EU STATE AID LAW AND THE CREDIT CRISIS CONOR QUIGLEY QC IIEA, DUBLIN 3 FEBRUARY 2010

State Aid: Article 107(1) TFEU  State aid within Article 107(1) TFEU  Aid entails a financial advantage from State resources  Selective advantage favouring certain undertakings  Distortion of competition  Effect on trade between Member States

State Aid: Article 107(3) TFEU  Exemptions: Article 107(3)(c) TFEU  Permissible aid  Regional aid  Aid for SMEs  R&D&I aid  Environmental aid  Training/employment aid  Rescue & restructuring aid  Article 108(2) TFEU: Council approval in exceptional circumstances

Supervisory Procedures  Supervisory regime  Block exemption  Individual exemption  Duty to notify: Article 108(3) TFEU  Procedural Regulation 659/1999/EC  Preliminary assessment: Article 4  No aid  Aid compatible with common market  Doubts as to compatibility  Formal assessment: Article 7  No aid  Aid compatible  Conditional decision  Negative decision

Initial reaction to the credit crisis  Rescue and restructuring guidelines  Bank in difficulty  Rescue aid  6 months  Loan/guarantee for liquidity purposes  Restructuring aid  Restructuring plan for long-term viability  Avoidance of undue distortions of competition  Divestment of assets, capacity reduction

Credit crisis measures  Systemic banking crisis: Article 87(3)(b) EC / Article 107(3)(b) TFEU  Commission communications  Rescue operations  Recapitalisation  Treatment of impaired assets  Temporary framework  Restructuring measures

Issues in State aid and the credit crisis  Definitions  Market operator test: NAMA  Sale of bank assets: LloydsTSB  Bonus taxes: Bank payroll tax

State Aid definition  Intervention by the State resulting in an advantage for an undertaking by mitigating the charges which are normally included in its budget: Case 30/59, Steenkolenmijnen v High Authority [1961] ECR 1, p. 19.  Recipient receives an economic advantage which it would not have obtained under normal market conditions: Case C-39/94, SFEI v La Poste [1996] ECR I-3547, para 60  Departure from a benchmark set of rules, or from a normal burden, which confers an advantage: Case C-66/02, Italy v Commission [2005] ECR I-10901, per Advocate General Stix-Hackl at para 48.

State Aid and the Market Operator Test – principles (1)  Would a private operator, in possession of the same information as the public authority, conduct the same commercial transaction on the same terms: Case C-457/00, Belgium v Commission [2003] ECR I-6931, para 47.

State Aid and the Market Operator Test – principles (2)  All the relevant features of the measures and their context must be examined, including those relating to the situation of the authority responsible for granting the measures: Case T-196/04, Ryanair Ltd v Commission [2008] ECR II-nyr, para 59.  always necessary to assess properly any commercial reasons underlying the transaction in question, especially where there is a change from previous commercial arrangements involving the same parties, see, for example, Case T- 98/00, Linde v Commission [2002] ECR II

State Aid and the Market Operator Test – principles (3)  Comparison between the conduct of public and private investors must be made by reference to the attitude which a private investor would have had at the time of the transaction in question, having regard to the available information and foreseeable developments at that time: Cases T ‑ 228/99 & T ‑ 233/99, Westdeutsche Landesbank Girozentrale v Commission [2003] ECR II ‑ 435, paras ; Case T-20/03, Kahla/Thüringen Porzellan GmbH v Commission [2008] ECR II-nyr, para 238.

Restructuring: sale of assets  Restructuring guidelines  Long term viability  Compensatory measures to avoid distortions of competition  Significant own contribution  Ensuring competitive banking sector

State aid and Taxation  Selectivity: Where measure constitutes an advantage for certain undertakings in comparison with others which are in a comparable legal and factual situation: Cases C-182/03 & C-217/03, Belgium and Forum 187 v Commission [2006] ECR I- 5479, para 119  Reference framework must be determined: Case C-88/03, Portugal v Commission [2006] ECR I-7115, para 56  Differentiation may be justified by the nature of the general system: Case C- 143/99, Adria-Wien Pipeline [20-01] ECR I-8365, para 42