State Aid Rules
The European Commission monitors and controls State Aid in the EU by requiring Member States to notify the Commission in advance of proposed State Aid. This gives the Commission the opportunity to approve or refuse to approve the proposed State Aid.
The Procedure Regulation (659/99) defines unlawful aid as unnotified aid.
Under the present procedural rules, the Commission is under the obligation to order the recovery from the beneficiaries of any unlawful aid that is found to be incompatible with the Common Market. This includes repayment with interest to the public authorities.
Why Have State Aid Rules?
State Aid rules aim to ensure fair competition and a single common market. Giving favoured treatment to some businesses would:
- harm business competitors;
- risk distorting the normal competitive market; and
- hinder the long-term competitiveness of the Community.
That is why the European Community founding Treaty generally forbids State-funded aid that would favour certain businesses or goods production.
The State Aid rules contribute to the effective functioning of the Single Market and European Union economic reform in two key ways:
i) They prevent State Aid that would seriously distort competition - thereby helping to achieve a fair market for businesses in all Member States;
ii) They allow State Aid that promotes economic development and other legitimate policy objectives, where this benefit outweighs any distortion of competition.
The European Commission guide, EU Competition Policy and the Consumer, contains a section on State Aid.