EU State Aid Law. Emerging Trends at the National and EU Level

The book represents one of the outcomes of the EU-financed project ‘European Networking and Training for National Competition Enforcers’ (ENTraNCE) managed by the Robert Schuman Centre for Advanced Studies of the European University Institute (EUI – Florence). Among other activities, the project organised training for judges from the Member States. The book is a collection of contributions from the speakers of the 7^th training, which focused on the role of national courts in the enforcement of EU State aid rules.

As the editors clarify in their introduction, over the past decades EU State aid has evolved from being a tool for avoiding subsidies wars between the Member States, to becoming an instrument for the pursuit of broader goals, such as the financial stability of the Member States and the coordination of their fiscal policies. The first four chapters very much develop this theme. A methodological assumption underlies these chapters. Economic reasoning upholds – or should uphold, the different chapters show nuanced approaches – Commission decisions on State aid measures adopted by the Member States.

Merola and Caliento analyse the notion of State aid as developed by both the Commission and the EU Courts. The central contention is not so much whether the notion has widened or shrunk, but how the rationale for State aid control has changed, impinging on the same notion of State aid. While being generally critical of both the State aid modernization package and of the 2016 Commission Notice on the notion of State aid (C/2016/2946), which seem to be looking backwards, the Authors stress that the 2014 General Block Exemption Regulation (Commission Regulation (EU) N°651/2014 henceforth GBER) had already paved the way for transforming EU State aid law into a tool to create an EU industrial policy, by providing a long list of measures presumed compatible with the internal market. In this way, EU State law has morphed from being a negative integration instrument – striking down subsidies that alter the level competitive playing field among EU undertakings – to a positive integration tool steering the Member States’ economic lever towards industrial policy goals favoured by the Commission. However, according to the Authors, the case law struggles to take this evolution into account. While the General Court tries, from time to time, to come up with innovative approaches, the Court of Justice is more conservative (p. 25).

The analysis flows smoothly in the following chapter by Alberto Heimler, who focuses on one of the elements of the notion of State aid: namely, its effects on trade between the Member States. This chapter indeed strengthens the argument that EU State aid is being used, not just as an industrial policy tool, but as an ersatz common corporate tax regime. The Author laments the fact that ‘effects on trade’ do not feature prominently – and early enough – in the analysis of potential State aid cases, limiting the capacity of the law to strike down subsidies really having that effect, including some arguably too generously covered under the GBER. To remedy the situation, it is suggested to involve national competition authorities in policing State aids (pp. 67 f.).

The more theoretical arguments developed in these two chapters are further pursued in the following chapters by Ginevra Bruzzone and Marco Boccaccio on the one hand, and by Pier Luigi Parcu and Alessandra Maria Rossi on the other. The first authors address infrastructures and SGEIs. Starting with a detailed analysis of the case law, the Almunia package and Commission practice, they highlight the broad control over the Member States’ choices about which infrastructures to finance. The Authors argue for a ‘more economic approach’, under which subsidies should be limited to the correction of market failures (p. 94). The same approach is followed concerning the broadband sector in the chapter penned by Pier Luigi Parcu and Alessandra Maria Rossi, who both show how, in practice, the EU has developed a strong industrial policy favourable to the deployment of broadband networks across the EU. They argue that the Commission has been taken away by this goal, thus being very generous in allowing more subsidies than strictly required, under an economic approach focusing on the analysis of market failures as a limit to the intervention of the public purse (p. 106).

These first chapters are indeed very well-researched and prompt further reflection. Trained in law, the reviewer cannot avoid raising questions as to the (EU) constitutional basis of the developments which are so astutely analysed by the contributors. True “State aid has become a governance tool. It enables the Commission to exercise its influence in Member States’ national economic policies and to coordinate industrial policies, as this is key to increasing the efficiency of public spending and streamlining resources toward objectives of common interest in the EU” (p. 46). Two questions – and no pretence of any easy answers here. Starting with the division of competencies between the EU and the Member States, what is the legal basis in the Treaties for these developments? As is well known, under Article 5(1) TEU, ‘The limits of Union competences are governed by the principle of conferral […]’. On its face, ‘increasing the efficiency of public spending’, however desirable a goal this may be, cannot fit easily, either with the EU exclusive competence to establish competition rules necessary for the functioning of the internal market (Article (1)(b) TFEU), or in the shared internal market competence (Article 4(2)(a) TFEU). This is not a trivial problem, since the EU might be seen as expropriating the competence of the Member States to decide, for instance, which infrastructures to build and which SGEIs to finance – in the latter case, flying in the face of Article 14 TFEU. The gravity of the issue is exacerbated, if we can at least suspect that economic analysis as to the efficiency of any given policy choice is not an exact science, and policy preferences might affect its outcome. If so, the allocation of the decision-making power is no technicality. Unsurprisingly, the Member States are neither pleased nor fully committed to this new notion of State aid (pp. 55 f). Coming next to the EU ‘internal’ competence question, why should the EU Commission be tasked with developing the EU industrial policy in lieu of differently – but truly – representative institutions like the EU Parliament or the Council? Similar questions concern, for instance, the use of State aid law to bring about some measure of corporate tax harmonisation. Economic efficiency (alone) is not a constitutional foundation for sharing competence between the EU and the Member States, nor within the EU. Legal analysis of the evolutions of EU State aid law is badly in demand.

The following five chapters enter into a more familiar landscape for the legally trained, delving into the complex issues of enforcement of EU State aid rules. As many contributors have pointed out, the discretion enjoyed by the Commission in assessing the legality of a measure against Article 107 TFEU means that breach of the standstill obligation under Article 108(3) TFEU ends up being litigated in national courts. Fernando Pastor-Merchante and Giorgio Monti trace how – lacking a secondary law harmonisation of remedies for breach of EU State aid rules at national level – the case law of the Court of Justice has considerably filled the gap in limiting the procedural autonomy of the Member States. Their analysis is supplemented by Simone Donzelli and Bernadette Willemot-Nieuwenhuys, who focus both on damages and on the cooperation tools outlined – on the basis of the case law – the Commission Notice of 1993 on cooperation between national courts and the Commission, and following documents. The discussion of the difficulties faced in receiving damages is particularly enlightening. The chapter also deserves reading for the information on the actual working of those cooperation tools, taken up in the following chapter, which highlights the difficult imbrication between EU State aid law and international investment law. Adam Scott highlights the difficulties faced by national courts, especially following the Micula litigation, to square conflicting EU and international law obligations even when requesting or being faced with the Commission enjoying its role as an Amicus Curiae. The following chapter by Josef Weinzierl takes us back to aid to infrastructure development. This time the focus is on the ‘tepid’ reception of the developments in EU State aid law – and the role assigned to national courts – in Germany. The picture painted by Juan Jorge Pernas López in the last chapter of the book sharply contrasts with Weinzierl’s. This last chapter is also valuable for showing how difficult it is – even when both lawmakers and the courts are forthcoming – to give effect to Commission decisions that find wide taxation aid schemes illegal.

This review cannot do full justice to the richness of the contributions collected in the book. A number of other themes intersect throughout the contribution, such as the effectiveness of ex post control (see pp. 53 f and 55). From a comparative law perspective, the last two chapters offer a sharp contrast concerning the reception of the EU case law on the recovery of (arguably) illegal State aids by the German and the Spanish courts, pointing to a very asymmetrical application of EU State aid law in different Member States. This divergence from the constituent idea of the uniform application of EU State aid law will be easily confirmed and more extensively analysed – including as to its constitutional and cultural reasons – in a full blown comparative study going beyond the book under review, and further building on the State aid chapters in the coeval book edited by Ferdinand Wollenschläger, Wolfgang Wurmnest and Thomas M.J. Möllers, Private Enforcement of European Competition and State Aid Law (Alpeen aan den Rijn, Wolters Kluwer, 2020).