The scope of State aid law is very broad: it includes direct subsidies as well as loans and guarantees below market rates, but also indirect measures resulting in lower costs for enterprises. Other examples of State aid:
- municipalities reducing or waiving sufferance tax
- tax measures favouring selected enterprises
- the sale of land or property below market rates
As State aid can distort the level playing field within the internal market, the European Union has a strict State aid regime. State aid is in principle prohibited unless it can be deemed compatible with the internal market. The European Commission monitors compliance with State aid rules. Therefore, in principle, any plan to grant State aid must be notified to the European Commission. It has exclusive competence to assess the compatibility of a concrete aid measure. As long as the European Commission has not decided on the compatibility of a measure, the planned aid may not be implemented. Notification may be waived if an exemption applies.
The Court of Justice of the European Union supervises enforcement by the European Commission. If the European Commission decides that the payment of State aid was unlawful, the relevant public authority must recover this aid from the receiving enterprise, even without a judicial order to such effect having been issued.
Click here to read more about the concept of State aid.
Services of general economic interest
Services of general economic interest (SGEI) are economic services that serve a public interest. If these services are not provided or taken up by the market (under socially acceptable conditions), we speak of market failure. The State may then decide to entrust an undertaking with the provision of an SGEI and provide compensation in return. When the State finances the performance of this SGEI, it must take account of the State aid rules. Subject to certain conditions, this financing is permitted. The SGEI exemption decision of the European Commission sets out the conditions under which State aid in the form of compensation granted to undertakings entrusted with performing public services can be exempted from the notification requirement.
Foreign subsidies
On 12 January 2023, Regulation (EU) 2022/2560 ("Foreign Subsidies Regulation”) entered into force. It establishes a framework to address distortions of the internal market by foreign subsidies. Under the regulation, foreign subsidies are deemed to exist where a third country provides, directly or indirectly, a financial contribution which confers a benefit on an undertaking engaging in an economic activity in the internal market and which is limited, in law or in fact, to one or more undertakings or industries. Foreign subsidies are not subject to the State aid regime, because they are granted by non-EU countries.
Designed to combat the competition-distorting consequences of foreign subsidies, the Regulation rests on three main pillars:
- a general power conferred on the Commission to investigate foreign subsidies that actually or potentially distort the internal market
- an obligation to notify concentrations
- an obligation to notify foreign financial contributions in the context of public procurement procedures
This blog (in Dutch) delves deeper into the Foreign Subsidies Regulation and its application.
At AKD, we can help contracting authorities and tenderers to comply with their obligations arising from the Foreign Subsidies Regulation.
Expertise
Our experts will advise on complex legal concepts of State aid law, such as 'economic advantage' or 'effect on intra-Community trade', and they are eminently capable of assessing whether a measure constitutes State aid and whether it should be notified to the European Commission. If it proves impossible to design a measure in such a way that it falls outside the scope of the state aid prohibition, it is often possible to make use of one of the exemptions from the notification obligation. Our specialists have extensive experience designing state aid-proof transactions between public authorities and businesses, and like to conceive and flesh out ideas with you, always mindful of the practical realities. In many cases, this avoids a lengthy notification procedure and the initiative envisaged by the measure can proceed quickly.
Notification
If notification is required anyway, we can supervise and support the notification. Our services also include assistance in Commission investigations into possible prohibited state aid and related disputes before the European and national courts.
Complaints
Interested parties may submit a complaint to inform the European Commission of any alleged unlawful State aid. Regulation (EU) 2015/1589 obliges the Commission to investigate any such complaint. If you suspect that a competitor received unlawful aid, then we can assist you in submitting a complaint.
In addition, we can advise on claims seeking the cessation of further aid or undoing any aid already granted or the effects thereof.
Last but not least, we have the capability to assist with complaints to inform the European Commission of suspected foreign subsidies.
Recent work
Our recent work includes:
- advising on large-scale investment projects by municipal and provincial authorities
- advising municipal authorities on COVID-19 aid
- advising on (real estate) transactions by public undertakings
- advising on the design of SGEIs
- assisting NGOs that the European Commission considers to be undertakings
- litigating for municipalities over complaints concerning alleged State aid
- submitting complaints and litigating for undertakings whose competitors received unlawful State aid