International law of Subsidies Part I

1. International law of SubsidiesPart I Aleksandra Gebuza

2. State Aid – mainaims • Connected with the competition policy of the EU • In order to ensure: fair competition, functioningmarkets and a competitiveeconomy • The mainpillar art. 107 (1) • 1. Save as otherwise provided in the Treaties, 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.

3. ProhibitedStateair • The measureconfersanadvantageon itsrecipientswhichrelievesthem from chargesthatarenormally borne from theirbudgets • The advantageisgranted by the stateorthroughstateresources • The measureaffectscompetition and trade betweenMemberStates • The advantageconferredisspecificorselective in thatiffavours „certainundertakingsor the production of certaingoods”

4. WhyState Aid isprohibited? • Prevents waste of public resources for inefficientsubisidies • Preventscrowding out of efficientprivateinvestmentsby preservingcompetitive and open internal market

5. Thereforewhenstateaidshould not be prohibited?

6. Legalstateaid – reasonswhy • Fullyjustifiedwhereitisput in place in order to target market failures and therebycomplement, not replace, privatespending • State Aid may be required in order to givepeoplegoods and services that the market would not deliver on fair and equaltermsorwould not deliveratall • State Aid ma inducesitsbeneficiaries to undertakeeconomicactivitiestheywould not havetakenotherwise

7. Exemptionsunder art. 107 (2) and (3) • 2. The following shall be compatible with the internal market: • (a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; • (b) aid to make good the damage caused by natural disasters or exceptional occurrences; • (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point. • 3. The following may be considered to be compatible with the internal market: • (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation; • (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; • (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; • (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest; • (e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

8. Role the Commission • Commissionhas to check • whether MS conceive and design onlyaidmeasures to help enterprises producegoods and services thatwouldotherwier not be provided in the internal market • Whethertheseaidmeasureswould not distortcompetition by strengthening the particularinterests of a region orsector to the detriment of the economy as a whole • Priorauthorization! MS may not puttheirproposedaidmeasuresputintoeffectuntil the Commissionhasapproved tchem

9. CASE – definitione of UNDERTAKING (enterprise) • Agardian Sports Club is a non-profit association (“Association”). The Association was established by a public institution and is financed from public funds to develop and promote healthy lifestyle and sports in all 9 kingdoms. • By virtue of the decision of the All-Father Odin, the Association participates in making administrative decisions on organizing sport competitions by issuing binding opinions on whether such a competition should be approved by Odin or not. • The Association also organizes its own competitions. As part of these competitions, it concludes sponsorship, advertising and insurance contracts. Competitions organized by the Association belong to the largest and best organized events in the sports industry. They are often considered to be # 1 competitions in this field in all 9 kingdoms. Assume that EU law is applicable on the territory of 9 kingdoms. Assess whether, under EU law, the Association may be considered an undertaking?

10. CASE • The Flying Boats Club in Midgard is a foundation supporting public bodies in organizing tenders, primarily for the purchase of equipment and systems related to air traffic management. • Pursuant to the Act on the Uniform Air Traffic Management System adopted in the area of ​​9 kingdoms, the Club aims to develop cooperation in the field of air navigation, considering the needs in the sphere of defense, while providing all airspace users with the widest possible scope of freedom that remains in compliance with the required level of security. Under this Act, the Club has the task, inter alia, to adopt and apply common standards and specifications, harmonize the regulations applicable to air traffic services and to support purchase of flight safety systems and devices. • The Club does not receive any remuneration for its services. • There is also another entity on the Midgard market whose activity also consists in offering support in the organization of tenders in the field of aviation. It is “2Ravens Ltd.”. • “2Ravens Ltd.” sued the Flying Boats Club as an undertaking exploiting its dominant position on the market. Assess whether, under EU law, the Club has the status of an undertaking and whether its activities can be considered as exercising public authority.