State aid law methodology for publicly owned companies. EU Commercial Law and Litigation Jakob Lundström, October 14, 2014

Transcription

1 State aid law methodology for publicly owned companies EU Commercial Law and Litigation Jakob Lundström, October 14, 2014

2 Agenda Practicing state aid law at a state owned company What is state aid? Is all state support illegal? MEIP and SGEI different lines of argumentation? Questions/Discussion. 2

3 Practicing state aid law

4 State aid law scenarios Donor or recipient? All transactions may involve state aid (sales and purchase agreements) as long as direct/indirect transfer/use of state resources Co-operation with local authorities/private companies(marketing etc.) Co-financing projects (infrastructure etc.) M&A (real estate transactions) 4

5 Risk management Awareness is still very low Indirect state aid hard identify To notify, or not to notify? Legal security/comfort Exceptions may apply How possible is a complaint? Who? Possible sanctions Hard sanctions (repayment, damages) Soft sanctions (bad will, internal costs) 5

6 Compliance programs Provide knowledge to the organization Ensure that legal department is involved in due time Tone from the top is critical Effective mitigation of risk Practical implementation not easy Repeat, repeat and repeat 6

7 What is state aid?

8 State aid (Art TFEU) any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.. 8

9 Why do we have state aid rules? Free trade between EU member states Fair competition within the EU Avoid undue public funding Part of the EU competition rules 9

10 Imputability to the state State resources can be used at national, regional or local level Financial means under public control What kind of control? Formal (board of directors, ownership) Informal? (advisory boards) Public undertakings must be assessed on a case-by-case basis (Case C-482/99 France v Commission, [2002] ECR I-4397 ("Stardust Marine" judgment)) Actual exercise of control must be shown 10

11 Mandatory criteria All criteria must be fulfilled Distortion of competition strengthen the position of an undertaking compared with other undertakings The intra-state traded must be affected purely national measures with national/local effects are excluded The real test is in general the selectivity criteria 11

12 Responsible authorities The European commission has the exclusive right to take decisions on compatibility National courts (recovery, prohibition on implementation, damages) EU-courts (preliminary rulings, appeal of Commission decisions etc.) 12

13 Is all state support illegal?

14 State support vs. state aid What is state support? No legal definition Could be anything where public resources are involved State aid is legally defined and per se illegal Can state support be beneficial to the market? How? State support may possibly help dysfunctional markets SGEI MEIP = no state aid! 14

15 MEIP and SGEI different lines of argumentation?

16 MEIP as a primary line argumentation Market Economy Investor Principle principle that stems from the case law of the EU Courts State aid must favour certain undertakings or the production of certain goods Normal commercial behavior/market conditions state aid The issue of compatibility and the existence of possible exceptions is not of relevance A notification is not necessary but could be made in order to obtain legal comfort 16

17 How to prove the fulfillment of MEIP? Compare with a hypothetical private investors/creditors in comparable situation Co-financing (joint ventures etc.) by independent private investors is good evidence (i.e. concomitance test) Could be worth arguing even when notification is deemed necessary Informal discussions with the European Commission prior to a formal notification 17

18 SGEI (Article 106(2) TFEU) Undertakings entrusted with the operation of services of general economic interest shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them 18

19 SGEI (cont.) What is a SGEI? Is there a proper definition? Who decides? Member states have a broad jurisdiction to define SGEIs The services shall be addressed to to citizens or be in the interest of society as a whole How shall a SGEI be assigned? By way of a specific act according to the Commission (SGEI Communication) 19

20 Altmark-test First condition: Clearly defined public service obligations Second condition: Objective parameters as to the calculation of the compensation Third condition: The compensation does not exceed what is necessary to cover the costs incurred in the discharge of public service obligations Fourth condition: Public procurement procedure or benchmark with a typical and well-run undertaking If the four cumulative criteria are fulfilled = no state aid If not it aid may be exempted under article TFEU 20

21 Questions/Discussion

22 Thanks for listening! Jakob Lundström Legal Counsel, Group Legal Affairs Swedavia AB Mobile: