State Aid

State aid

State aid is defined in the Treaty on the Functioning of the European Union (TFEU). Pursuant to Article 107(1) TFEU, any aid granted by a Member State, or through State resources in any form, 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 EU countries, be incompatible with the internal market.

Four cumulative criteria of State aid

On the basis of the above definition, the following cumulative criteria must be assessed when examining whether a measure constitutes State aid within the meaning of Article 107(1) TFEU:

·       the support is granted by the State or through State resources;

·       the support favours one or more undertakings and is selective;

·       the support affects trade between EU countries; and

·       the support distorts or has the potential to distort competition.

State aid is in principle incompatible with the internal market. It may be granted only where a legal basis (exception) for its lawful granting exists. Such bases may include, for example, de minimis aid, or compensation for the provision of services of general economic interest (SGEI compensation), provided that the relevant rules are complied with.

Why address State aid?

Unlawful granting of State aid may threaten competition. For this reason, the granting of State aid in the European Union is strictly regulated. When is State aid incompatible with the internal market granted, both the aid-granting authority and the beneficiary expose themselves to the risk of recovery of the aid. If the European Commission adopts a negative decision in respect to the unlawful aid, the aid-granting authority is obliged to recover the State aid. The beneficiary must then repay the aid, together with interest. Moreover, the granting of unlawful State aid may also lead to the potential invalidity of contracts and other negative effects.

Competence of the Office in the field of State aid

The powers of the Office for the Protection of Competition, as the coordinating body in the field of State aid, are laid down in Act No 215/2004 on the Regulation of Certain Relations in the Area of State Aid and on the Amendment of the Act on the Support of Research and Development, as amended. These powers, comprising coordination, advisory, consultative and monitoring roles, are exercised by the Office primarily in relation to the providers of State aid in nearly all areas. The responsible authority for area of forestry, agriculture, fisheries and aquaculture is the Ministry of Agriculture.