1. © Łukasz Stępkowski 2016 For ll.b. - introduction to eu state aid law
ADVANTAGE
© Łukasz Stępkowski 2016
For ll.b. - introduction to eu state aid law

2. Advantage
An advantage is one of the required components of a State aid measure
Any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market
Given it is a component of a State aid measure, the absence of an advantage in the sense of Article 107(1) TFEU renders the State aid regime inapplicable

3. Absence of an advantage for the purposes of Article 107(1) TFEU
There is no advantage for the purposes of a State aid measure where:
A measure works to the detriment of its addressee
A measure is neutral to its addressee
The measure confers an advantage, but said advantage is granted on normal market conditions

4. Detrimental measures
In principle, should a measure be disadvantageous to the addressee, there is no advantage
For this reason, self-standing taxes, levies, capital requirements, transparency obligations and other administrative burdens do not normally constitute aid
However, a burden of that kind may constitute an advantage if it is more favourable than a general system
For instance, a special tax for a certain category of undertakings which is lower than a general tax may be an advantage for the purposes of Article 107(1) TFEU

5. Neutral measures Measures that are either: Examples include :
irrelevant for the purposes of State aid rules, or
correct a market imbalance of some kind, which results in allaying a detriment of some sort to a ’zero’
Examples include :
Members’ company rights (e.g. the right to withdraw from the company, C-237/04 Enrisorse)
A grant for decontamination due to pollution of an industrial plot of land, where the owner is both not culpable for the pollution itself and has been unaware without fault on his part of the damage before buying the land at issue (C. Quigley, EU State aid law and policy, Oxford 2015, p. 24)

6. Advantageous measures
Not every benefit is an advantage for the purposes of Article 107(1) TFEU
In order for it to be so, the advantage has to be obtained not on market conditions
An advantage that was obtained on market conditions is no State aid
Examples include:
A loan with a rate and collateral that are within range of those granted by market participants
A guarantee with an appropriate market premium
A capital injection where such an injection will lead to a greater return from equity
Deferred payment or debt write-off, where it would lead to an overall greater percentage of claims having been paid
A contract entered into with a party chosen over a public tender

7. Unmarketlike advantage
For the purposes of Article 107(1) TFEU:
„Whenever the financial situation of an undertaking is improved as a result of State intervention on terms differing from normal market conditions, an advantage is present”

8. Effects-based approach
Only the effect of the measure on the undertaking is relevant, and not the cause or the objective of the State intervention
the financial situation of the undertaking following the measure should be compared with its financial situation if the measure had not been taken
Since only the effect of the measure on the undertaking matters, it is irrelevant whether the advantage is compulsory for the undertaking in that it could not avoid or refuse it

9. Effects-based approach, cont.
As it is the norm with State aid measures, the form of an advantage is irrelevant
Both positive measures and relief from burdens
The existence of an advantage is not ruled out by the mere fact that competing undertakings in other Member States are in a more favourable position, because the notion of advantage is based on an analysis of the financial situation of an undertaking in its own legal and factual context with and without the particular measure

10. Assessing market conditions
The Commission and the CJEU developed a tool for assessing whether a measure was „market-like”
The tool is called a market economy investor principle (M.E.I.P.) or a market economy operator (M.E.O.) test
A variation of the M.E.I.P. is the market economy creditor principle (M.E.C.P.), for when a State already acts as a creditor wishing to obtain the highest payment possible
Further variation is found in the market economy vendor principle (M.E.V.P.), who wants a highest possible offer

11. Assessing market conditions, cont.
The test is supposed to be carried out ex ante, ie. before the action to be taken, having regard to the information available at the time the intervention was decided upon
only the benefits and obligations linked to the role of the State as an economic operator — to the exclusion of those linked to its role as a public authority — are to be taken into account

12. Methods of assessing market conditions
pari passu investment
competitive, transparent, non-discriminatory and unconditional tenders
benchmarking
expert valuation

13. Pari passu investment
A method establishing direct evidence that an activity would be carried out on market conditions
When a transaction is carried out under the same terms and conditions (and therefore with the same level of risk and rewards) by public bodies and private operators who are in a comparable situation
The ‘pari passu’ condition may not be applicable in some cases where the public involvement (in view of its unique nature or magnitude) is such that it could in practice not be replicated by a market economy operator

14. Tender
If an activity is carried out by way of a tender, the existence of aid is in principle excluded
However, tender procedure has to be competitive, transparent, non- discriminatory and unconditional
All interested parties are to be allowed to participate
No „secret” or „special” rules for certain bidders
No conditions that the buyer is to assume special obligations for the benefit of the public authorities or in the general public interest, which a private seller would not have demanded
Using EU Public Procurement provisions generally is sufficient to exclude aid

15. Benchmarking
If there is no pari passu investment and/or tender rules do not apply, benchmarking may be used to establish „market-likeness”
Evidence of a genuine market measure within the projected parameters is strong evidence for market character of the aid measure
Examples include:
Loans with rates and due dates within parameters utilised by financial institutions
Guarantee with a premium used by the financial sector

16. Expert valuation
Independent experts may be called upon to assess the transactions, esp. where the projected measure is complex
Experts should act on the basis of a generally-accepted, standard assessment methodology

17. Advantage and the amount of aid
While advantage is required for the existence of aid and influences the amount of it, there is no requirement that the amount of a given advantage should directly correspond either to the amount of any transfer of funds or the amount of aid itself
Even if the Commission must establish a sufficiently direct link between, on the one hand, the advantage given to the beneficiary and, on the other, a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget, it is not necessary that such a reduction, or even such a risk, should correspond or be equivalent to that advantage, or that the advantage has as its counterpoint such a reduction or such a risk, or that it is of the same nature as the commitment of State resources from which it derives (C-399/10 P and C-401/10 P Boygues, EU:C:2013:175, para 110).

18. Direct and indirect advantages
While the primary „mode of application” for advantage is that of a direct benefit, it may be that a measure would grant indirect advantages to other entities than its primary addressee
For instance, if an aid programme is designed in such a way as to funnel State benefits to intermediaries dispensing aid, those entities receive indirect advantage and are in themselves beneficiaries – especially where there was no public, competitive, transparent and unconditional tender procedure