Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 1, Page 15 - 28

This paper identifies a significant shift in the approach for determining whether a tax measure is selective. The European Commission, in its decisions on tax rulings, has found that the selective nature of the rulings stemmed from the fact that they endorsed arrangements whose terms deviated from those that would have been agreed under normal conditions of competition. Unlike its other decisions on tax rulings, the Commission in the Engie case does not examine whether Engie benefitted from treatment that was not available to other companies. Instead, the Commission bases its finding of selectivity on the fact that Engie minimised its tax liability. This is an ‘outcome-based’ approached rather than a ‘treatment-based’ approach which requires comparison between companies in similar situations. Without a benchmark of comparison, an outcome-based approach is meaningless. In addition, the Commission breaks new ground by finding a selective advantage in favour of Engie in the non-enforcement by Luxembourg of anti-abuse rules. The Commission asserts that Luxembourg should have refused to issue the tax ruling. Keywords: Selectivity; tax rulings; anti-abuse rules.

Caroline Buts, Phedon Nicolaides, Hans Pirlet

European State Aid Law Quarterly, Volume 18 (2019), Issue 4, Page 489 - 509

Despite the improvement of the State aid rules on Research, Development and Innovation (RDI) during the past decade, stakeholders have claimed that the current rules are at points ambiguous, which results in a negative impact on innovation. By means of an exploratory case study and participatory action research, this article aims to identify the ambiguities in the RDI rules. While the rules are detailed and overall well explained, we detect three themes where ambiguities arise, ie non-economic activities, price calculation of goods or services provided by research organisations, and ancillary activities of research organisations together with the 20% threshold. For each of these categories, we discuss what constitutes a ‘safe’ interpretation of the concepts involved. This entails an interpretation that is in line with the case law as well as with the spirit of State aid control. Where appropriate and possible, we provide examples as well as suggestions for their practical implementation. Next to providing guidance regarding the detected ambiguities, this article aspires a contribution to the forthcoming revision of the State aid rules for RDI. Keywords: State aid policy; Research, Development and Innovation; GBER; RDI Framework.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 2, Page 121 - 137

State aid to financial institutions has been massive. State aid rules together with the directive on bank recover and resolution and the regulation establishing the Single Resolution Mechanism require that banks that receive State aid must be resolved or liquidated. The exception to this rule is that State aid may be granted without leading to resolution or liquidation when the beneficiary bank is solvent, the aid is necessary to preserve financial stability and the aid is intended for liquidity support or precautionary recapitalisation. This paper identifies a number of ambiguities in the application of Article 107(3)(b). First, it is unclear whether aid under Article 107(3)(b) has to counteract and/or prevent a ‘serious disturbance’ in the economy of a Member State. Second, it is unclear how Article 107(3)(b) can apply to aid that addresses regional rather than national problems. Third, it is unclear how the double requirement of remedying a serious disturbance and preserving financial stability is applied to solvent banks which are not systemically significant. Fourth, it is unclear whether the requirement that resolution aid must be in the ‘public interest’ also implies that aid must be limited to banks with systemic significance. Keywords: Banks; Serious disturbance; Burden sharing; Resolution.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 3, Page 368 - 374

The amount of State aid in a loan or guarantee is not necessarily equal to the principal of the loan or the guaranteed amount. Moreover, the liability of the State and the risk borne by the State depend on the rights or collateral that the State secures before it grants a loan or guarantee. For this reason, State aid law needs a third concept to describe the behaviour of the State apart from that of ‘public authority’ or ‘private investor’. That third concept is labelled here as ‘ex-ante creditor’. It applies to those sums over which the State can exercise a claim without expecting ex-ante to receive a profit. Past loans or guarantees that contain State aid should be ignored, as prescribed by the Court of Justice, only when the State has no prospect of recovering any amount that is due to it or when it has no claim to exercise against the borrower who is the aid recipient. Keywords: Private investor; Private creditor; Loans; Guarantees; Past State aid.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 1, Page 2 - 18

When Member States act as regulators, they need not maximise revenue from the granting of permits, licences or concessions rights. However, they must grant permits, licences or concession rights on the basis of procedures which are open, transparent, non-discriminatory and unconditional. This article argues that qualitative selection criteria may not in fact support the effective achievement of the stated regulatory objectives and, as a result, they may confer an advantage and transfer State resources to the chosen undertakings. Since the concept of State aid does not depend on policy aims or intentions, the regulatory objectives of the authority that grants the exclusive permits, licences or concessions should be irrelevant. EU law does not prevent Member States from using procedures that can aim simultaneously at revenue maximisation and achievement of public policy objectives. Keywords: Competitive Selection; Regulation; Non-Discrimination.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 3, Page 419 - 427

A tax measure is selectivity if it deviates from the reference tax system and if it cannot be justified by the logic or internal economy of the reference system. In order to determine whether a tax measure deviates from the reference system, only its effects are taken into account, not the regulatory technique used by the Member State in question Keywords: Selectivity; Reference tax system; Regulatory techniques.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 3, Page 412 - 418

A tax measure can be selective in relation to both direct and indirect beneficiaries. A beneficiary that passes on all benefits to third parties may still derive a selective advantage. The selectivity of such advantages have to be determined on the basis of their effects, not the form of the tax. Keywords: Selectivity; Direct beneficiaries; Indirect beneficiaries; Passing on advantage.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 4, Page 534 - 545

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 2, Page 259 - 263

Caroline Buts, Phedon Nicolaides

European State Aid Law Quarterly, Volume 16 (2017), Issue 2, Page 272 - 275

While many islands can be attractive tourist destinations, other parts of the economy often face serious challenges that are the direct result of natural and permanent handicaps. Small islands encounter difficulties in attracting and maintaining manufacturing activities. Additional transport costs as well as the absence of economies of scale and low connectivity can result in investment decisions on the mainland, rather than the island. Multiple policies exist to help islands balance out the disadvantage of being remote, small or sparsely populated. Nevertheless, the State aid rules treat small and remote islands differently, depending on whether they are a region or a Member State. After briefly reviewing the main difficulties encountered by islands, we study the case of Malta. Next, the relevant State aid rules are evaluated, revealing inconsistencies and the need for revisions with important consequences for Malta and Cyprus. Keywords: Regional State Aid; Peripheral Islands; Island States; Transport Costs; Industrial Base.