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The Court of Justice Allows Member States to Compensate the Undertaking of their Choice: a Critique journal article

Phedon Nicolaides

European State Aid Law Quarterly, Volume 22 (2023), Issue 4, Page 371 - 380

State aid that compensates for damage caused by natural disasters or exceptional occurrences can run into many millions. It has the potential to cause a serious distortion to competition in the internal EU market. Yet, Article 107(2)(b) declares that aid compatible with the internal market without any prior assessment of its positive and negative effects by the Commission. This immediately raises the question - why is that aid considered by the TFEU to be compatible with the internal market? A corollary question is whether compensatory aid can be granted only to some of the undertakings harmed by a natural disaster or exceptional occurrence. The Court of Justice has recently answered the latter question by ruling that compensatory aid for a limited number of beneficiaries is not excluded by Article 107(2)(b). This paper argues that the latter question cannot be answered without deriving a plausible answer to the former question. Given the structure and overall objective of Article 107, a plausible answer is that compensatory aid tends to restore rather than distort competition. Therefore, compensatory aid that is granted to a limited number of beneficiaries is likely to be discriminatory beyond the extent that is inherent in any State aid measure and to cause excessive distortion of competition. Keywords: Article 107(2)(b) TFEU, compensation for damage, selectivity, discrimination.


News from Micula: The Court of Justice Clarifies the Temporal Application of EU State Aid Rules and Confirms the Relevance of Achmea · Case C-638/19 P European Commission v European Food SA and Others (Micula) · Annotation by Vasiliki Dolka journal article

Annotation of the Judgment of the Court of Justice (Grand Chamber) of 25 January 2022 in Case C-638/19 P European Commission v European Food SA and Others ('Micula')

Vasiliki Dolka

European State Aid Law Quarterly, Volume 21 (2022), Issue 1, Page 87 - 92

On 25 January 2022, the Court of Justice (CJ) overturned the judgment of the General Court (GC) that had annulled a 2015 European Commission (Commission) State aid decision declaring the payment of compensation granted by an arbitral award for violation of the 2003 Romania-Sweden Bilateral Investment Treaty, as unlawful and incompatible State aid. The GC annulled the Commission Decision for lack of competence ratione temporis to assess the measure as it considered the aid to have been granted before Romania’s accession to the EU. To the contrary, the CJ considers that the critical date at which the right to receive the aid is conferred to the beneficiary coincides with the granting of the right to compensation. On this ground, the CJ reinstates the Commission’s competence to review the aid. It also confirms the relevance of the Achmea ruling, by concluding that any consent that may have been given by an EU Member State to participate in international investment arbitration proceedings before its accession to the EU lacks any legal force post accession. The CJ has remanded the case back to the GC to decide on the merits.



Transport Companies Are Entitled to Compensation for Public Service Obligations Imposed by General Rules · Case C‑614/20 Lux Express Estonia · Annotation by Benjamin Linke journal article

Annotation on the Judgment of the Court (First Chamber) of 8 September 2022 in Case C‑614/20 Lux Express Estonia

Benjamin Linke

European State Aid Law Quarterly, Volume 21 (2022), Issue 4, Page 419 - 424

It has been controversial for years whether transport companies were entitled to compensation for the burden of tariff obligations imposed by competent authorities. The ECJ has now granted the transport companies a claim derived from Regulation (EC) No 1370/2007. In view of the political discussions about compensation obligations in the legislative process for the Regulation, this comes as a surprise. Henceforth, however, companies will be entitled to compensation for all negative effects (less all positive effects) of maximum tariffs imposed outside public service contracts through so called general rules.


State Aid Assessment of Complex Settlement Agreements: journal article

The European Commission’s Opening Decision in the German Lignite Phase-Out Case

Christian Koenig, Carlos Deniz Cesarano

European State Aid Law Quarterly, Volume 20 (2021), Issue 4, Page 560 - 571

The European Green Deal envisages a clean and decarbonised energy sector with net-zero greenhouse gas emissions by 2050. These ambitious objectives entrust the Member States with enormous tasks in connection with the transformation process, which must always be designed in a proportionate manner. For this purpose, compensation measures are regularly part of decarbonisation strategies. In the context of the German lignite phase-out, new legal challenges arise due to State aid law. In particular, the present case poses the question of how elements of settlement agreements are to be assessed under State aid law. This field currently seems to be almost unexplored, as the Commission’s notice on the notion of State aid only refers to settlement agreements in connection with tax law. However, settlement agreements contain some important elements that should be properly taken into account by the Commission in its State aid assessment. The fact that settlement agreements serve to avoid legal and factual uncertainties, especially in the context of highly complex decarbonisation strategies, must play a decisive role in an all-embracing economic analysis.


New Methodology to No Avail? journal article

A Review of the European Commission’s Case Practice Regarding the Net Avoided Cost Methodology Following the 2012 SGEI Package

Mikael K. Lund

European State Aid Law Quarterly, Volume 20 (2021), Issue 2, Page 229 - 239

Seeking to improve cost estimates for services of general economic interest (SGEI), the European Commission in the 2012 SGEI package introduced the new net avoided cost (NAC) methodology for calculating the cost of such services. This article conducts a comprehensive review of the Commission’s case practice with respect to the application of the NAC methodology. The review shows that the Commission has a low threshold for what is considered a ‘duly justified’ reason for not using the NAC methodology. First, the Commission has held that the undertaking performing the SGEI must be known in advance. This effectively means that it cannot be used in conjunction with tenders or public procurement. In practice, the NAC methodology can only be applied where the undertaking is already engaged in the activity in question. Second, the Commission has implicitly established two criteria for when a relevant counterfactual scenario can be defined. These criteria are interpreted strictly, effectively restricting the application of the NAC methodology to very few cases not already covered by sector specific regulation. The implication of these findings is that the introduction of the NAC methodology did not contribute anything substantial to SGEI regulation. Keywords: services of general economic interest; SGEI compensation; public service compensation; net avoided cost; NAC methodology.


State Aid Perspectives on the Coal-to-Clean Transition journal article

Report on the Conference held at the Club de Warande, Brussels, 14 November 2019

Juliette Delarue

European State Aid Law Quarterly, Volume 19 (2020), Issue 1, Page 105 - 110

Alongside long-term political commitments and robust administrative planning, a successful decarbonisation of the energy sector requires supportive measures, of which some may qualify as State aid. For the ‘Coal-to-Clean Transition’ these may include: compensation for the closure of coal facilities; efforts to achieving a fair and just transition in regions hitherto dependent on coal mining or coal use; and adequate interventions to ensure security of electricity supply. The conference of 14 November 2019 highlighted that a precise scrutiny of State aid aspects of these politically-sensitive measures by the Commission is required to ensure certainty for Member States, operators and the general public alike. Keywords: Just transition; Capacity mechanisms; Compensations; Coal phase-out; Energy transition.


State Aid Tools to Tackle the Impact of COVID-19: journal article

What Is the Role of Economic and Financial Analysis?

Nicole Robins, Laura Puglisi, Ling Yang

European State Aid Law Quarterly, Volume 19 (2020), Issue 2, Page 137 - 149

In response to the COVID-19 pandemic, the European Commission quickly provided guidance on how Member States can support companies during the crisis in a manner that is in line with State aid rules. With the Commission having approved €2.6 trillion of aid notified by Member States since the start of the pandemic, State aid rules have come under the spotlight more than ever before. Some argue that the different approaches adopted by Member States to deal with the crisis create significant competitive distortions between Member States, while others argue that State aid rules should be made more lenient. This article discusses the State aid tools that Member States can use to deal with the effects of the pandemic, focusing on the role of economic and financial analysis to support the application of these tools. The article examines how Member States can provide liquidity support to companies in compliance with State aid rules, before looking at how Member States could provide more longer-term funding solutions to companies to deal with the effects of the pandemic without breaching State aid rules. Keywords: COVID-19, liquidity support, compensation for damages, rescue aid, restructuring aid, economic and financial analysis, recapitalisations


Taxation, State Aid Rules and Arbitral Courts: journal article

A BIT of a Mess in the Micula Saga

Begoña Pérez Bernabeu

European State Aid Law Quarterly, Volume 19 (2020), Issue 3, Page 329 - 338

In its long-awaited ruling on 18 June 2019, the General Court (GC) annulled the Commission's State aid Decision in the Micula case where the Commission considered that the damages payment by Romania of an ICSID award constituted State aid. In the GC's opinion, the payment of the adverse arbitration award by a Romania does not constitute illegal State aid. Unfortunately, the GC's reasoning is tied to the timing of the measure taken by Romania, which took place before Romania acceded to the EU, and the rest of the compelling substantive pleas were not assessed. Moreover, the GC did not rule on whether the compensation of the withdrawal of the tax incentives for the post-accession period constitutes State aid given that the Commission failed to distinguish between compensation for the period predating accession and post-accession. For this reason, this judgment does not put an end to the Micula saga as long as the Commission has lodged an appeal before the Court of Justice. Keywords: arbitral award, Bilateral Investment Treaty (BIT), repeal of tax incentives, damages compensation, enforcement


When a Member State Admits an Aid to Be Incompatible · Case T-778/17 Autostrada Wielkopolska · Annotation by Marek Rzotkiewicz journal article

Annotation on the Judgment of the General Court (Ninth Chamber) of 24 October 2019 in Case T-778/17 Autostrada Wielkopolska S.A. v European Commission

Marek Rzotkiewicz

European State Aid Law Quarterly, Volume 19 (2020), Issue 2, Page 205 - 211

The granting of State support for entities is a politically sensitive subject. Member States often grant aid and then, when questioned by the Commission, defend it vigorously claiming that there was no aid at all, or that such aid was compatible with internal market rules. Different situations, ie in which Member States admit granting aid and also confirm that such aid was incompatible with internal market rules, are rare occasions. In the exceptional cases where Member States may have opposing interests to those of an entity, it is particularly important for the Commission to give the entity the opportunity to submit meaningful comments to defend its rights.