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The prohibition of state aid

a reminder and an all-clear

The prohibition of state aid

Not surprisingly, questions about the prohibition of state aid under EU law usually arise when there is vociferous public support and politicians are discussing appropriate measures. 

COVID-19 has given rise to this on several occasions, with the EU responding, in particular, through a temporary framework for state aid to support the economy. On this basis, it has so far approved more than 200 measures of aid, including some from Austria. These measures include aid for fixed costs and support for Austrian Airlines. However, when considering financial aid, it is often overlooked that not every instance of monetary aid provided by public authorities falls under the prohibition of state aid. Indeed, this rule only covers measures that are considered to be aid in the first place. If this is not the case, there is no need to notify the European Commission of it and, a fortiori, no need to discuss the facts on which the aid or the aid regime is to be based. 

Only measures which encompass all the elements constituting the concept of state aid are considered to be aid. In addition to being granted through state resources, this includes, inter alia, a favourable impact and a selective effect on certain companies or sectors. Often, this condition alone means that planned financial support is not considered to be aid at all. In many cases, the intended beneficiaries are not enterprises. 

Even if this is understood independently of their legal form and the way in which their activity is financed, and even if it includes bodies which do not carry out purely commercial activities, in practice (at least, within the analysis provided) there are always cases where the support does not benefit an undertaking, or, strictly speaking, is not intended to support the commercial activities of the beneficiary. In order to avoid treating financial resources as aid, it is necessary to separate the two areas and thereby permit a clear allocation to costs and financing. This is intended to prevent cross-subsidisation. 

In certain areas, it is nigh on essential to examine the activities in more detail. This applies to the health and education sectors, in particular, as well as to the fields of culture and sport, i.e., services of general interest. Therefore, before referring to the set of rules for ‘Services of General Eco- nomic Interest’ (SGEI), a collection of individual acts, it is recommended to undertake a closer examination of whether the financing at hand constitutes aid. After all, even the European Commission, sometimes erroneously known for its rigour, as well as the courts of the European Union, have repeatedly concluded that there is no economic activity at play. Now, an almost unmanageable practice of making decisions on a case-by-case basis, above all, has developed. Under this, for example, museums and (music) theatres are classed as companies – but not without exception. 

A somewhat clearer picture is to be found in the education sector. There is a minimal amount of systematics at hand here, with the level of education, its integration into the state system (supervision) and its predominant financing by the state playing a role. The entity funding the educational establishment in question does not make a difference: just as public institutions can also be economically active, e.g., by offering continuing professional training for a fee, so too are private educational institutions not to be regarded as enterprises simply because of the requirement for attendees to pay (low) contributions. In the health sector, it is possible to be guided by whether the service is provided under a (national) social security system based on the principle of solidarity, especially if it is free of charge. It should be noted that the same entity may not be economically active in respect of some services, but may be economically active in respect of others. In other words, the concept of enterprise is relative. 

However, even in cases where the beneficiary’s status as undertaking is undisputed, financial support to that body does not necessarily need to constitute aid. This would be the case (and this is also the practice by which decisions are made) if the measure does not affect trade between Member States and therefore lacked the essential elements of aid. Although there is no fixed set of criteria, it can be concluded from the cases to date that support for services of a purely local nature, such as cultural events or amateur sports facilities, cannot be regarded as aid for good reasons, given their regional catchment area and the lack of demand from other Member States (no incoming tourism). 

Author:

Univ.-Doz. Dr. Dr. ALEXANDER EGGER, Head of EU, Regulatory, Public Procurement & State Aids at LANSKY, GANZGER + partner

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