2.3.6 Criterion 6: The aid must affect trade between Member States

As was explained in the previous subsection, the conditions that trade between Member States must be affected and competition distorted, are as a general rule inextricably linked. This means that trade is regarded as affected by the aid, when the aid strengthens the position of an undertaking as compared with other undertakings competing in intra-Union trade.

The background of this criterion is that EU-law does in principle not apply to purely domestic situations. In that regard, it should be pointed out that the fact that an undertaking is not engaged in cross-border trade or only operates locally or regionally, does not preclude the existence of an effect on intra-Union trade.1 This is because the aid makes it more difficult for undertakings from other Member States to enter the market on which the beneficiary undertaking is operating.

The criterion of effect on trade between Member States was elucidated by the Court in one of the bank State aid cases. In its judgment in the case C-667/ 13 (Banco Privado Portugues) – which will be discussed further in chapter 5 of this PhD-study – the Court held that, when aid granted by a Member State strengthens the position of an undertaking in comparison with other competing undertakings in trade between Member States, that trade must be regarded as being affected by that aid. In this regard, the fact that an economic sector, such as that of financial services, has been involved in a significant liberalisation process at EU level, enhancing the competition that may already have resulted from the free movement of capital provided for in the Treaty, may serve to determine that the aid has a real or potential effect on competition and affects trade between Member States.2