Public funding of failing banks in the European Union (LBF vol. 19) 2020/3.3:3.3 The concept of State aid

Public funding of failing banks in the European Union (LBF vol. 19) 2020/3.3

3.3 The concept of State aid

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Not all public funding qualifies as State aid within the meaning of Article 107(1) TFEU. In accordance with Article 107(1) TFEU State aid is an intervention by a Member State or through Member State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods and that affects trade between Member States. In order for a measure to be categorised as ‘State aid’, all the conditions set out in Article 107(1) TFEU must be fulfilled. The Commission has no margin of discretion to decide that a measure is not State aid, if it meets these conditions.1 A Commission decision categorising a national measure as State aid must however set out the reasons why the Commission takes this view.2 It must disclose in a clear and unequivocal fashion the reasoning followed by the Commission in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review.3

It is in the first place up to the Member State that intends to grant public funding to make the assessment whether this qualifies as State aid. Only if the outcome of the assessment is positive, it needs to obtain the approval of the Commission prior to awarding the public funding.4 With a view to contributing to an easier, more transparent and more consistent application of the notion of State aid across the EU, the Commission published a Notice on the notion of State aid on 19 June 2016.5 Given that the notion of State aid is an objective and legal concept defined directly by the TFEU, the Notice clarifies the Commission’s understanding of Article 107(1) TFEU, as interpreted by the ECJ, in order to assist Member States in making the correct qualification.6

The following sections set out and discuss the different elements of the concept of State aid with a focus on the State aid measures that have been implemented in the banking sector.

3.3.1 Intervention by a Member State or through Member State resources3.3.2 Advantage3.3.3 Selectivity3.3.4 Undertakings3.3.5 Distorts or threatens to distort competition and affect trade between Member States

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