From Subsidy Control To Subsidy Governance
Presented by: Dr. SZEGEDI
Date: 11 – 13 January 2025
State Aid: Diverse Level Of Legal Acts And Actors
- Treaty-level provisions
• Expanding secondary legislation
(Council + European Parliament BUT also: Commission's soft law)
• Pivotal role of CJEU case-law
(Commission as EU-level competition authority and national actors)
- TFEU Art. 107-109.
• Main rules combined various set of exemption rules and procedural
requirements (e.g. recent SATF)
• 1/ Fiscal state aids in taxation?
• 2/ Greening of state aid rules (and case law) in nuclear projects
'Economic' History Of State Aid Law In The EEC/EU
- Parallel evolution with state aid law
• 1950s
restrictive practices meant treating the subsidy as 'bad.'
less interventionist and less intensive regulatory approach
• 1970s
main game-changer crisis cycles - the collapse of Bretton Woods'
monetary system and two consecutive oil shocks + several Japanese and
American companies began locating their plants in Europe with some
Member States to offer subsidies to attract them
use public subsidies to promote national undertakings providing
subsidies for national market competitors
US takeovers to contemplate positive action in the broad field of
industrial 'policy'
• 2012: SAM - State Aid Modernization Reform - less strict notification
obligations by MSs + much more exemptions
• Present days - various economic and crisis cycles
A broader set of diverse policy areas reflected in state aid-related policy-
making (industry, FDI, CFSP, economic governance, commercial
policy)
COVID-19 management and the post-COVID era - more state aid by
MSs needed?
- History rep repeats itself?
Post-Covid MS-Level Subsidy Competition?
- SUBSIDY DISTORTION TO CYCLICAL DISTORTION?
• 2020. Germany and France were "responsible" for MORE THAN HALF of the
approved State aid,
• smaller and financially weaker Member States deteriorated rapidly,
- MS-LEVEL DIFFERENCES:
• Some may use bazookas while others shoot slingshots.'
- ANY SOLUTIONS by EU-LEVEL FUNDS?
• setting up compensation funds financed by a certain percentage of the aid
• A new Solvency Support Instrument has not been enacted
• new RRF framework could be seen as a positive step along with some new fund
programs (CRII, CRII+, and REACT-EU)
- Exemptions period technically finished in Q4 2023
CJEU: Fiscal State Aid Or Taxation Matters?
- MSs vs. COM
• MS-level tax rules/arrangements for (MNE - US-based) enterprises labelled as
state aid?
• COM (EU) as competition authority gaining new powers in taxation?
• Highly complex methodology: Selectivity + OECD'arms length principles +
market-based outcome between branches
- CJEU (GC)
• General Court - rather restrictive: COM to identify the MNEs (and national
actors') manifest errors:
Lack of manifest errors in transfer pricing
• Manifest error in Luxemburg's applied methodology (no ordinary market
circumstances)
- Spill-over effect on taxation?
• Yet to be decided by Court (2nd instance)
• Modifying national tax regulations and former national practices
• Better cooperation between national authorities
CJEU: Greening Of State Aid Matters?
- MSs vs. COM
• MS-level nuclear projects investigated based on TFEU 107.3-state aid rules
• Hinkley Point C (HPC) - last pre-Brexit case before CJEU
• Paks2 - still ongoing
• Austria: challenging nuclear projects based on state aid rules instead of green
• requirements:
• 1/ MSs prerogative: choose free mix of energy in Treaties
• 2/ complex investigation of aids based on market scenarios
- CJEU (Court and GC)
• CJEU - Rather restrictive:
• 1/ Treaty-based prerogative:
• choose free mix of energy in Treaties (no modification by CJEU)
• 2/ Lack of manifest errors in state aid investigation by COM
• 3/ NEW state aid investigation scheme in HPC case
• HPC: Aid must be COMPATIBLE EU environmental lax
• Paks2: the breach of another rule of EU law would have had to be indissociably
linked to the State aid measure
- Spill-over effect of environmental considerations?
• Yet to be decided by Court (2nd instance) in case of Paks2
• HPC-more activist Court and Paks2 seems to be a step towards sideways
• (Yet) NO green U-turn form side of the CJEU...
Conclusions – Towards ‘Subsidy Governance'?
- To some extent, history has repeated itself, yet with obvious differences
• Some subsidy competition emerged between MSs, similar to the 1970s
• BUT much broader integration in terms of policy areas and the number of MSs
concerned
- Horizontalization of EU law and State aid law - Already governance?
• Diverse policy areas became state aid relevant - industry, CFSP and FDI, Green
Deal, commercial relations (Foreign Subsidies Regulation)
• CJEU: seems to be less activist in 'horizontalization' (lack of COM's manifest
errors + no border interpretation of Treaty provisions, no competence
expansion)
• State aid measures need to be balanced and rebalanced due to policy priorities
of different areas
• The diverse set of policy areas could be treated in a highly different way baser
on MSs interests
