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EU STATE AID LAW AND THE CREDIT CRISIS

Explore the intricacies of EU State Aid Law amidst the credit crisis, covering Articles 107(1) and 107(3) TFEU, supervisory procedures, credit crisis measures, and issues in state aid. Delve into the market operator test, state aid definition, and restructuring guidelines.

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EU STATE AID LAW AND THE CREDIT CRISIS

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  1. EU STATE AID LAWAND THE CREDIT CRISIS CONOR QUIGLEY QC IIEA, DUBLIN 3 FEBRUARY 2010

  2. State Aid: Article 107(1) TFEU • State aid within Article 107(1) TFEU • Aid entails a financial advantage from State resources • Selective advantage favouring certain undertakings • Distortion of competition • Effect on trade between Member States

  3. State Aid: Article 107(3) TFEU • Exemptions: Article 107(3)(c) TFEU • Permissible aid • Regional aid • Aid for SMEs • R&D&I aid • Environmental aid • Training/employment aid • Rescue & restructuring aid • Article 108(2) TFEU: Council approval in exceptional circumstances

  4. Supervisory Procedures • Supervisory regime • Block exemption • Individual exemption • Duty to notify: Article 108(3) TFEU • Procedural Regulation 659/1999/EC • Preliminary assessment: Article 4 • No aid • Aid compatible with common market • Doubts as to compatibility • Formal assessment: Article 7 • No aid • Aid compatible • Conditional decision • Negative decision

  5. Initial reaction to the credit crisis • Rescue and restructuring guidelines • Bank in difficulty • Rescue aid • 6 months • Loan/guarantee for liquidity purposes • Restructuring aid • Restructuring plan for long-term viability • Avoidance of undue distortions of competition • Divestment of assets, capacity reduction

  6. Credit crisis measures • Systemic banking crisis: Article 87(3)(b) EC / Article 107(3)(b) TFEU • Commission communications • Rescue operations • Recapitalisation • Treatment of impaired assets • Temporary framework • Restructuring measures

  7. Issues in State aid and the credit crisis • Definitions • Market operator test: NAMA • Sale of bank assets: LloydsTSB • Bonus taxes: Bank payroll tax

  8. State Aid definition • Intervention by the State resulting in an advantage for an undertaking by mitigating the charges which are normally included in its budget: Case 30/59, Steenkolenmijnen v High Authority [1961] ECR 1, p. 19. • Recipient receives an economic advantage which it would not have obtained under normal market conditions: Case C-39/94, SFEI v La Poste [1996] ECR I-3547, para 60 • Departure from a benchmark set of rules, or from a normal burden, which confers an advantage: Case C-66/02, Italy v Commission [2005] ECR I-10901, per Advocate General Stix-Hackl at para 48.

  9. State Aid and the Market Operator Test – principles (1) • Would a private operator, in possession of the same information as the public authority, conduct the same commercial transaction on the same terms: Case C-457/00, Belgium v Commission [2003] ECR I-6931, para 47.

  10. State Aid and the Market Operator Test – principles (2) • All the relevant features of the measures and their context must be examined, including those relating to the situation of the authority responsible for granting the measures: Case T-196/04, Ryanair Ltd v Commission [2008] ECR II-nyr, para 59. • always necessary to assess properly any commercial reasons underlying the transaction in question, especially where there is a change from previous commercial arrangements involving the same parties, see, for example, Case T-98/00, Linde v Commission [2002] ECR II-3961.

  11. State Aid and the Market Operator Test – principles (3) • Comparison between the conduct of public and private investors must be made by reference to the attitude which a private investor would have had at the time of the transaction in question, having regard to the available information and foreseeable developments at that time: Cases T‑228/99 & T‑233/99, Westdeutsche Landesbank GirozentralevCommission [2003] ECR II‑435, paras 244-246; Case T-20/03, Kahla/Thüringen Porzellan GmbH v Commission [2008] ECR II-nyr, para 238.

  12. Restructuring: sale of assets • Restructuring guidelines • Long term viability • Compensatory measures to avoid distortions of competition • Significant own contribution • Ensuring competitive banking sector

  13. State aid and Taxation • Selectivity: Where measure constitutes an advantage for certain undertakings in comparison with others which are in a comparable legal and factual situation: Cases C-182/03 & C-217/03, Belgium and Forum 187 v Commission [2006] ECR I-5479, para 119 • Reference framework must be determined: Case C-88/03, Portugal v Commission [2006] ECR I-7115, para 56 • Differentiation may be justified by the nature of the general system: Case C-143/99, Adria-Wien Pipeline [20-01] ECR I-8365, para 42

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