Is state aid illegal in the EU?
Is state aid illegal in the EU?
Under European Union competition law the term has a legal meaning, being any measure that demonstrates any of the characteristics in Article 107 of Treaty on the Functioning of the European Union, in that if it distorts competition or the free market, it is classed by the European Union as being illegal state aid.
What is banned by the EU rules on state aid?
European Union law generally prohibits State aid to undertakings (Treaty on the Functioning of the European Union (TFEU), Article 107(1)). Public aid granted to an undertaking may give the company in question a selective financial advantage, which may distort competition and the functioning of the internal market.
How does state aid affect competition?
Article 107(1)2 declares that State aid, in whatever form, which could distort competition and affect trade by favouring certain undertakings or the production of certain goods, is incompatible with the common market – unless the Treaty allows otherwise.
Why does the EU regulate state aid?
The European Union’s (EU) restrictions on member states’ use of state aid were put in place to ensure that government resources are not used to distort competition between member states.
Why is state aid illegal?
The UK and EU have agreed to terms on a Comprehensive Free Trade Agreement, due to come into force on 1 January 2021. This agreement contains provisions related to subsidy control. Some state aid is illegal under EU rules because it distorts competition in a way that is harmful to citizens and companies in the EU.
Why is state aid prohibited?
In general, State aid is banned because of its anti-competitive effects. For example, without State aid rules Member States might engage in wasteful subsidy races, which are non-sustainable, or perfectly healthy companies might be put out of business because their competitors received unfair state subsidies.
Is the UK still subject to EU state aid rules?
As a member of the European Union, the United Kingdom was part of the EU regime on restricting trade-distorting business subsidies (“state aid”). EU state aid rules continued to apply to the UK till the end of the transition period on 31 December 2020.
Is the UK still bound by EU state aid rules?
The EU State aid rules will no longer apply to most aid provided by government departments and other public authorities in England, Scotland and Wales, unless this relates to Northern Ireland companies and is within the scope of Article 10 of the Northern Ireland Protocol.
What is the EU doing about state aid?
Therefore the Treaty generally prohibits State aid unless it is justified by reasons of general economic development. To ensure that this prohibition is respected and exemptions are applied equally across the European Union, the European Commission is in charge of ensuring that State aid complies with EU rules.
How big are the large state aid schemes?
In total, 20 schemes have reported expenditure above 1 billion EUR in 2018, while 155 are above 100 million EUR. For this reason, the 2019 Scoreboard pays particular attention to st the large State Aid schemes in terms of expenditure and displays data at the level.
Is state aid incompatible with the EU’s Common Market?
It stated that any aid given to a company by a state within the EU would generally be incompatible with the EU’s Common Market. Within the new law under the treaty, the first chapter of it defines what is not allowed to be done with state aid and the second chapter defines actions that can be done within legal limits.
What is state aid and how does it work?
State aid was formally introduced into European Union statute law by the Treaty of Rome where it classified state aid as being any state intervention that distorted competition law.
