Maria Segura, Egill Olafsson, Marianne Clayton

European State Aid Law Quarterly, Volume 18 (2019), Issue 1, Page 3 - 14

One of the many and still unresolved questions raised by the discussions surrounding Brexit is that of its implications on State aid rules. The consequences for the UK and for both the EU and the European Economic Area are still unknown. The options are diverse and still open to much speculation. In this article, we will focus on the EEA model. Because it is not that well-known, the scope of the EEA agreement and the way it functions will firstly be presented. Indeed, some specificities of the EEA framework, amongst which the principle of homogeneity, deserve explanations as a cornerstone for the application of State aid rules within the EU and the EEA. Finally, the actual different options regarding State aid control post-Brexit within the UK, EU and EEA will be discussed. To conclude, attention will be devoted to the concerns regarding the continuation of the EEA Agreement as it stands and the future homogeneous application of State aid rules. Keywords: State aid control; Brexit; Homogeneity principle.

Jan Bonhage

European State Aid Law Quarterly, Volume 18 (2019), Issue 1, Page 29 - 36

Taking into account previous State aid in the MEOP assessment requires an in-depth analysis of the specifics of the individual case. The mere fact that economic interests derive from previous State aid does not rule out their relevance in the assessment of the economic rationality of further financial measures. State aid aims at a comprehensive analysis of all relevant factors at the time of the funding decision. Both the purpose of the MEOP and previous European case law support such comprehensive substantive approach in the MEOP State aid assessment of subsequent financial measures. In light of the rationale of the MEOP and previous decisions, the CJEU’s rather formal approach in the FIH case is not convincing. The comprehensive substantive approach of ING Groep, also concerning the relevance of previous State aid in the assessment of subsequent public measures, more adequately reflects all aspects that a private investor would take into account in a comparable situation. Keywords: FIH; ING Groep; Land Burgenland; MEOP; previous State aid; subsequent financial measures; substantive approach; comprehensive assessment; formal approach; public authority.

Adina Claici, Norbert Maier

European State Aid Law Quarterly, Volume 18 (2019), Issue 1, Page 76 - 83

This article describes a recent State aid case that advances the boundaries in the analysis of the Market Economy Investor Principle beyond the level of complexity reached in previous cases. In 2017 the European Commission approved the aid to Paks II nuclear power station in Hungary following an in-depth investigation. We highlight the most original pieces of economic analysis and financial modelling that contributed to the decision. Among others, the Commission used multiple benchmarking methodologies to estimate the profitability of the investment and the parameters of the financial model. Furthermore, a complex probabilistic model ensured robustness of the results. Finally, we explain the reasoning provided by the Commission when rebutting some of the assumptions put forward by Hungary. Keywords: State aid; MEIP; Nuclear power; Hungary.

Fausta Todhe

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 249 - 263

In its recent State aid Decisions, the Commission claimed that an (autonomous) arm’s length principle, independent from the one originating in the OECD framework, is embedded in Article 107(1) TFEU as a tool to ensure the protection of the principle of equality. Considered a novelty, the Commission’s approach has been challenged not only by the appeals submitted from the interested parties but also from a number of practitioners and academics. Although the last words remain still with the Courts, the purpose of this article is to join the debate and bring a personal view on the matter. It therefore reviews the recent State aid Decisions on individual aid in order to determine the potential embedding of an (autonomous) arm’s length principle in European State aid law. Keywords: Fiscal State aid; Arm’s length principle; Tax rulings

Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 226 - 238

In order to determine whether a tax measure is selective, it is necessary to determine first the reference tax system. The General Court has recently ruled that the reference system is that which is defined by Member States and includes such components as the tax base, the tax rates, and the various bands of taxable income, profit, or revenue. The Commission may not identify a hypothetical or artificial reference system. The General Court has also ruled that differentiation of tax payers is not necessarily selective as long as it follows from the objective of the system and that the progressivity of tax rates is a form of differentiation that is not necessarily selective. In this connection, progressive tax rates on profit can be justified according to the ability to pay. This article argues, however, that progressive taxes on turnover are unlikely to correspond to ability to pay. It also warns that Member States may be tempted to target company size under the pretext of levying progressive taxation. Keywords: State aid; Turnover; Taxation; Progressive rates; Selectivity

Katrine Lillerud

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 239 - 248

National registers on individual aid grants above €500 000 became mandatory from 1 July 2016. The European Commission hopes the registers will promote compliance, raise awareness on aid granted and function as a disciplinary measure. They count on the registers to ensure better control at the national level, by incentivising beneficiaries to comply and by providing enough information for competitors to check whether aid was lawfully granted. This article provides a case study of how the national registers function in Norway, Iceland and Liechtenstein. The three European Economic Area States are an interesting case study as they are the only countries that have opted for their own national transparency registers, whilst the EU Member States all use the Commission’s portal. The findings show that the transparency registers currently do not provide the information required for competitors to assess the compatibility of an aid measure with the internal market. Almost all the published aid measures lack a link to the national legal basis or the granting authorities’ decision on the individual aid measure. These shortcomings are easily corrected. However, if left unattended, they arguably render block exempted aid unlawful. Currently, the effect of the national registers appears to be that they induce competitors to apply for aid rather than litigate on it. Keywords: Ex post evaluation; Block exemptions; National transparency registers; Individual aid; Privatization of State aid enforcement; Transparency communication

Giulia Sonderegger

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 264 - 273

Rescuing and restructuring aid (R&R aid) is one of the most controversially debated categories of State aid and perceived very critically by the Commission. In the course of the State aid modernisation programme in 2014, the Commission has tightened the requirements to grant such aid by introducing a non-exhaustive list of balancing criteria. This counterfactual analysis increasingly shifts the focus to the economic effects of R&R aid and the incentives it creates. The modernised R&R aid therefore primarily aims at promoting a more reliable assessment of all the effects of an intervention whilst enhancing the predictability of decisions. Despite the efforts the Commission has put into improving R&R rules, this article asserts that due to R&R aid’s pervasive and distortive nature, it can hardly ever be justified and should consequently be replaced with other, less distortive market instruments, such as harmonised insolvency proceedings. Considering the fact that the EU consists of 28 countries with various national interests, the currently very restrictive practice of R&R aid could, however, be seen as a temporary compromise solution between Member States and the Commission. Keywords: Rescue and Restructuring Aid; State aid Modernisation; Justifiability of Rescue and Restructuring Aid

Federica Maldari

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 398 - 403

The Case deals with the decision of Portuguese authorities to put Banco Espirito Santo SA (BES) into resolution and to immediately create a ‘Bridge Bank’. The Portuguese authorities notified to the EC the proposal to grant €4.899 million of State aid to the ‘Bridge Bank’ by way of initial share capital. The EC concluded that the State aid at issue was compatible with the internal market. BPC Lux 2 Sàrl and the other subordinated creditors of BES initiated proceedings before national courts and ultimately to the Court of the Justice of the European Union. On 7 November 2018, the Court of Justice rejected the General Court’s Order to dismiss the action as inadmissible due to lack of interest. Consequently, the Court of Justice confirmed the principle that an interest in bringing annulment proceedings may arise where the annulment might benefit the applicant in pending proceedings before national courts. Keywords: State aid; Financial crisis; Subordinated creditors; Damages; Annulment proceedings; National legal basis.

Edwin Schotanus

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 359 - 365

Under the Case law of the Court of Justice (CJ), aid measures are very quickly considered to affect competition and trade between Member States (inter-State trade). Nonetheless, in certain clear, specific situations, this will not seem to be the case. The European Commission is constantly seeking ways to dispose of such issues fast, in order to focus on more harmful types of State aid. This pragmatic approach by the Commission is at odds with the CJ’s principled application of the criteria ‘effect on competition’ and ‘effect on inter‑State trade’, and may sometimes result in inconsistent Decisions. Legal certainty would be furthered by a CJ ruling about the Commission’s pragmatic approach. Keywords: effect on inter-State trade; effect on competition; appreciability; State aid.

Begoña Pérez Bernabeu

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 377 - 381

Without ruling on the merits of the Case, the General Court annulled the Commission’s Decision qualifying as State aid a tax regimen granted by Spain to the major Spanish professional football clubs Real Madrid, F.C. Barcelona, Athletic Club de Bilbao and Club Atlético Osasuna. Following the action for annulment from F.C. Barcelona, the General Court took the view that the Commission had not sufficiently proven that the tax regime had the effect of conferring an actual economic advantage on these four clubs. Keywords: State aid; Burden of proof; Standard of proof; tax advantage; tax rate.