Europäisches Beihilfenrecht

We agree that the judgment is confusing at several points. With respect to conferment of advantage, please see paragraphs 48 & 63. With respect to intentions, it is a fundamental principle that intentions do not matter. The way the Court refers to them contributes to the rather convoluted reasoning in this judgment. But I fully agree with your point concerning construction and access to infrastructure.

An excellent article, and a good case study on state aid to SGEI. The interactions between the state aid regime and the public procurement regime are particularly interesting as they are two sides of the same coin. EU officials from DG Comp and DG Grow however sometimes know surprisingly little about how each other’s regimes operate.

”…But if the fee had to cover all true costs, then any subsidised infrastructure would never be used [since by definition aid is necessary when a project is not commercially viable without aid] or users would be presumed to benefit from State aid – an unwelcome expansion of the scope of State aid and of State aid investigations…”. Could you please explain why users would be presumed to benefit from State aid? As I understand it, users would be deemed as State aid beneficiaries on condition that what they pay for the use of the infrastructure falls short of the incremental costs plus reasonable profit which represents a minor portion of the full costs recovery. Why full cost recovery would be considered as State aid? Even if you mean State aid in favor of the operator still confuses me.

Now it makes sense for me. What I failed to understand is that in your reference to ‘users’ in the quoted part, you mean ‘users (that pay a fee amounting only to costs plus profit)’. Thank you for taking the time to answer my question.

Reminds me about a (not so recent) judgment by the EFTA Court regarding the notion of undertaking/”economic activity” carried out by public bodies (Kindergartens in the case at hand). The Court followed a rather different approach by applying case law from the freedom to provide services (para 78 ff).

Sir, the claim “no other means of producing electricity generated radioactive waste [paragraphs 78-79]” is not supported by available scientific evidence, as convincingly argued for instance by UNSCEAR review of technologically modified exposures to natural radiation. This authoritative UN body has for instance endorsed the conclusion that “radionuclide concentrations in ashes and slags from coal-fired power stations are significantly higher than the corresponding concentrations in the earth’s crust”. In other words, coal used for electricity production provides an immediate counter-example to the said claim. It would be interesting to speculate whether the conclusion of the Court still holds in absence of that leg. JM

Phedon, an interesting and insightful article. I’m pleased that you recognise the contribution that the UK has made during its membership. I also feel that the UK has been a strong contributor, particularly when it comes to State Aid law, in sharing best practice and putting forward novel initiatives which have later been adopted in other Member States. It is important to note that the referendum question was very narrow and leaves the UK parliament wide discretion as to what model to pursue in the future. Indeed, I don’t think a European wide competition authority would necessarily be opposed by the UK – after all companies operate across borders and it is important that subsidy regulation / enforcement has the same reach. It should also be noted that in 2013 when the UK government consulted domestic stakeholders about State Aid law the feedback (as set out in the Balance of Competencies report) was wholly positive. Change is inevitable in light of the referendum, but I would hope that the UK and EU could cooperate to keep the rules that both parties want in place after Brexit.

Many thanks for the clarification. Much appreciated. Indeed I admit I was speculating on this issue (that is why I used the words “it is not clear” and “presumably”) because the Court did not carry out any exhaustive investigation. Of course, the Court does not have to carry out any such investigation itself, but it could have at least tried to consider how the extra pension costs affected Deutsche Post. As you indicate, companies that do not employ Beamte have an initial higher cost. This means that companies that do employ Beamte have an initial lower cost and therefore advantage. Perhaps Deutsche Post also derived an indirect advantage because it was able to retain more experienced staff rather than losing them to the competitors who entered the market after liberalisation. Perhaps Deutsche Post was able to reduce gross wages to offset the higher pension costs. The Court merely focused on one cost component – the pensions – and inferred that it reduced the overall competitiveness of Deutsche Post without considering how Deutsche Post may have responded to neutralise that disadvantage, if it was a disadvantage. Competitiveness is a composite concept and the Court did not seem to understand that. The intention of the German authorities was to compensate Deutsche Post, but what were the actual effects of the pensions obligation? Recent decisions of the Commission on compensation of postal operators for public service obligations have also considered benefits from these obligations, such as network effects, visibility, etc. Legally, the Court did not ask what were the actual effects of the pension obligation. It applied instead only half of the Altmark criteria

The article asks „how will the UK establish its own system of State aid rules?“ The UK state aid control system’s scope would be defined by a treaty regulating „Brexit“ (the „Brexit Treaty“). Akin to the EU contractual practice under family of association agreements (FTAs under WTO rules) the EU will probably insist on applicability of Article 107 TFEU and its „instruments of interpretation“ even beyond the exit. The instruments of interpretation will be linked to the EU institutions practice (i.e European Commission and the CJEU) hence their content will evolve accordingly. Under such scenario, space for development of autonomous UK legal concept of „common interest“ would be somewhat limited. In any case, such concept will gravitate around a notion of distortion of trade between the EU and the UK. In other words, the autonomous concept of aid reserved for distortion of the UK market alone would be redundant. Indeed, the leverage that the UK negotiators would have compared to administrative capacities of association states may provide more autonomy to the UK from the Brussels to develop more progressive industrial and state aid control policy. On the other hand, the EU association agreements so far have lacked a robust and effective system of control of compliance of state aid practices in parties to the agreement. Therefore, the real question would be if an institutional arrangement of the Brexit Treaty would provide effective means to control the aid compliance with its provisions. Likewise, another question would be if UK companies will have effective and non-discriminatory access to the EU’s system of state aid control to tackle any non-compliant aid with the future trade agreement.

This case is one too far by the Commission and directly interferes in national sovereignty to set up progression in tax measures. The argumentation is very vague in places and it may well be a politically driven decision

Very good example. Thanks. Indeed, any (public or private) fund manager operating under a contract with a public authority would fall in that category too.

Many thanks for the comment. We agree that regardless of motives, someone has to bear the full cost of the good or service that is provided. When I buy food for my children, I provide it to them free of charge, but I still have to bear the full cost. The fact that I am not acting economically or commercially does not make costs disappear. It merely shifts them from the users to the provider. A commercial operator would accept to bear costs that exceed the price it charges only temporarily and only because it is a profit-maximising strategy in the long-term. It is in this sense that, in the context of state aid law, the intentional shifting of costs away from the users indicates a non-economic activity. For example, the cost of shelters for the homeless is borne by voluntary contributions. The cost of public education is borne by taxpayers. But there is another reason that this shifting of costs is intentional. The users are not charged a price that covers cost because they are considered to be entitled to or in need of the particular good or service. Price is just a mechanism for allocating scarce resources according to ability to pay. But some goods and services are provided regardless of ability to pay so as not exclude those who cannot afford them. Ability to pay, in this instance, would be contrary to rights or needs. Therefore, if you think that intentions would not fit in state aid law, then this idea can be expressed in the form of the following two-step test: i) Is the good or service provided on a constant basis at a loss without contributing to the revenue of another good or service? ii) If yes, is “consumption” of the good or service in question rationed on the basis of non-price criteria and users have no obligation to buy any other good or service? The answer must be “yes” in both steps.

Dear Professor Nicolaides, Thank you for your article, insightful and informative as always. One statement in your article raised a question for me. You wrote, ”An activity or product is non-economic when the beneficiaries or users have a right to it [e.g. health or education services], deserve it [e.g. research awards or prizes] or need it [e.g. shelters for homeless or rescue services].” I reacted to your statement that an activity can be non-economic when the beneficiaries or users deserve it. You gave two examples: research awards or prizes. There are certainly limits to when such activities can be considered non-economic, but the statement here is broad-reaching. I wonder if you could comment. Thank you.

Dear Carmen Butler, Thank you for your comment. What I had in mind was a foundation awarding prizes to researchers who discover something significant [e.g. Nobel prize]. Naturally, state subsidies to research can also be granted to economic activities, even if the recipient undertakings may “deserve” them because they do something good for the economy.

Thank you for your query. There are several Member States, especially among the newer ones, who have developed national data bases for recording de minimis aid. However, many Member States rely on self-certification by aid recipients [whereby, granting authorities ask recipients to confirm that they are single undertakings and to specify all de minimis amounts granted to them in the current and previous two fiscal years]. As to how the Dutch authorities calculated the amount of aid, please see the text of the decision [a link is provided]. The Dutch authorities calculated the precise amount of the aid they granted to each undertaking. This is the only way to ensure that the de minimis threshold is not exceeded.

Well done, Erika, I fully agree and appreciate your clear-cut and outspoken positin!

Prof. Nicolaides could, the Court, pull another argument in your opinion that State Aid rules cannot be misused to achieve effects contrary to their purpose. Namely, it appears to me that if the imputability was found (or if indeed regulatory authorities influenced the company not to purchase) the competition would have been distorted.

The problem with selectivity is, as you correctly elaborate, to find the proper comparison, or yardstick, as beautifully demonstrated in C-524/14 P European Commission v Hansestadt Lübeck (cf. EStAL 2/2017, p. 285). But already in C-403/10 P – Mediaset v Commission – the problem of different broadcasting systems arose, cable v terrestrial. It was thus quite manifest for the Commission to somewhat reduce their efforts in reasoning – and consequently the court followed them in most of the cases. In fact, in C-70/16 P, para. 61, the Court does not say that the Spanish measure was not selective, only that the Commission should have reasoned on this point. In the end, the result will be predictable, but the Commission is rightfully reminded to take nothing for granted or self-evident. This argument may sound formal, but judicial protection starts with upholding the formalities …

I very much agree that the Commission should take nothing for granted. Perhaps it thought that in this case the selectivity was self-evident. It was wrong. It had to be proven. And, yes, formalities must be respected.

It is really a very controversial case, that shows again the complexity of the notion of State Aid and the alternative versus cumulative question about the difference inter state aid and/of public resources. I will read the Decisión again. Thanks again, Prof. Nicolaides, for showing us this very interesting cases.

This is an interesting judgment, indeed. The Slovak system does very much resemble the German social health insurance system, only that there are a lot more “competitors” offering their services to those obliged to join the system (about 90% of the population). Even with contribution regulated by law (a percentage of the income from employed work, up to a moving threshold), and little room for any additional premium, the insurers – all organised as public-law corporations – still manage to vary in amount and quality of service, be it by “economies of scale”, be it by lean management or other means of cost efficiency. Private insurance companies are not admitted to this market, but according to the GC, this is a market. It will be interesting to see how the ECJ thinks about this, and what consequences this may have also for the German system, which is under massive criticism anyway.

This importan judgment seems to confirm my analysis that not only for-profit but also non-profit and municipal schools offering their services free och charge but in competition in the Swedish publicly financed system (a system where pupils may choose the school they attend), must be seen as conducting an economic activity. The same goes for elderly care in systems of free choice in Sweden, where for-profit entities, non-profit entities and public institutions in competition offer their services which are financed to a large extent by the state. See Services of General Economic Interest as a Constitutional Concept of EU Law, 2016, Springer, p. 297-339. I based my analysis of the Swedish cases (free choice systems for school and elderly care) on a very detailed analysis of the notion of economic activity in the case law of the CJEU, which is shortened in the book (chapter 2) but considerably longer and more detailed in my PhD thesis.

I’m not sure whether I fully grasp your conclusions. The constructions to be found in ports do vary across the EU, so funder and owner are not necessarily identical. Nor are owner and operator, though especially public entities usually employ an operator, selected – hopefully – by a proper tendering process (cf. art. 56 b para. 7 GBER). In this case, the operator has to pay a “concession fee” to the owner which then, as determined by the tender, reflects the market price and excludes any State aid to the operator. If the owner operates himself (no “third party” involved), there is no question of State aid (cf. GBER). Concerning State aid to the users of the port (the shipping lines), I refer to the judgment C-524/14 P (Flughafen Lübeck) and the ECJ’s clarification on selectivity: the yardstick is the airport itself, not the neighbouring one (cf. para. 123 of this judgment on the opposite way of argument). It is thus not relevant whether or not the selected operator wants to maximise its profit, but that it does not unjustifiably discriminate against any user. In this constellation, a comparison to port fees in other ports is not required. Only in the case where the public owner of a port is also the operator, it will – in order to avoid State aid to the users (the shipping lines) – have to charge port fees according to market prices, at least cover its own full costs plus a usual market profit, which is easily to be determined by studying the annual (or quarterly) reports of other port operators. For me, the main clarification in this judgment concerns the obligations of the Commission and the necessary scope of its investigation, plus underlining that a factual monopoly caused by lapse of time may very well constitute State aid, be it intentional or not.

This is an interesting point, indeed. But I have doubts whether this argument will carry through. Any counterfactual scenario must be realistic and credible in itself. In this case, AoG would have had to argue that higher costs for electricity would have deteriorated their competitive position on the market, thus led to reduced sales, reduced production, and reduced consumption of energy. This would necessarily imply that they were not able to compensate for higher prices for electricity at some other point in their calculation or cost structure, and that this claimed reduction was inevitable and coherent in itself. I find this a rather daring approach, considering the complexity of markets and cost calculations, which I would not necessarily advise to my client, if only for the sake of the argument. N. B. In this case we are not talking about the presence of aid, but only discussing its amount, aren’t we?

All good points. As I wrote, I do not think there is a precedent for the use of counterfactual in the case law. For sure it will not be easy. Since the argument put forth by AoG was hopeless, I suppose defendants will have to come up with more innovative approaches. I was testing a possible option.

The EU case law notion of economic activity as offering goods or services on a market is well established. I wonder whether it could be possible clarify further the meaning of offering goods or services on a market. In my opinion, the economic point of view is the right approach to answer the question, even for a correct legal glance on the topic. I think that there are two considerations to take into account. First, offering goods or services (set aside for the moment any consideration about the reference to a market) implies investments of scarce resources and the selling of the output of a production process, as clarify in the judgement: “(47) services normally provided for remuneration are services that may be classified as ‘economic activities’. The essential characteristic of remuneration lies in the fact that it constitutes consideration for the service in question”. So, we need to ascertain that those scarce resources have been transformed into a product for which someone – i.e. customers – is able and willing to pay a remuneration. The economic problem rises whenever limited resources, which have alternative uses, face up unlimited human wants. That means that the remuneration is the outcome of a customer’s choice. The finance flows from customers to producers. The other consideration regards what means market in the EU caselaw notion. As “(46) not-for-profit basis does not prevent the entity which carries out those operations on the market from being considered an undertaking, since that offer exists in competition with that of other operators which do seek to make a profit.”, I think that there have to be not only customers willing to buy, but also other competing firms, which have been offering other goods/services. In other words, a market exists if customers can enjoy the freedom to choice what to buy and consume, because of a large numbers of producers. The freedom to choice also implies the choice to give up goods/services the consumer do not want. For example, a supermarket employee could not place an unwanted product into a shopper’s basket and expect the shopper to pay for it at the checkout. This is called the principle of rejectability. On the market the sovereign is the consumer “whose buying or abstention from buying ultimately determines what should be produced and in what quantity and quality” (s. Mises, The Anti-Capitalistic Mentality). “The customers are “always right,” [they are] the patrons who have the power to make poor suppliers rich and rich suppliers poor. (…) The profit system makes those men prosper who have succeeded in filling the wants of the people in the best possible and cheapest way. Wealth can be acquired only by serving the consumers. The capitalists lose their funds as soon as they fail to invest them in those lines in which they satisfy best the demands of the public. In a daily repeated plebiscite in which every penny gives a right to vote the consumers determine who should own and run the plants, shops and farms. The control of the material means of production is a social function, subject to the confirmation or revocation by the sovereign consumers” (cfr. Mises cit.). Provided those conditions, we should assume that an economic activity in the EU law is an activity financed by the buyers of the goods/services produced. As a consequence, it does not exist any economic activity in nature. This is a logical contradiction. Any activity is economic as far as it can satisfy social needs. The problem is elsewhere and consist in looking into the financing of the activity concerned. The question is way how the activity is financed and by who, as stated by the EU Court. If “(56) the educational activities of the Congregación […] are subsidised by the Spanish State, [they] could not […] be classified as ‘economic’.” “(57) By contrast, […] educational activities that are not financed by the Spanish State, […], meet all the criteria […] for classification as ‘economic activities’”. I will appreciate very much any reaction to my comment.

The case T‑216/15, Dôvera zdravotná poist’ovňa et al v European Commission, is a very very interesting one because in my opinion it raises the underlying question of what be the legal foundations of a free (i.e. competitive) market. In order to decide whether an activity is economic or not, the profit motive does not matter – that is obvious if we distinguish the profit as purpose of operation of business, which is an ex ante choice of the entrepreneur, from the profit as actual ex post result of that operation, which depends on the choice of the consumer. As stated by CJEU, “It follows that it is not the mere fact of being in a position of competition on a given market which determines the economic nature of an activity, but rather the presence on that market of operators seeking to make a profit”. Yet, the presence on …. market of operators seeking to make a profit is a mere fact. The number and in particular the possibility to enter the market depends on the law. In the case T‑216/15, Dôvera zdravotná poist’ovňa et al v European Commission, the essential point is in my view, that the social security system be not a market at all because of the country’s legislation. It is due to that legislation, i.d. State intervention, if there are only three undertakings, or in other words, there is no competition and consequently no market, as health insurance is compulsory for each individual. This situation guarantees to realize quite easy profits, although improperly. In such situation, no company has any stimulus to compete and try to better up their services or to reduce the cost of their operation (i.e. to be innovative and efficient). The marginal company can simply rise up their prices, recording no losses to their turnover. We are facing a situation of rent granting. Paying a higher price because of the lack of real competition is quite equivalent, from an economic view, to paying taxes, which the State gives subsequently out to subsidise the activity concerned. Money does not flow from taxpayers into the State, but consumers pour it out directly in the firms’ hands as higher prices. In both cases, the undertaking receive an undue advantage, unjustifiable because paid by the consumer, always involuntary and often unaware as well. The consumer is simply exploited: they cannot choose a) neither to buy and above all not to buy the health coverage of their preference; b) nor the benefit from the insurance as “…Slovak health insurance companies are obliged to offer the same statutory benefits …”. There is no market within the Slovak compulsory health insurance system, either in respect of the compulsory statutory benefits or formally on the amount of contributions. Competition requires a market clear of State interferences, any form they can assume. Market requires freedom of contract – or better the freedom to carry out any economic activity without any other limitations than civil rights and freedom of consumers – and protection of private property. On these grounds, competition can emerge as a feature of the market. So that we could say that the purpose of competition law is twofold: 1) to increase the ever changing set of choice (above all the choice not to choose) rather than to protect the consumers’ rights, and 2) to protect market from State intervention (State aid law). Consumer is the sovereign.

But of course there was burden-sharing in the precautionary recapitalisation of MPS. It suffices to look at the right decision (the one on precautionary recapitalisation, not the one on the previous liquidity aid). Here is the right decision (have a look at recitals 60-61 and 101-110): http://ec.europa.eu/competition/state_aid/cases/270037/270037_1951496_149_2.pdf

Last week, the Commission appealed against the judgment of the General Court. Let’s see what the Court of Justice will have to say on this very important issue and how it will approach the concepts of market and competition.

Interesting subject indeed, in case the UK does finally leave the EU. Even more difficult to predict if tthey were going to exit without agreement, this might deteriorate any chances for a common State aid rule book, but also reduce Whitehall’s chances to come to terms with the devolved admins/governments (by the way, what about Gibraltar?). Another point of interest: The White Paper (p. 11) contains “a commitment that UK courts would pay due regard to EU case law”. Presumably, this would include State aid case law. But how can the government commit independent courts? Isn’t there a division of powers, established since the 13th century? And how could a “Joint Committee” (of government officers?) arbitrate in case of diverging rulings from CFI/ECJ and UK courts? It seems to me rather unlikely that the UK was willing to give up long-standing constitutional principles, models the world over, for the sake of something as ludicrous as “Brexit” …….

Hello – I generally agree with the analysis – However your criticism about classifying exceptions of general application as selective measures ignores the notion of justification – Indeed, there are exceptions of general application which are not selective because justified by the nature and logic of the tax system of reference. If for example, Spain would have demonstrated that there was a tax logic in the tax lease structure by which one can amortize fully building costs but forfeit tax on gains because taxed at a later stage then the exception of lower tax now would have been justified and therefore not selective

In light of that recent case law, do you think that a “horizontal exemption”, like the reduction in social security contributions to undertakings employing manual workers (as in Maribel scheme), is a selective measure?

Faidon, many thanks for this intriguing “food for thought” piece of analysis as well as the other excellent pieces of state aid case law commentaries. In my view there must be a significant difference between granting a taxi-licence, a doctor licence, or a banking licence and a licence to explore state owned natural resources. The latter is in my view about the sale of a public asset and ought to follow the abolished Communication on the sale of public land and buildings, the relevant section of the Notice on the notion of State aid and all the guidance around privatisations (the Aviation Guidelines of the 1990’s and the XIV EC Annual Report on Competition. I have not seen any specific reference to this framework. Very best Michalis Papadakis +447900167276

Your doubts are well founded. Regardless of the Commission’s doubts, the significance of this case is that it addresses the issue of whether a non-undertaking my charge a price [yes] and how much of the costs that price should cover [less than 50%]. This is useful to such entities as public hospitals, public schools, museums, libraries, etc.

In this case, both the Commission and the General Court have misapplied the notion of aid scheme within the meaning of Article 1d of Reg 2015/1589, which does not refer in any way to discretion. This is not new, because the national tax rulings practices are still fundamentally misunderstood. Any such national practice corresponds to a tax scheme by which a taxpayer (generally a multinational group which is confronted with the problem of international double taxation), without need of further implementing measures, asks the tax administration to have access to special rules, which are also general, to define the tax base in a way that eliminates or reduces international double taxation. This is what even the General Court has misunderstood. Discretion is the general administrative discretion that any tax administration needs to have when applying such general rules. Administrative discretion is fully irrelevant provided that the administration acts within its general prerogatives, and cannot turn an aid measure into “individual aid”.

It is interesting to read AG Kokott Opinion in case C-74/16, Congregación de Escuelas Pías Provincia Betania, par 53-60, that also deal with the idea of “non-relevant” economic activity and proposes not to consider relevant an economic activity below 10% of the total activity. The ECJ did not explicitly address this issue in the final judgement.

Thank you for an excellent and stimulating analysis. I think your last point is the critical point, and one which I think will not be resolved by one or more judgements at the ECJ whilst the EU Treaty remains as it is. How do you fully develop and defend a single market without a common fiscal policy – i.e. federal Europe? The same might also be said about defending the Euro on the international markets, but let’s not go there!

In this new Nicolaides’ post analyses the essential , but very unknown, role pf national Courts both, in Public and Private Enforcement, front ne conclusions of a Study on the enforcement rules and decisions of State aid by national courts, prepared by a consortium of academic and consultancy organisations. In a few minutes, we all can discover on database, the importance and potentially on this particularly necessary role. Congratulations and, once more again, thanks very much for your new contribution to the knowledge of the application of EU State Aid Rules Professor Nicolaides.

Thank you for your comments! As more competitors or aid recipients resort to national courts, I expect that granting authorities will “discover” that state aid rules do not just constrain them, but can also save them from their mistakes.

Dear Phedon, many thanks for your observations. You write that: Therefore, the Court of Justice instead of using vague concepts such “connected, by their nature, their aim and the rules to which they are subject” and agonising about “separability”, it could have simply ruled that when an activity is necessary for and proportional to the exercise of officials powers or non-economic activities, the whole package is non-economic. This, however, raises the question with me whether and to what extent using concepts like ‘necessary’ and ‘proportionate’ are any clearer, simpler or easier to administrate compared to the Court’s – admittedly – vague terminology? Furthermore, if I understand the judgment correctly, the reasoning turns on the factual assessments set out in para. 43 (to which para. 45 refers). This in turn refers to the factual assessments by the GC set out in paras 96 and 51 of the GC judgment. These paragraphs don’t really add to the reasoning, but the paragraphs leading to para 51 of the GC judgment refer to the design choice by the Netherlands government to design TenderNed as an integrated application with two modules to comply with the public procurement directives. I’m not sure how the design at one stage of a system can determine the seperabilty and any later stage. Let me use one example. It is obvious that the organisation and approval of racing activities in Greece have long been in the hands of ELPA. That was probably a well-thought out design choice by the Greek authorities. Still, that did not keep the Court from ruling that the activities of organisation and approval can be separated without any problems, as it did in MOTOE. Perhaps, the Court’s deference in this case follows from the fact that we’re dealing with the concept of an economic activity and therefore the scope of the competition rules whereas MOTOE dealt with the activities that were firmly in the scope of the competition rules? If so, I do not see why there should be greater deference for MS choices on whether there is a market compared to the choices a MS makes within a market. Both are questions of EU law where the Court has jurisdiction. I’d love to hear your thoughts.

Thank you very much for your comment and please apologise the late reply. I share your concerns. I am not sure I have a better answer. But let me try to express my view succinctly and concisely. The crux of the issue is how to give effect to a non-market activity [i.e. something that falls within the prerogatives and exclusive powers of the state] without the state engaging in a market activity. The state needs to use tools or instruments to implement its decisions that stem from its state prerogatives. The problem is that these tools or instruments in almost all cases one can think of contain activities that are carried out on the market. Therefore, the state has a choice to use a market agent or manage the tools or instruments itself [e.g. to deliver cash from the central bank to commercial banks. Without actually delivery of the money, the issuing of money is useless.] If the state actually delivers itself, this is necessary to give effect to its prerogative of issuing money. If it is limited to the delivery of money and not delivery of pizzas, then it is also proportional. If you take any other view, then you enter into an interminable discussion on the limits of the state. For example, should the state only regulate rather than actually manage air traffic control? Should the state regulate rather than actually run prisons?

I have read the opinion but I do not normally comment on opinions. As with all AG opinions, it provides an educational review of the case law. But I am not sure it offers a test that can be applied in other situations to determine whether what we may call “residual” competition can turn a non-economic activity into economic. It should not be surprising that some residual competition existed in that health insurance system. This is because I have never observed a non-economic activity which is totally devoid of some form competition [above minimum required standards] among those who carry it out. [e.g. teacher or nurse of the year awards, research or book prizes, etc] So there is always some competition, some emulation, some performance comparison. But how much is too much?

I disagree with the comment that the notion that progressive turnover taxes being linked to ability to pay is incorrect. The ability to pay is the same that is found in other indirect taxes = its the customers’ ability to pay. I find that state-aid commentators tend to quickly equalise indirect taxes to direct taxes and this is in my view a source of misunderstandings. On a different note, the judgments are in my view stressing again the importance of the distinction between the notions of advantage and selectivity when reviewing tax measures, which seems to be lost in the recent practice. Advantage is a first step in determining whether a tax measure falls within the scope of State Aid review. When dealing with assigned taxes, the entire tax can be State Aid if it is indeed assigned to certain beneficiaries. When dealing with exemptions or reductions, the advantage is such if it relieves from taxes otherwise borne by the beneficiary. That analysis is not comparative as many believe but focuses on what the same beneficiary would normally be charged as tax (irrespective of comparable undertakings). If this is the case, the selectivity analysis may follow to verify if comparable undertakings get the same advantage and if not whether this is justified by the nature and scope of the tax system. In my view, the judgements are a useful reminder of how the notion of advantage and therefore of tax measures falling or not within the scope of application of state aid control should be applied. I wonder if the same rigorous approach has been used when examining the individual rulings as separate measures instead of general schemes. What is advantage there and why is it necessary to find that not is selective if individual rulings are just individual measures?

My reading of the temporary framework is that it is only directed at member state governments and doesn’t provide any guidance, for instance, to municipalities who may be considering aid measures to individual local businesses (SME and non-SME) to reduce the impact from COVID-19. Advising local authorities in the UK, which has no notifiable schemes under the temporary framework, I am struggling to say with confidence that they can rely upon an 800,000 euro limit on COVID-19 related aid if there is no broader scheme which has been notified to the Commission. Is this your reading also? Or do you think it reads that the temporary framework rules if complied with may be just reported on SANI2 and that is the best you can do as a municipality (where no scheme is relevant).

@ Carlos Oliveira: Good questions. A credit moratorium would not be state aid not only because would be general but also because, presumably, it would not involve transfer of state resources if it would simply suspend the repayment of loans. With respect to Art 349 regions, the MS concerned can already grant operating aid under the regional aid rules. But nothing prevents them from applying in those regions too covid-19-related measures.

What should European Commission do with decisions that demand recovery of aid, which has already made, but the recovery deadline is somewhere april or during the crisis? I think Commission should suspend these decisions, because it affects these companies very badly. One problem right now is with Deggendorf principle, which means that undertakings that should pay illegal state aid back and has not yet done so, cannot rely on new state aid. What do you think about that?

Thank you Phedon – insightful and directly relevant to the practical issues faced by public bodies distributing funding. Do you think the Commission might revise the definition of Undertaking in Difficulty in the next amendment to the Temporary Framework? It seems to be a sticking point for many Covid-19 measures and therefore the Commission might choose to depart from the definition used in other Regulations.

Dear Professor, You state that “the only explicit exclusion in the current Temporary Framework concerns undertakings that were in difficulty before 1 January 2020”. In fact, this provision is repeated in all sections of the Temporary Framework, except sections 3.9, “Aid in form of deferrals of tax and/or of social security contributions” and 3.10 “Aid in form of wage subsidies for employees to avoid lay-offs during the COVID-19”. Does this mean that aid under these two sections can be granted to undertakings in difficulty before January 1,2020? Thank you

Since Art 2(18) of the GBER refers to “subscribed capital”, the right answer must be EUR 2m (as in your example).

Interesting to see yet another case where the Court struggles to differentiate the facts from those of Preussen Elektra, despite the fact that there has not been any case since Preussen (over 18 yeas ago) where a State imposed payment has been considered not to entail State resources. One would think that the Court believes that at least some State-imposed obligations should remain outside the scope of State Aid rules, despite the angry winds to the contrary…