Special Event – What is State Aid?

Speakers: Kerle Clemens, Jéhanno Bertrand, Verouden Vincent
Moderator: Derenne Jacques

On Tuesday 4th of March, at the premises of Science14 Atrium in Brussels, PubAffairs Bruxelles hosted a debate concerning the notion of State aid. The event was moderated by Mr Jacques Derenne, Partner and Head of the Antitrust, Competition and Economic Regulation practice at Hogan Lovells, while the discussants were Mr Clemens Kerle, case-handler in the State aid policy unit at DG COMP and member of the team authoring the draft Notice on the notion of State aid, and Mr Bertrand Jéhanno, French General Secretariat for European Affairs. Mr Vincent Verouden, Deputy Chief Economist at DG COMP, was also attending the session for comments.

As an introduction to the debate, Mr Derenne presented the speakers and made some remarks on the notion of State aid. Mr Derenne recalled the importance of the 1956 “Spaak report”, which covered for the first time the issue of State aid in the context of the integration of the European internal market, as well as the “open definition” of State aid enshrined in Article 107 (1) TFEU. He then proceeded by emphasizing that case law has shaped the actual application of the EU competition rules regarding these matters. Finally, he listed a series of criteria which, in his opinion, should be considered as cardinal in the definition of State aid resulting from the EU case law. He then gave the floor to the discussants.

Mr Kerle started his preliminary speech by pointing out that the draft notice on the notion of State aid must be interpreted in the context of an ongoing modernisation of EU State aid policies aiming at fostering growth, streamlining decision-making processes and providing guidance for stakeholders. He then highlighted the fact that the concept of State aid has been very dynamic and has evolved with time, an evolution which is reflected by rich and complex case law. Mr Kerle continued by stating that the draft notice is a novel type of document setting out the Commission’s comprehensive interpretation of the notion of aid and it remains bound by the CJEU (Court of Justice of the European Union) jurisprudence whereas the Commission normally releases communications and guidelines in order to provide guidance on compatibility criteria (setting out under which conditions State aid is allowed). Mr Kerle concluded his intervention by stating that there are still a number of areas within the draft notice where there might be room for improvement – the draft was intended to form the basis both for a comprehensive discussion with stakeholders and further regulatory initiatives.

Mr Jéhanno began by welcoming the draft notice from the Commission, while remarking that, according to his methodology assessment, the discussion on the issue of State aid modernisation should have started from this very notice. He continued by affirming that there should not be a high level of expectation for a definitive settling of the issues at stake in the draft notice, as the jurisprudence has noticeably varied, especially in recent times. He also welcomed the progress which the Commission document brings about the notion of “economic activity”, although this very notion was already covered by the legislation and communications on services of general economic interest. He finally remarked that, in the light of both the new case law and the strategic importance of the matters, the issue of infrastructure, the concept of “market economy operator” and the issues concerning the conditions of distortion of competition and effect on trade between Member States have not been fully addressed by the draft notice.

Mr Verouden entered the discussion on the two main economic notions which are related to the definition of State aid, namely, the concept of advantage and the issue of distortion of competition and the effect on trade. On the first matter, Mr Verouden pointed out that while common types of State intervention, such as subsidies or grants, can quite easily be seen as conferring an advantage to the undertaking, there are several other means by which the State may grant an advantage (e.g. through cheap loans, guarantees or equity injections at favourable conditions). He explained that the definition of “economic advantage” is inextricably linked to what the undertakings are able to gather in the market in order to finance themselves compared to what is offered by the State. In order to define a given State intervention as State aid, it is necessary to demonstrate that the State is offering conditions that are not offered by the market.

A first set of focal points of debate included the possibility of the Commission providing definitions when there is no case law available, the relation between the shaping of the notion of State aid and EU policy making, with special regard to the energy sector, and the consistency of State aid policies with other EU policies.

Mr Kerle replied to a question by stating that it is risky for the Commission to provide definitions without any CJEU case law background. In addition, he stated that it would be difficult to detect in advance the lack of a definition without a clear context. Mr Kerle continued by saying that the Commission has always been explicit about the fact that there are a number of policy objectives underlying the Commission’s compatibility guidelines, while the draft notice is meant to simply clarify the notion of aid to stakeholders. Mr Jéhanno commented on this part of the debate by saying that he would welcome a clearer State aid definition considering the whole four conditions laid down in Article 107 (1) TFEU at the stage of qualification (and thus inviting the Commission to really assess the effect on trade and distortion of competition at this stage, giving up its practice to simply presume them) and he added that, in his opinion, the Commission had given so far a clear and satisfactory framework with regard to State aid policies within the energy sector domain.

Another focal point of debate was the issue of the concentrated geographical extension and State aid of a small amount with which the Commission is often dealing. On this matter, Mr Verouden explained that the European Commission must assess every case, although they may sometimes appear of meager proportions, in order to prevent the multiplication of small breaches which, as a whole, can affect competition in the EU internal market.

The matter of state aid and nuclear energy, the issue of selectivity, the issue of references as well as the recent evolution of State aid case law, State aid effects on trade and the “de minimis” principle, were also discussed during the questions and answers session of the debate.

Do you want to go further into the issues discussed in our debate? Check our list of selected sources which we have provided for you

State aid control, Overview, European Commission

Consultation on the Notice on the notion of State aid, European Commission

State aid, Global Competition Review

EStAL – European State aid Law Quarterly

Revue Concurrences – State aid quarterly (in French)

French General Secretariat for European Affairs position on State aid