International Law of Subsidies and State Aid Regulations Explained

International law of Subsidies Part I Aleksandra Gebuza

StateAid main aims Connected with the competition policy of the EU In order to ensure: fair competition, functioning markets and a competitive economy The main pillar art. 107 (1) 1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

Prohibited State air 1. The measure confers an advantage on its recipients which relieves them from charges that are normally borne from their budgets 2. The advantage is granted by the state or through state resources 3. The measure affects competition and trade between Member States 4. The advantage conferred is specific or selective in that if favours certain undertakings or the production of certain goods

Why StateAid is prohibited? Prevents waste of public resources for inefficient subisidies Prevents crowding out of efficient private investments by preserving competitive and open internal market

Therefore when state aid should not be prohibited?

Legal state aid reasons why Fully justified where it is put in place in order to target market failures and thereby complement, not replace, private spending StateAid may be required in order to give people goods and services that the market would not deliver on fair and equal terms or would not deliver at all StateAid ma induces its beneficiaries to undertake economic activities they would not have taken otherwise

Exemptions under art. 107 (2) and (3) 2.The following shall be compatible with the internal market: (a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; (b) aid to make good the damage caused by natural disasters or exceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission,may adopt a decision repealing this point. 3.The following may be considered to be compatible with the internal market: (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment,and of the regions referred to inArticle 349,in view of their structural,economic and social situation; (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest; (e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

Role the Commission Commission has to check whether MS conceive and design only aid measures to help enterprises produce goods and services that would otherwier not be provided in the internal market Whether these aid measures would not distort competition by strengthening the particular interests of a region or sector to the detriment of the economy as a whole Prior authorization! MS may not put their proposed aid measures put into effect until the Commission has approved tchem

CASE definitione of UNDERTAKING (enterprise) Agardian Sports Club is a non-profit association ( Association ). The Association was established by a public institution and is financed from public funds to develop and promote healthy lifestyle and sports in all 9 kingdoms. By virtue of the decision of the All-Father Odin, the Association participates in making administrative decisions on organizing sport competitions by issuing binding opinions on whether such a competition should be approved by Odin or not. The Association also organizes its own competitions. As part of these competitions, it concludes sponsorship, advertising and insurance contracts. Competitions organized by the Association belong to the largest and best organized events in the sports industry. They are often considered to be # 1 competitions in this field in all 9 kingdoms. Assume that EU law is applicable on the territory of 9 kingdoms. Assess whether, under EU law, the Association may be considered an undertaking?

CASE The Flying Boats Club in Midgard is a foundation supporting public bodies in organizing tenders, primarily for the purchase of equipment and systems related to air traffic management. Pursuant to the Act on the Uniform Air Traffic Management System adopted in the area of 9 kingdoms, the Club aims to develop cooperation in the field of air navigation, considering the needs in the sphere of defense, while providing all airspace users with the widest possible scope of freedom that remains in compliance with the required level of security. Under this Act, the Club has the task, inter alia, to adopt and apply common standards and specifications, harmonize the regulations applicable to air traffic services and to support purchase of flight safety systems and devices. The Club does not receive any remuneration for its services. There is also another entity on the Midgard market whose activity also consists in offering support in the organization of tenders in the field of aviation. It is 2Ravens Ltd. . 2Ravens Ltd. sued the Flying Boats Club as an undertaking exploiting its dominant position on the market. Assess whether, under EU law, the Club has the status of an undertaking and whether its activities can be considered as exercising public authority.