EC Law on State Aid; Legal Framework, Case Law and The Story in The Alitalia State Loan Case

Rastislav Funta

Abstract

The EC Treaty does not include any definition of State aid. Nevertheless, the Commission and the European Courts have construed the definition so that we should regard State aid as any advantage granted directly or indirectly through State resources.     The ECJ has e.g. in Belgium v Commission stated that aid is ‘defined in regards to its effect, and not its aim or form’.     Four cumulative elements must be shown to satisfy the test for State aid which mean that the measure must be specific, it must grant an advantage to an undertaking, the aid must come from State resources, the advantage must distort competition and have an effect on Trade between Member States.     Under the first criterion (the measure must be specific) we should understand general economic policy norms (growth- and stability-oriented macroeconomic policies which should sustain economic growth in the short term, create the possibility for growth in the medium-term and the capacity for structural changes in longer-term).     About the second criterion (advantage to an undertaking) was decided in the Case Denkavit where was held that the advantage must be granted for no consideration or countervailing benefit. Here, the hypothetical investor test must be applied in which the state aid is compared against the hypothetical case of a private undertaking functioning in a market economy.    Third criterion (come from State resources) mean that the benefiting must come directly (e.g. direct grant aid) or indirectly (e.g. loss of tax revenue).    Last but not least, (distortion of competition) by breaching of Article 87 EC the benefit must distort or threaten competition by favouring certain undertakings (even small amounts of aid would distort competition as it was decided in Vlaams Gewest v Commission).   Contrary to CFI, the Commission in Notice on the de minimis rule for State aid (Commission Regulation (EC) No 1998/2006, OJ L 379 of 28. 12. 2006) held that small amounts of aid would not fall under State aid Rules. The recapitalisation of Alitalia was authorized according to State aid legislation in 2001. It is clear that government may not give financial preference to individual companies unless they are acting in accordance with market economy investor principles.

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