State Aid Rules Research Articles

The Development of the European Union State Aid Rules in the Energy Sector

The present paper presents the developments on the framework that governs the investments on the energy sector, focusing on competition law and the support to renewable energy sources through state aid. The researchers examine the developments of the state aid cases that have been under assessment by the European Commission over the course of the years and particularly, those regarding investments on renewable energy sources (RES) after the announcement of the European Green Deal, in late 2019. In addition to the above, the decisions of the European Commission and its tendency to not raising any severe objections, in general, against such cases of support schemes provided as state aid, are reviewed in parallel to the energy policy of the European Union, as it has been recently shaped in order to promote the increase of the use of RES in the EU Member States. Besides, the increased penetration of RES for the European Union, bares multiple benefits since, apart from playing a key role in the Union’s policy to tackle climate change and its severe consequences, it also contributes in the extended efforts of the EU Member States to minimize their dependence on energy products highly imported from Russia, such as natural gas, in the shadow of the recent war in Ukraine. Under that prism, the present paper provides a coherent and consistent examination of the ways in which state aid can be accepted by the European Commission, within the broader framework of the Competition protection in the EU, as well as the ways in which it can be even considered not to cause any severe distort of competition. The above are mainly concluded in case in which the support provided through such schemes tends to promote the development of activities that serve - on a high degree - the common interest, both on the national and the European level. Thus, the development of renewable energy technologies in the European energy sector and their enhancement towards greening the Union’s energy mix while turning it into a more resilient and independent one, can be considered as such a type of activities, as it will be further analyzed in this paper.

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.

Protecting the Internal Market From Subsidisation With the EU State Aid Regime and the Foreign Subsidies Regulation: Two Sides of the Same Coin?

The European Union’s (EU) internal market is a popular venue for international investments and activities by third-country entities. Once on the EU internal market, foreign companies can operate freely and enjoy the benefits of the internal market: free circulation of goods, services, establishment, and capital, complemented by competition and State aid rules to allow a level playing field with EU companies. However, in recent years, the issue of subsidisation of companies active on the EU internal market by third States and the corresponding distortions have gained novel prominence and lead to an increased discussion in practice and academia. Reports by the European Court of Auditors,1 the German Monopoly Commission (Monopolkommission),2 and several Member States3 have given examples that third-country subsidies, notably those subsidies granted by the Chinese State to State-owned enterprises (SOEs) with subsidiaries active on the EU internal market, would constitute State aid if granted by an EU Member State. Yet, State aid rules do not apply to such financial contributions granted by third States. Therefore, foreign subsidies could create an uneven playing field on the internal market: the companies receiving financial support from EU States are subject to EU State aid discipline, while companies receiving third-country subsidies are not subject to comparable State aid systems. Thus, the latter are having a noticeable advantage over EU companies for their economic activities on the EU internal market.

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.

Beihilfen im Lichte der Coronapandemie

Abstract The impact of the COVID-19 pandemic has hit the economies of the European Union hard. Member states have channeled significant financial resources into the economy and the EU has relaxed the relevant state aid rules designed to protect competition in the Single Market. State aid provided by member states has increased as a result, in some cases sharply. The differing degrees to which the pandemic has affected EU member states and the occassionally considerable discrepancy in state aid provided, both in terms of GDP and as an absolute amount in 2020, has led to fears that competition would be distorted in favour of Germany in particular. However, this is not confirmed by official data and statements of the EU, at least for 2020.

A Counterfactual Impact Evaluation of EU State Aid in Greece

EU state aid adopted from Member States is increasing at a fast pace due to the Covid-19 pandemic and energy crisis. Given its impact on the European economy, securing a maximum value added is a challenge for both policy makers and public administration. State aid impact depends not only on available resources but also on spending decisions that must be in line with state aid rules. It is believed that new policies would benefit if they were based on assessed evidence of existing policies during periods with similar characteristics. Our contribution analyses the characteristics of Greek development law based on a unique dataset extracted from the management information system of the Ministry of Economy. We hypothesize that there will be a change in firm productivity in the first years since program closure. Using counterfactual impact evaluation and propensity score matching, we find that there is a minor negative impact of development law on productivity. This might be an indication that firms receiving state aid do not perform as expected and perhaps better planning during policy modeling is needed.

State aid trends in the Western Balkans in the light of the European Union acquis

Granting state aid to market players while ensuring compliance with the internal market requirements, as derived from the European Union (EU) acquis, seems to be a challenging exercise for the Western Balkans. As an integral part of the competition rules (Cseres & Reyna, 2021) state aid requirements proved to be a challenge, especially at the outbreak of the COVID-19 pandemic, as part of the state efforts to keep alive certain key sectors of the economy (Bouchagiar, 2021). As an EU requirement and Stabilisation and Association Agreement (SAA) legal obligation became even more important. Struggling between the need to save the market while respecting the state aid rules, Western Balkans seem to have to pay more and closer attention to this field. This is why this paper, through an analytical and descriptive approach, intends to address such shortcomings and challenges in light of the efforts to enhance the harmonization of the legislation while ensuring its due application. Enforcing state aid rules requires professional and independent capacities within the relevant state aid authorities an objective remaining far from reach in the Western Balkans. The paper provokes further debates and analysis in the scholarly efforts to shed light on this sector.

The Awarding of Royal Warrants:

This article explores the tradition of awarding of royal warrants in monarchies in the EU. A royal warrant is an entitlement for an undertaking to utilise the fact that it is supplying a royal court with goods or services in its marketing, as a quality assurance. To determine the legality of awarding royal warrants under EU law, it is examined whether the EU State aid rules apply. To determine whether this is the case, it is decisive whether the monarch is the ‘State’ for the purpose of Article 107(1) TFEU. Therefore, EU law and national public law is analysed. The analysis shows that legal analysis of royal warrants rests on the public/private divide. It is analysed how the various national legal conceptualisations of the monarch fits in the EU concept of State, encompassing all entities which may reasonably be said to act on behalf or under influence of the State. No hard conclusion can be drawn, but it is found that the monarch’s resources are State resources and that the awarding of royal warrants arguably must be considered as imputable to the State. Further, royal warrants confer an economic advantage on beneficiaries, and the monarch does not (formally) receive any (market-like) remuneration. Thus, it is concluded that the award of a royal warrant grants State aid to the benefitting undertaking. Keywords: concept of State; royal warrants; monarch; State resources; economic advantage

EU energy governance—moving targets and flexible ambitions between opacity and opportunism?

Abstract This article examines the robustness of the architecture of European energy and climate governance and the instruments developed to execute climate governance based on EU-wide targets and the ambition of ‘net-zero’ by 2050. Its primary focus is on the quality of the European energy and climate governance process.The Commission’s primary task is to monitor closely national efforts to achieve the EU’s binding targets for example on energy efficiency, greenhouse gas (GHG) emission reduction and renewables production, to report regularly on progress or lack thereof. Although a considerable literature on climate governance has now evolved its focus is primarily on the tools available to the Commission to realize the Union’s climate and energy governance strategy in the absence of legally binding national targets. Many important and central questions about this governance process remain largely unanswered and unresolved. Legally binding union-wide climate targets are embraced by the new EU Climate Law of 2021, and various measures to promote renewable energy, energy efficiency and emission reduction are expressed to be ‘legally binding’ on the European institutions. But what does this mean in practice – especially in the current ‘energy emergency’ situation? Are there any effective legal constraints if the Commission’s actions or its failure to act is likely to imperil the timely realization of these ‘binding’ European wide targets. The first part of this article analyses the climate and energy governance and assesses the Commission’s role and responsibilities. Two additional and inter-related instruments of European ‘net zero governance’ are dealt with in the second and third parts. These are the reliance on delegated acts (part two) and the use of state aid control (part three). The scope of the Commission’s discretion when drawing up delegated rules has become an essential element of the ‘net zero’ governance process. An assessment of the application of the Treaty state aid rules to national schemes to support fossil fuels provides useful legal as well as policy insights. It serves as an important testing ground for policy coherence and continuity in pursuing the Union’s climate goals. This assessment contributes to a practical appraisal of the quality of governance from the perspective of this article – in terms of the scope of discretion open to the Commission to continue to approve such subsidies even in the light of the Climate Law’s binding targets.

Fiscal state aid law as a tool against harmful tax competition in the EU: déjà vu?

Abstract The theme of this article is the relationship between harmful tax competition measures and prohibited fiscal State aid. The aim of this article is to present a targeted examination of the use of State aid rules against national tax measures, eg tax schemes and tax rulings, following the adoption of the EU Code of Conduct for Business Taxation in 1997. The fiscal State aid decisions and judgments to be covered are divided into two parts: the first fiscal aid wave of the (early) 2000s and the second (ongoing) fiscal aid wave, which most notably includes the Apple, Fiat, Starbucks, and Amazon cases. It is argued that an important factor connecting the two fiscal State aid waves is the link they share with the EU’s fight against harmful tax competition.

Analysis of the European Union COVID-19-Related State Aid Rules and Their Application in the Croatian Maritime Sector

The paper presents the possibilities that Member States have under Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak to subsidise undertakings having liquidity problems or suffering damage because of the COVID-19 outbreak. Under the European Union Law, State aids are forbidden. However, some exceptions from that general rule are expressly provided for by the Treaty on the Functioning of the European Union. The Member States mostly used Article 107, paragraphs (2) and (3) of the Treaty as a legal basis for subsidising their economies in the COVID-19 pandemic, which has been qualified as an exceptional occurrence causing a serious disturbance in the economies of Member States. In the decisions authorising the State aid granted due to the COVID-19 crisis, the European Commission referred to its previous decision-making practice and the case-law of the Court of Justice of the European Union. Finally, the paper analyses the national State aid scheme that the Republic of Croatia adopted to support undertakings performing economic activities in the maritime and related sectors, based on the relevant EU regulations.

Bio-CCS as a policy measure to achieve climate goals – the pioneering support scheme in Sweden

By 2045, Sweden is to have zero net emissions of greenhouse gases into the atmosphere. After 2045, Sweden should achieve negative emissions. To accomplish this, the use of bioenergy with carbon capture and storage (bio-CCS) will be important. Sweden should aim to capture and store two million tonnes of biogenic carbon dioxide per year by 2030. However, the feasible potential for bio-CCS in Sweden amounts to at least 10 million tonnes of biogenic carbon dioxide per year in a 2045 perspective. To support the development and deployment of CCS the Swedish energy Agency has been given two governmental assignments.1. The first task/assignment, given in December 2020, was to establish a national centre for CCS. This task entails planning, coordination and promotion of CCS throughout the country. The Swedish Energy Agency will carry out its work in dialogue with both national and international stakeholders: industries, academia, governmental authorities and the Government Offices of Sweden. The present tasks for the centre are to implement a support system for bio-CCS and ensure that it is line with international conventions, such as the UN Convention on Biological Diversity and its moratorium on geo-engineering, and the London Convention and the London Protocol. The centre is also working with questions related to the accounting and reporting of negative carbon dioxide emissions in relation to national and international climate goals as well as following the emergence of a carbon market – voluntary and/or regulated – for negative emissions.2. The second assignment was to roll-out the support system earlier proposed by the agency. The Swedish Energy Agency has concluded that a reverse action as the most cost-effective support system as well as to be compatible with EU state aid rules. The support system for bio-CCS has a budget framework of 3.6 billion €. A reverse auction means that, for example, a pulp and paper industry or a combined heat and power plant can submit a bid on how much carbon dioxide they can capture and store, and at what cost. The one who can deliver bio-CCS according to the stipulated requirements at the lowest cost, wins the auction. The Swedish Energy Agency hope to launch the first round of auction in 2023 and have the first storage of Swedish captured carbon dioxide taking place in 2026.Other countries can use Sweden’s knowledge and experiences when implementing bio-CCS. Exchanging knowledge, experiences and ideas with other countries are important to achieve large-scale deployment of bio-CCS in the Nordic-Baltic region and net-zero emissions in 2045.

Article: Analysis of the (In)compatibility of Digital Services Taxes With State Aid Rules

After the recent agreements at a global level, some Member States of the European Union have paused their plans for Digital Services Taxes. However, others have decided to move forward with them as the global political agreement reached, while encouraging, has not been implemented yet. Therefore, it is still relevant to understand the nature of such taxes and, more importantly in the context of the EU, their possible (in)compatibility with state aid rules. The purpose of this article is to shed light into these measures in a manner that encompasses all possible taxes. To establish the possible incompatibility of the taxes, an analysis is made passing through all the conditions for a measure to be considered as state aid and giving particular importance to the notion of selective advantage, which will be the determining factor if the Court of Justice of the European Union (CJEU) ever must pronounce itself on this matter. Digital Services Taxes, State aid, Fiscal State aid, Selective Advantage, European Union, European Commission, Court of Justice of the European Union, Unilateral measures, OECD

Article: Is the Symmetrical Classification Method EU Proof?

One way to solve classification conflicts involving hybrid entities is for states to apply a so-called symmetrical classification method, whereby a state adopts for its domestic tax purposes the tax classification applied to an entity by another state. The outcome of applying such a method can be that a state classifies foreign entities differently from domestic entities, raising potential issues from an EU law perspective when EU Member States are involved. For instance, in case a cross-border situation leads to more burdensome taxation compared to the domestic situation, a violation of the EU fundamental freedoms can be present, whereas if the classification leads to a lower tax burden for certain enterprises, a violation of EU State aid rules can be the result. In this article, we assess the conformity with primary EU law of tax classification methods, and especially of the symmetrical classification method. It is concluded that the risk of incompatibility with the EU fundamental freedoms and EU State aid rules should typically be limited when EU Member States align their tax classification rules with those of other states to alleviate risks of double (non-)taxation. Risks can increase, however, for instance if nationality is used as a distinguishing criterion, or where under- or overkill occurs. Taxation, Hybrid Entities, Mismatches, Classification, Symmetrical Method, EU Law, Fundamental Freedoms, State Aid

Commission

This overview highlights the Commission’s (i) plan to respond to rising energy prices; (ii) approval of technical support for tax reforms in the Member States; (iii) initiative to waive VAT to support defence and security capabilities within the European Union; (iv) scrutiny of Hellenic Post’s VAT exemption under State aid rules; and (v) approval of French tax scheme to attract investment to Saint-Martin.

Permission to bail out EU’s national flag carriers? Technocratic and political determinants of commission approval of state aid to national airlines in difficulties in the pre-COVID era

AbstractThe enforcement of EU state aid rules is often portrayed as mainly driven by technocratic standards, but there are indications that political factors also play a role. However, their exact impact and relationship with technocratic factors remain unknown. This article studies under which technocratic and political conditions the Commission approves or does not approve state aid to national airlines. Based on a crisp-set Qualitative Comparative Analysis of all 14 cases of alleged state aid to national airlines between 2004 and 2019, the article shows that both the approval and non-approval of aid are predominantly dependent upon the Commission’s technocratic assessment: a low degree of market distortion turns out to be a sufficient condition for the approval of aid, whereas a high degree of market distortion is a necessary condition for the non-approval of aid. However, in some cases, political factors are decisive in determining enforcement outcomes.

The EU scheme for the state aid rules in the air transport sector during the Covid-19 crisis

Paper provides for a systematic overview of the EU scheme for the State aid rules applicable to the air transport sector during Covid-19 crisis. The COVID-19 outbreak is having a major impact on European air transport sector. In order to help air transport undertakings in Europe to overcome the financial troubles, to preserve jobs, to secure supply of essential food, medicals or other items, etc., the EU Commission adopted set of legislative measures enabling the EU Commission and Member States to authorise hundreds of State aid measures, not only to air transport sector, but also to other economic sectors, which were mostly affected by the pandemic. Since in normal circumstances member states State aid to national undertakings are subject to extremely stringent EU competition law regime, the intention of this paper is, firstly, to analyse to what extent and under what conditions that has changed during pandemic. Secondly, the intention of the paper is to explore to what extent and for what purposes different Member States granted State aid to their airline industries with special respect to the French, Austrian, Swedish and Croatian State aid policy. Lastly, the authors will raise question whether massive capital injection to air transport companies being made only by certain, wealthier, member states are going, in long term, to cause negative impacts on the competition in the air transport sector in the internal market

The role of block exemptions and state aid modernization in enforcing state aid rules in the European Union

The article covers the role and effects of introducing block exemptions in state aid in the EU and the prerequisites for reforming state aid that was launched on a big scale in 2012, known as State Aid Modernization. Herein presented are key substantive uses of block exemptions as well as reform constituents and business processes employed by the European Commission to ensure that state aid regulatory framework is up-to-date and feasible. The article explores the trends prevalent in enforcing state aid rules given the increase of decentralization trends and overviews the implications of the implementation of regulatory acts upon which the state aid modernization was based.

The Commission Adopts the New Notice on the Enforcement of State Aid Rules Before National Courts:

The European Commission has adopted a new notice on the enforcement of State aid rules by national courts. The New Enforcement Notice replaces the 2009 Enforcement Notice, providing updated practical guidance for national judges facing private claims to remedy the unlawful granting of State aid, ie without a prior Commission approval or an exemption from notification. This article illustrates the main aspects of the New Enforcement Notice, from the general principles to certain topics, such as the interplay between the Commission and national courts’ proceedings, the role of national courts regarding aid covered by the GBER and damages actions, that appear particularly relevant in the light of the innovation they bring compared to the 2009 Notice. The article, in line with the spirit of the Enforcement Notice, stresses the importance of private enforcement before national courts for an effective development and application of EU State aid rules. Keywords: private enforcement; enforcement notice; national courts; standstill obligation; damages actions

Fostering Tech Sovereignty with a Level Playing Field on State Aid and Foreign Subsidies

In her 2021 State of the European Union Address, European Commission President Ursula von der Leyen stressed ‘the importance of investing in our European tech sovereignty’ and continued by appealing that ‘[w]e have to double down to shape our digital transformation according to our own rules’. Availability of semiconductors (also referred to as microchips or simply as chips) is essential for industry and national security alike. Without microchips there is no tech sovereignty. Given the currently fragile state of global supply chains, expanding fabrication capacity within the EU is high on the political agenda. At the same time, ensuring fair competition is of paramount importance. While tech sovereignty must be matched by sufficient State funding, it still needs to be awarded in compliance with EU State aid rules. These rules must not work as an impediment to tech sovereignty. Furthermore, the rules of the game must be the same for everyone. This regulatory objective is most evident in the draft Distortive Foreign Subsidies Regulation. Keywords: twin transition; ICPEI; supply chain; sovereignty; EU Chips Act; foreign subsidies