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Measures falling outside the State aid rules Eszter Hargita 30 May 2011 Ankara What is not State aid? • Social measures (aid granted to the customers) • Behaviour in line with the market economy investor/creditor principle • General measures (non selective) • Nature of the tax system • Small amount of aid (de minimis) Eszter HARGITA 2 Market economy investor principle - MEIP 1. • Established by the jurisprudence • Based on the non-discrimination and neutrality of ownership • Individual assessment whether state intervention constitutes aid or not • Margin of discretion – grey areas – benchmarks • Unlimited sources of the state Eszter HARGITA 3 MEIP 2. • Objective of the analysis: is there advantage? • What could been obtained on the market (cost of the money) – Cost of the risk free money – state bonds, interest set by the central bank – Risk premium • Normal market condition, business rationality • Under similar conditions a normal market investor would have done the same capital increase? Eszter HARGITA 4 MEIP 3. • Medium or long term expectations should govern • Only the profit expectation counts no side effects (regional development, employment. etc.) – Positive effects are scrutinized during the compatibility assessment of the aid • It ignores all other policy objectives (like lowering unemployment, raising productivity, improving training, protecting environment, expanding research) • Additional tax income or the maintenance of it is not an argument Eszter HARGITA 5 MEIP 4. • • • • Early losses are acceptable Group thinking, indirect effects acceptable More actors from the state assessed together Different assessment of new or follow up investments • Good evidence: Participation of private and public investor (50%-50%), pari passu (similar amount, equal terms), if they are in a comparable situation • Waiver of state profit is aid Eszter HARGITA 6 MEIP 5. • State cannot use its privileges (cheap resources, no bankrupcy), normal market profit level has to be required • Reasonable decision – not the highest profit expectation is required • Risk assessment case by case Eszter HARGITA 7 MEIP 6. • Comparable situation, sectors, companies • The time of the decision and the information available is relevant, not the real outcome! (HAMSA case T-152/99.) Eszter HARGITA 8 MEIP 7. • • • • Burden of proof is on the Member State High degree of certainty is needed Use of the individual experts In case of doubts – prenotification Eszter HARGITA 9 MEIP 8. • Employees are not independent market investors. Investment by employees in their own badly doing company is not lead by profit purposes. • Applicable not only to capital increase but to state regulation (mining fees, concession fees) or even for taxes in case of state owned companies Eszter HARGITA 10 Private creditor • Regarding the repayment of investments already made, the private creditor is interested in the maximalisation of the likelihood of re-obtaining the funds he has provided already, not on the profit. Eszter HARGITA 11 General measures • A general measure affecting the whole of the state's economy e.g. nation-wide fiscal measures is not considered a State aid. • Tax incentive for environmental, training and employment purposes But no discriminatory power for the authorities! Eszter HARGITA 12 General measures? 1. Does the measure intend to favour certain firms or a group of firms? 2. Is there an administrative discretion in its application? 3. Are the results likely to favour in practice certain firms? 4. Is the measure open to all firms without any discrimination? Eszter HARGITA 13