by Ana Filipa Afonseca, student of the Master´s degree in EU Law of UMinho

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In general, the Member States have always had a bad understanding about the importance of the prohibition of the state aid, pursuant Article 107, TFEU, in fact, in 1966 and in 1987, the Member States rejected the proposal of the Commission to assume a legal definition of aid.

Truly, in the past – not so distant – Member States escaped the application of the prohibition of the state aid in a simple way: they didn’t notify the European Commission about the aid that they had conceded to their companies.

The importance of the state aid prohibition started to become clear to the Member States when they noticed this article plays an important role on improving the growth of the internal market. And the main reason this prohibition was learned by the Member States was due to its control for a non-differentiated growth of the Member States and distortion of competition. Besides that, it ended an obscure and dubious policy practice of the destination of public funds to the eyes of the citizens… until, shall we say, the beginning of the crisis in 2008.

The Member States found a new practice to avoid the application of the Article 107, TFEU ironically in a way that should be seen as a symbol of the depth of integration process by competition law: they either use the ambiguity of “filling in” the legal elements of the article or they simply assume that certain behaviour is a state aid, but they try to prove that it is compatible with the internal market.

In this way, it was needed an urgent modernization of the applications of the subject of the state aid, the European Union needed take into consideration the “law in action”, and it was established by 3 major mechanisms of modernisation and super-modernisation.

In the first step, through the Regulation 2015/1589, it was introduced some inspection and investigation powers to the European Commission and at the same time were also introduced regime figures like amicus curia in Article 29(3), that is used in other rules of competition (101 and 102,  TFUE) to make the prohibition more effective.

Secondly, the instruments of soft law had increased in the time of crisis, with the figure of “Communication” emended by European Commission. Through the Communication, the Commission established a standard of comparability that the CJEU use with that logic: through the communication, the Commission establishes an understanding around the Article 107 that can’t contradict their own final decisions of the application of the state aid prohibition. The proliferation of the Communications is now so specific such as the “Communication of the bank sector”, and in our opinion the most daring of all, “Communications of the definition of the state aid definition”. Clearly, it is a objectionable mechanism, but oriented to the necessity to make Article 107 more practicable.

All in all, the most important modernisation occurred through the CJEU decisions which innovated the image of the state aid. Along with this movement of modernisation there is also a supermodernisation movement operated by the importance that the European funds acquired for companies around the EU territory.

The truth is that everyone who has dealt with the complexity of the Article 107, TFEU has already wondered: why hasn’t the EU called upon itself the responsibility to attribute compatible state aid to the internal market? Well, Manuel Lopes Porto, gave us a probable answer: the EU doesn’t have the capacity to replace the state budget wise. But, the truth is that now the European funds are present in most Member States’ companies, so we could affirm that there is a tendency to converge the state aid with a new preponderance of the European funds.

And the truth, to a large extent, is that there is the general belief that the compatibility or incompatibility of the state aid with the market – perhaps mainly because of the whole problem of the banking sector – depends more on the will of the “Brussels bureaucrats”. The state aid seems to be unclear and arbitrary and their importance and purpose also escape from the European citizens, but the silent truth is that the European Union made a great effort to turn the prohibition of the arbitrary state aid more effective with those new ways of practice, however, if the Member States aren’t able to hear it, the problem might not be the voice speaking.

Picture credits: Untitled  by mmmCCC.