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Hello and welcome to a lecture concerning
one of my favorite subjects, State Aid.
Today, I will present you with
an introduction to State Aid law and
present the definition of
State Aid in Article 107 TFEU.
The main question is how
do we define State Aid?
A colleague of mine will tell you more
about the exceptions from the provision of
state aid in another lecture.
I will tell you more about state aid
procedure and the judicial procedure
linked to state aid control in
a separate lecture on Article 180 TFEU.
In order to profit from this lecture,
I suggest you read through articles 106,
107 and 108 TFEU.
When you have done so, you can
continue to watch the presentation.
First, let me tell you something
about state aid law in general.
Stated Law is generally speaking, the
common term to denote the prohibition in
the treaty of member states
providing subsidies to companies,
which threaten to distort
competition in the EU.
As we will see,
the prohibition is shaped, so
that it allows a wide margin or
discretion for the administration.
Both on the European and
on the member state level,
the law leaves space for politics.
One such example is the decision
of European government and
the commission to allow state aid to
banks during the financial crisis.
But there is another side too,
that is the economic side of state aid.
State intervention in the economy is
a common feature in developed countries.
Since the state is so
powerful, an intervention can
have an impact on the economy.
While some argue that
this is a positive force,
others argue that this
is a negative force.
In any case, the application of
state aid law will always
have an economic dimension.
The nature of state aid is therefore,
best described by the state aid triangle.
In this course, we will deal mainly
with the law part of the triangle.
But keep in mind, that the other
aspects are just as important.
The definition of State Aid is
found in Article 1071 TFEU.
According to this provision, 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
favoring certain undertakings or
the production of certain goods
shall be insofar as it affects trade
between member states incompatible
with the internal market.
The notion of undertaking
is a very flexible one.
It includes any entity that
engages in an economic activity,
regardless of its legal status or
how it is financed.
It has also been described as
an economic entity, which consists of
a unitary organization of personal,
tangible and intangible elements,
which pursue a specific economic
aim on the long term basis.
This does not mean that
an undertaking must be profit driven.
It is sufficient that the undertaking
operates on the market in
which there is competition
between undertakings.
Activities, which consist
in the exercise of
public authority are not considered
to be economic activities.
And therefore, the rules on state,
they do not apply to these undertakings.
This rule concerns childcare and
education and such services.
There are four main criteria,
which have to be fulfilled for
a measure to be defined as state aid.
The first is that the aid must be granted
by a state or through state resources.
This is called Imputability.
That is the aid must come
from the purse of the state.
The notion of state
carries a wide definition.
It does not only cover the state per se,
but also the administration and companies,
which have very close links to the state
and fulfill administrative functions.
The decisive question is
whether the state has
a determining influence in the company.
Here already,
there is an important exception.
If the state acts like a private investor
in the market economy, the intervention
is considered to be a normal investment,
such an intervention is not
considered to fall under the prohibition
of state aid in Article 171 TFEU.
Therefore, if state controlled companies
follow market oriented transactions,
there is no state aid.
If the state acts like a creditor,
owner and
investor on market terms,
there is no state aid.
The second criterion is that
the aid must bring an advantage.
Article 171 TFEU speaks of
favouring undertakings.
In short,
the beneficiary of the aid must be
better off after the aid has
been granted than he was before.
But it doesn't have to
be a transfer of money.
The provision also covers
a situation where the state does
not take out a levy or a tax or otherwise,
must be paid by everybody else.
The third criteria is that
the aid must be selective.
Article 171 TFEU prohibits
state aid only if it
favors certain undertakings or
the production of certain goods.
This means that the targeted measured
to a specific undertaking or
groups of undertakings is prohibited.
However, if a measure is
general in character,
it's not covered by this criterion.
You can imagine that this leads to
big difficulties when it comes to
tax measures, because how do you determine
that a certain tax measure is selective?
There is a lot of discussion
on this particular topic and
a lot of case law from
the court of justice.
The fourth criteria concerns
the distortion of competition.
Here we have a presumption that if
the first three criteria are fulfilled,
the last one is fulfilled too.
However, this does not
free the authorities from
making an assessment on this point.
But the burden of proof goes over to
the state or beneficiary to show that
the measure in question does not distort
or threaten to distort competition.
There has been discussions about
how to make this assessment more
scientific based on competition economics,
that discussion effectively
ended with the financial crisis.
The question whether these four
conditions are fulfilled are always
made based on objective criteria,
that is the intention behind
an intervention by the state
plays a secondary role.
So remember,
when these four criteria are fulfilled,
a measure qualifies as state aid and
an Article 171 TFEU.
However, there is much more to be
said about the state aid system.
At the center stage of the system, you
will find the exception to the prohibition
which are laid down in Article 107(2) and
107(3) TFEU.
As far as state aid is concerned,
these exceptions and
how they are applied by the commission
contribute to a much softer application
of the prohibition than the wording
of Article 171 TFEU may imply.
So when you hear the following
lecture on Article 172 and
173 TFEU and the other exceptions
to the prohibitions on state aid.
Keep in mind that those
provisions only applied to
measures that have already been
declared state aid as such.
It's just that they maybe justified or
as we say in EU law,
declared compatible with
the internal market.
We now have reached
the end of this lecture,
which concerned the basic
notion of what is a state aid.
Thank you for tuning in and
see you soon again.
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