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What Future for Equity Financial Instruments Where the State Acts as a Private Co-investor under the Market Economy Operator Test?

Florin Dascalescu


The notion of ‘advantage’ is a necessary element for a national measure to be qualified as State aid under Article 107(1) TFEU. In order to determine whether commercially oriented economic transactions confer or not an advantage on the recipient, the European Courts have recognised as of 1980s a general test, which implies the comparison between the State and a private economic operator. When a transaction is carried out under the same terms and conditions (pari-passu) by both public and private investors, it can be inferred that such transaction is in line with this market economy operator test (MEOT). In pursuing profit-making goals, the State may choose to act as a private investor for equity investments in target undertakings, directly or indirectly, via financial instruments or risk finance investments. The indirect investments are carried out as an intermediated finance model, via financial intermediaries, ie investments in an equity fund, administered by a fund manager in accordance with a profit-oriented investment strategy agreed between the investors (public and private). This article supports the view that more dedicated soft law rules should be adopted to support the State’s co-investor role in equity financial instruments, in order to facilitate access to finance for European companies, in particular SMEs.
Keywords: Market Economy Operator Test; MEOT variations; private investor principle; pari-passu test; European Structural Funds; financial instruments; risk finance investments; State aid compliance; investment funds; distortive foreign subsidies

Florin Dascalescu is a Senior legal counsel at the European Investment Fund (EIF) in Luxembourg, working on corporate and EU law matters, including State aid. The author would like to thank his colleagues, Nicolas Panayotopoulos and Vivi Papasouli for their very useful comments on an earlier version of this article. The content of this article strictly reflects the personal views of the author based on the information examined. For correspondence: <>.


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