From Subsidy Control To Subsidy Governance

From Subsidy Control To Subsidy Governance Presented by: Dr. SZEGEDI Date: 11 – 13 January 2025 State Aid: Diverse Level Of Legal Acts And Actors - Treaty-level provisions • Expanding secondary legislation  (Council + European Parliament BUT also: Commission's soft law) • Pivotal role of CJEU case-law  (Commission as EU-level competition authority and national actors) - TFEU Art. 107-109. • Main rules combined various set of exemption rules and procedural requirements (e.g. recent SATF) • 1/ Fiscal state aids in taxation? • 2/ Greening of state aid rules (and case law) in nuclear projects 'Economic' History Of State Aid Law In The EEC/EU - Parallel evolution with state aid law • 1950s  restrictive practices meant treating the subsidy as 'bad.'  less interventionist and less intensive regulatory approach • 1970s  main game-changer crisis cycles - the collapse of Bretton Woods' monetary system and two consecutive oil shocks + several Japanese and American companies began locating their plants in Europe with some Member States to offer subsidies to attract them  use public subsidies to promote national undertakings providing subsidies for national market competitors  US takeovers to contemplate positive action in the broad field of industrial 'policy' • 2012: SAM - State Aid Modernization Reform - less strict notification obligations by MSs + much more exemptions • Present days - various economic and crisis cycles  A broader set of diverse policy areas reflected in state aid-related policymaking (industry, FDI, CFSP, economic governance, commercial policy)  COVID-19 management and the post-COVID era - more state aid by MSs needed? - History rep repeats itself? Post-Covid MS-Level Subsidy Competition? - SUBSIDY DISTORTION TO CYCLICAL DISTORTION? • 2020. Germany and France were "responsible" for MORE THAN HALF of the approved State aid, • - MS-LEVEL DIFFERENCES: • - smaller and financially weaker Member States deteriorated rapidly, Some may use bazookas while others shoot slingshots.' ANY SOLUTIONS by EU-LEVEL FUNDS? • setting up compensation funds financed by a certain percentage of the aid • A new Solvency Support Instrument has not been enacted • new RRF framework could be seen as a positive step along with some new fund programs (CRII, CRII+, and REACT-EU) - Exemptions period technically finished in Q4 2023 CJEU: Fiscal State Aid Or Taxation Matters? - MSs vs. COM • MS-level tax rules/arrangements for (MNE - US-based) enterprises labelled as state aid? • COM (EU) as competition authority gaining new powers in taxation? • Highly complex methodology: Selectivity + OECD'arms length principles + market-based outcome between branches - CJEU (GC) • General Court - rather restrictive: COM to identify the MNEs (and national actors') manifest errors:  Lack of manifest errors in transfer pricing • Manifest error in Luxemburg's applied methodology (no ordinary market circumstances) - Spill-over effect on taxation? • Yet to be decided by Court (2nd instance) • Modifying national tax regulations and former national practices • Better cooperation between national authorities CJEU: Greening Of State Aid Matters? - - MSs vs. COM • MS-level nuclear projects investigated based on TFEU 107.3-state aid rules • Hinkley Point C (HPC) - last pre-Brexit case before CJEU • Paks2 - still ongoing • Austria: challenging nuclear projects based on state aid rules instead of green • requirements: • 1/ MSs prerogative: choose free mix of energy in Treaties • 2/ complex investigation of aids based on market scenarios CJEU (Court and GC) • CJEU - Rather restrictive: • 1/ Treaty-based prerogative: • choose free mix of energy in Treaties (no modification by CJEU) • 2/ Lack of manifest errors in state aid investigation by COM • 3/ NEW state aid investigation scheme in HPC case • HPC: Aid must be COMPATIBLE EU environmental lax • Paks2: the breach of another rule of EU law would have had to be indissociably linked to the State aid measure - Spill-over effect of environmental considerations? • Yet to be decided by Court (2nd instance) in case of Paks2 • HPC-more activist Court and Paks2 seems to be a step towards sideways • (Yet) NO green U-turn form side of the CJEU... Conclusions – Towards ‘Subsidy Governance'? - To some extent, history has repeated itself, yet with obvious differences • Some subsidy competition emerged between MSs, similar to the 1970s • BUT much broader integration in terms of policy areas and the number of MSs concerned - Horizontalization of EU law and State aid law - Already governance? • Diverse policy areas became state aid relevant - industry, CFSP and FDI, Green Deal, commercial relations (Foreign Subsidies Regulation) • CJEU: seems to be less activist in 'horizontalization' (lack of COM's manifest errors + no border interpretation of Treaty provisions, no competence expansion) • State aid measures need to be balanced and rebalanced due to policy priorities of different areas • The diverse set of policy areas could be treated in a highly different way baser on MSs interests