the institutional framework in this field in Serbia, and to present the EU state aid policy. The emergence of excessive, improperly selective and uncontrolled state aid can have profound negative consequences on social well-being, for which reason it is necessary to properly standardize and implement the rules envisaged in this area of law.

Common Interest as a Condition for State Aid Compatibility

According to long-standing Commission practice, State aid must aim at or contribute to an objective of common interest to qualify as compatible with the internal market. In the recent judgment Hinkley Point C, the Court of Justice rejected the pursuit of an objective of common interest as a condition for compatibility pursuant to Article 107(3)(c) TFEU. This article takes a closer look at the origin and content of the common interest condition. Further, it discusses whether the Hinkley judgment establishes a precedent to reject a common interest condition entirely, and the possible consequences of such a precedent for State aid law and policy going forward. Keywords: State aid; compatibility; compensatory justification; common interest; judicial review

The European Green Deal and State Aid:

The European Green Deal is the prelude and the foundation of a daunting, but necessary, environmental-centric industrial revolution. EU legislation has obviously dealt with environmental policies in the past, but the European Green Deal is a far-reaching project that will require unprecedented investments. The transition envisioned in the European Green Deal will also require amendments to a wide variety of existing EU legislation and policies, including in the field of State aid. The Guidelines on State aid for environmental protection and energy (EEAG), in force until the end of 2021, are the legal framework in force to assess environmental State aid. This raises the question whether these Guidelines are a suitable instrument to achieve the objectives of the European Green Deal. This paper is the first of a series that will discuss the interplay between existing State aid rules and policy on the one hand and the European Green Deal on the other. It will provide a broader introduction to the European Green Deal and its envisaged means of financing and will discuss the application of the incentive effect to the State aid assessment of national support measures to achieve objectives of the European Green Deal. Keywords: EU Green Deal, Environmental and Energy Guidelines, incentive effect, environmental targets, financing

Legal Status and Legal Effects of the Commission’s State Aid Guidelines:

Looking at the practical case of the Guidelines on State aid for environmental protection and energy (EEAG) (2014-2020) and implementation of them, this article intends to re-open the debate on the legal status of soft law instruments in EU State aid policy. It analyses the recent case law of the Court of Justice of the European Union and the manner the latter distinguishes between the legal force and the legal effects of the State aid guidelines, not only on the Commission, but also on third parties like Member States. The article puts in perspective the careful approach of the Court in not recognising the possible indirect effects of the guidelines on Member States or individuals with the procedural and structural changes in the adoption of the guidelines. With the implementation of the State Aid Modernisation, a circular process in three steps has been established between the adoption of the General Block Exemption Regulation (GBER), the new State aid guidelines and the proposals for new secondary legislation. In this process, the guidelines assume the function of a bridge, building on the binding principles enshrined in the GBER and preparing the revision of sectoral EU directives and regulations. With the upcoming revision of the GBER and the EEAG which is now scheduled for adoption in 2021, the same dynamic will most probably apply. The revision of the GBER and the EEAG will need to reflect the content of the newly adopted Clean Energy Package for All Europeans, but will also play a crucial role in preparing the grounds for amending relevant secondary legislation in line with the Commission’s European Green Deal Strategy. Keywords: EEAG 2014-2020, renewable energy, support schemes, GBER, legal force, legal effects

The EU State aid policy for broadband: An evaluation of the Italian experience with first generation networks

State aid (SA) measures for broadband have been flourishing in the EU, but our knowledge about the effectiveness and efficiency of this policy remains extremely scarce. We investigate the SA experience with the first generation of broadband services (FGB) in Italy, whose market was long plagued by extensive market failures, largely due to market power. By exploiting original open Government data and sources, we analyse the main domains of the EU SA policy, and assess whether its ex ante goals have been met in Italy. Four main results stand out. First, the plan extended the FGB coverage of rural areas, although with a substantial delay and incompletely, with respect to the ambitious targets of the Digital Agenda for Europe. Second, public consultations have significantly increased the transparency of the market and of the SA intervention, promoting investment and a gradual increase in the efficiency of public procurement. Third, the direct effects of SA on competitive entry appear less pronounced, at least in the static sense. Fourth, the final matching between allocative and dynamic efficiency of SA policy, and its coherence with industrial and innovation policies remain critical, based on the Italian experience: in fact, the persisting digital divide affecting the business-rich areas depicts another relevant instance of partial Government failure.

The Social Dimension of EU State Aid Law and Policy

AbstractTraditionally, EU state aid law has been attached to the goals of maintaining free competition and preventing the distortionary effects of Member States’ economic intervention, while social considerations have been considered immaterial to state aid control. However, in more recent years, EU state aid law has acquired a clearer ‘social dimension’, indirectly streamlining national subsidies towards social goals. The entry into force of the Treaty of Lisbon, and particularly of Articles 3(3) TEU and 9 TFEU, has had an impact on the way in which social goals have been taken into account in the application of the state aid provisions. In the last decade, the European Commission has sought out a more appropriate balance between the main objective of preserving competition in the internal market on the one hand, and social objectives, also enshrined nowadays in the Treaties, on the other. This ‘social dimension’ is still underdeveloped, but emerges to varying degrees when looking respectively at the definition of state aid under Article 107(1) TFEU, at the scope of the derogations under Articles 107(2) and 107(3) TFEU and at the secondary legislation adopted for their implementation.

EU Soft Law in the EU Legal Order: A Literature Review

In this first SoLaR working paper we are reviewing the literature on EU soft law, with a special focus on research dealing with competition law, state aid, financial regulation, environmental protection and social policy. The literature reviewed consists of studies conducted at the EU level of governance. A further paper will focus on nationally centered analyses, in particular concerning Finland, France, Germany, Italy, the Netherlands, Slovenia, and the UK. The present paper first discusses different definitions of soft law and taxonomies before moving to an analysis of status and legal effects of soft law. The paper then reviews studies dealing with the interface between soft law and adjudication. It finally looks into issues concerning the justiciability of soft law instruments in order to distill a theory with regards to the use of soft law in courts and national administrations. The paper concludes by looking at the consequences that the enforcement of soft law can have from a rule of law perspective.

Tax Policy Convergence and EU Fiscal State Aid Control: In Search of Rationality

The pending tax ruling constitute a new saga in the continuous political battle between the Member States and the European Commission about the limits of article 107 TFEU within the complex multi-level tax governance system of the EU. This article claims that the legal determination of these limits – as reflected in the distinction between general measures and fiscal state aids – cannot provide for a rational explanation concerning the balance of power between the Member States and the European Commission. Consequently, it cannot be maintained that the European Commission should merely monitor the limits of EU fiscal state aid control as defined by the Member States. Such an understanding is at odds with the prevailing neo-functionalist reality in which the European Commission is able to develop state aid policies in an independent way. This contribution reaches these conclusions on the basis of a combination of the legal and the political-economic traditions that study EU (fiscal) state aid control. It calls for more multidisciplinary academic discussion about the desirable function and limits of EU fiscal state aid control.

Politika zaštite konkurencije u Srbiji - dometi i ograničenja

Competition encourages market participants to be more efficient, which increases the economic growth rate and the standard of living. Any distortion of competition reduces economic efficiency and social well-being. The need to protect competition raises the issue of the effectiveness of the competition policy. The rules protecting the right of competition are the basis of this protection, but the effectiveness of competition protection also depends on other state activities in the field of competition protection policy. The state policy can both protect and compromise competition (e.g. the state aid policy). Domestic businesses are not used to competition but often try to profit by using privileges. On the other hand, our country does not demonstrate a genuine willingness to implement an effective competition policy, nor does it engage in a serious fight against business-related corruption. The domestic Competition Protection Commission and the State Aid Control Commission are essentially not independent, especially the latter. The Administrative Court is directly competent to decide on competition protection issues in our country; it is in charge of overseeing the decisions of the Competition Protection Commission but, for the time being, there are no specialized departments that would deal with this area. There is no effective competition policy without an independent and expert body, which would competently apply the regulations in this area, and an efficient judiciary. The national Competition Protection Act is not perfect, but it provides a solid basis for competition protection. The major objection to this Act is that the government establishes closer conditions for the implementation of this law, thus giving the executive authorities the power to restrict legislative provisions by enacting by-laws. The Act on State Aid Control should undergo major changes because it has not accomplished its goals, especially concerning the position of the competent commission in charge of its implementation. Although the Serbian legislation in the field of competition is not perfect, the legal provisions are less of a problem than their implementation. Thus, competition protection implies that good legal solutions are in place and that there are independent and effective institutions for implementing the envisaged provisions.

New Rules of Transparency for State and in Slovakia

The aim of the paper is to assess the impact of EU regulations on the creation and development of state aid policy in the Slovak Republic in connection with proper functioning of the EU internal market and the strengthening of transparency. The present Slovak national system of state aid provision and control is significantly influenced by the regulations of modernization of state aid and by the implementation of principles of independence, transparency and publicity. The paper will examine the introduced measures of publicity related to state aid provision from public sources. In the paper we highlight the significance of transparency in the area of public finance provision to economic entities, which reduces uncertainty and enables enterprises to check whether the state aid provided to competitors was legal and legitimate.

Eugene Stuart and Iana Roginska-Green: Sixty Years of EU State Aid Law and Policy: Analysis and Assessment

Eugene Stuart and Iana Roginska-Green: Sixty Years of EU State Aid Law and Policy: Analysis and Assessment

Burden Sharing Arrangements vs. Shareholders and Creditors: Kotnik, Dowling and the Current State Aid Policy in the Banking Sector

State aid policy to banks has developed extensively throughout the financial crisis. After outlining the main features of State aid policy in the banking sector, this article analyses the Kotnik and Dowling judgments where the application of burden sharing arrangements was assessed. In particular, the paper looks at the impact of these judgments on the approach of the Commission on State aid policy and examines the nature of burden sharing arrangements set out in State aid policy. In this context, the paper discusses more generally the relationship between burden sharing arrangements and fundamental rights, in particular the right of property. Then, the article shows that State aid policy to banks still remains highly relevant and controversial in the Banking Union framework where, under certain conditions, Member States can still grant State support measures. This is for instance the case of precautionary recapitalisation as State aid aimed at preventing a bank from going under resolution. Furthermore, the Banking Union framework raises questions such as how burden sharing is related to the Bank Recovery and Resolution Directive (BRRD) and what the relation is between burden sharing and bail-in.

Price Increasing Tax Reductions for Electronic Newspapers

The economic implications of indirect taxation have long been understood. Reducing indirect taxes results in lower prices. This straightforward and intuitive result has been an undisputed input into State aid policy, allowing robust legal analyses of tax exemptions. However, recent advances in the economic theory of two-sided markets yield new predictions for the impact of one type of indirect tax, the value added tax (VAT), on electronic newspapers. The surprising new theoretical prediction is that reader prices increase following VAT reductions. The prediction is driven by low marginal costs and the fact that advertisers would pay more for an ad seen by more readers. We bring this insight into the State aid literature and assess the implications for State aid policy. In particular, we raise questions over the legal assessment of a Norwegian State aid scheme, where a VAT exemption for print newspapers was extended to digital newspapers. If prices go up instead of down the policy will not have the intended effect and, under the given argumentation, the aid should not be viewed as compatible with the functioning of the internal market. The economic and legal arguments we present are important for the wider European debate on whether to reduce VAT on electronic newspapers. Keywords: VAT; Electronic newspapers; Two-sided markets

Investment State Aid for Ocean Energy Projects in the EU:

Ocean energy techniques (including tidal energy, wave energy, and salinity gradient energy) can play an important role with respect to the achievement of the Member States’ specific renewable energy targets set by the Renewable Energy Directive. In 2016, the EU's Ocean Energy Forum reported that EU State aid guidelines remain ‘burdensome and restrictive.’ This article argues that the State aid framework would indeed be too restrictive if it were to prevent those renewable (ocean) energy projects which are important for achieving a Member State’s renewable energy targets from sourcing sufficient funding. This would imply a lack of integration between State aid and renewable energy policy. It is concluded that while most conditions of the General Block Exemption Regulation and the Commission Guidelines on State aid for environmental protection and energy hardly seem to be burdensome, the State aid framework’s proportionality criteria may form a restriction to pre-commercial ocean energy projects. This article’s main suggestion is to solve this possible lack of integration by making the balancing test under the Guidelines more flexible for those situations where the State aid framework prevents important renewable (ocean) energy projects from sourcing sufficient funding. Also, two alternative solutions are discussed: improving access to finance for SMEs in the field of ocean energy, and providing for sufficient investment aid on the EU level.

State-aid programs of BRICS countries: Сase of transport equipment trade

State aid or subsidy programmes are a common practice of developed and developing countries to support national companies. Despite the fact that they are strictly regulated by the WTO rules, BRICS countries actively apply this measure, even though they announce the path to liberalization and trade cooperation. The aim of the paper is to reveal the distinguishing features of such programs in the BRICS in the field of trade in transport equipment. The methodology is based on a cross-country comparative analysis and case studies. The authors firstly explain the controversy in theoretical approaches to state aid policy analysis. Secondly they identify the peculiarities of non-tariff measures applied by BRICS and the role of state aid. And, finally, the paper presents the specific case studies in transport equipment trade. The authors conclude that the effectiveness of subsidies in the transport sector is not so obvious, as the dynamics in imports and exports of relevant products depends on various external factors. Nevertheless, the application of state aid in the industry leads to more favourable environment for national producers. State aid programmes, in most cases, do not comply with the WTO regulations, that implies trade distortion and could provoke trade disputes. The BRICS countries should strengthen the monitoring of these programs and focus on the opportunity of applying horizontal rather than vertical subsidies.

LEGAL FRAMEWORK OF STATE AID IN THE EUROPEAN UNION MARKET

State aid policy is a type of EU competition policy that symbolizes the braking system of industrial sector strategies that impede competition in the Single Market of the European Union. The determination of conditions and the procedure for controlling state aid are carried out to protect free competition in this specific market, applying the principles of market economy and stimulating economic development. It is necessary to ensure transparency in the granting of state aid, as well as respecting the provisions of the public law related to the state aid institute. It is fascinating to apply state aid to certain areas, such as regional aid, research, development and innovation assistance, environmental aid and assistance in taking risk capital. It is crucial that the economic life of the European Union be harmonized with the legislative framework of the communitarian law, which will also be the subject of the research presented in this paper.

Analysis of state aid policy to stimulate innovation and internationalization in Lithuanian animation industry

Research background: In order to achieve systematic development and growth of creative industries, instead of its being a random process, effective cultural policy tools need to be implemented. This task is greatly burdened by the fact that creative industries are a heterogeneous concept. Evidence suggests that indirect state aid is one of the most effective ways to stimulate growth and development of audiovisual segment. Lithuanian indirect state aid case suggests that there is still a great deal of confusion and misconception with the implementation and exploitation of this tool.
 Purpose of the article: To analyze how effectively indirect state aid is constructed to stimulate growth and development of the Lithuanian animation industry.
 Methods: This paper uses two methods to gather data. The first one is a quantitative questionnaire design to evaluate the overall situation of Lithuanian animation industry. The second method involves qualitative semi-structured interviews to collect specific data about Lithuanian film tax incentive from representatives of government institutions that administrate local fiscal incentive scheme and representatives of audiovisual industries.
 Findings & Value added: Results show that although Lithuanian film tax incentive can be considered as a successful cultural policy tool that brought a noticeable inward investment to the local film industry and economy in general, it had no positive effect on the local animation industry. The gathered evidence suggests that indirect aid tool should be constructed with more of surgical precision for each industry, rather than a fit-for-all cultural policy tool.