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EU STATE AID LAW AND THE CREDIT CRISIS

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

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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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