Global Journal of Human Social Science, E: Economics, Volume 21 Issue 4

As a general rule, 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" (2012) normally be incompatible with the internal market and therefore prohibited. This provision is considered to be still unchanged, the legislation, however, especially the secondary and supplementary legal sources, legal acts have significantly been extended over time. The main elements of the notion of State aid (European Commission, 2016) are the following when assessing a state intervention measure as State aid: 1. The Beneficiary Carries out an Economic Activity: Any activity involving the supply of goods and services on a given market which presupposes the risk of service provided for it. Thus, the business is not merely a business with or without legal entity but any market player carrying out actually an economic activity in the internal market irrespective of its legal status. 2. Imputability and State Resource: The term "state" includes both an institution established or managed or partly financed either by the central budget or its subsystems. Thus, any direct or indirect aid measure granted by the ministries, institutions (aid grantors) and other authorities belonging to the central government and any local government body (municipality, county, etc.), constitutes State aid. Moreover, lack in state revenue such as tax allowances (partial or entire tax benefit and tax credit, too) also constitutes aid within the meaning of the EU Competition Law. 3. Selectivity: When undertakings in the same factual and legal situation are not automatically eligible for support, the aid measure constitutes State aid because of its selective nature. The selectivity can be sectoral (e.g. covering a particular market), geographic (e.g. limited to a particular region) or discriminatory by aiming at particular market players. If undertakings in the same factual and legal situation are automatically eligible for and benefit from subsidy from an aid scheme and fulfill all the required (general and specific) conditions, it qualifies for a general measure and therefore does not constitute State aid. 4. Advantage at the Level of the Beneficiary: Under the same market and financing conditions, the beneficiary will not be able to obtain advantage on the market compared to its competitors. 5. Impact on Competition: In competing markets, including those which have not yet been liberalized (that is closed by the state or will be opened gradually) but competition may arise, the aid measure is considered to distort or threaten to distort competition and therefore it qualifyes for State aid. If a particular market had been liberalized earlier but later closed in front of market players, it also distorts or threatens to distort competition. 6. Effect on Trade between Mss: In case when due to subsidy it is likely that customers, investments or services are attracted from other MSs or the establishment of companies are obstructed from other MSs in the area concerned and the free movement of goods and services in the internal market are breached. Table 1: Forms of Aid and Block-exempted Aid Categories Direct Equity participation Closure aid Compensation of damages caused by natural disaster Culture Employment Environmental protection incl. energy saving Heritage conservation Promotion of export and internationalisation Regional development Rescue & Restructure Research and development incl. innovation Sectoral development SME incl. risk capital Social support to individual consumers Training Cash grant Guarantee Recapitalisation Impaired asset measures Liquidity measures Indirect Soft loan Tax deferral Tax exemption Tax benefit Other (e.g. apport, real estate, land etc.) Source: Author’s Compilation based on Directorate-General for Competition, European Commission. Volume XXI Issue IV Version I 18 ( E ) Global Journal of Human Social Science - Year 2021 © 2021 Global Journals When considering that an aid measure is qulaified as State aid based on the six criterion, State aid rules are to be applied. These criteria are conjunctive, meaning that all of them must be fulfilled for an aid measure to qualify as State aid and vice versa: if one of the constituent elements is not met, the aid measure does not constitute State aid. However, the European Commission (hereinafter EC) basically has the assumption that an aid measure distorts or threatens to distort competition and trade both from the supply and/or demand side. State Aid in the European Union: Where Law and Economics Meet