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The Social Dimension of EU State Aid Law and Policy

Published online by Cambridge University Press:  21 May 2019

Delia FERRI  and
Juan Jorge PIERNAS LÓPEZ
Delia FERRI
Affiliation:
National University of Ireland Maynooth
Juan Jorge PIERNAS LÓPEZ
Affiliation:
University of Murcia*
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Abstract

Traditionally, EU state aid law has been attached to the goals of maintaining free competition and preventing the distortionary effects of Member States’ economic intervention, while social considerations have been considered immaterial to state aid control. However, in more recent years, EU state aid law has acquired a clearer ‘social dimension’, indirectly streamlining national subsidies towards social goals. The entry into force of the Treaty of Lisbon, and particularly of Articles 3(3) TEU and 9 TFEU, has had an impact on the way in which social goals have been taken into account in the application of the state aid provisions. In the last decade, the European Commission has sought out a more appropriate balance between the main objective of preserving competition in the internal market on the one hand, and social objectives, also enshrined nowadays in the Treaties, on the other. This ‘social dimension’ is still underdeveloped, but emerges to varying degrees when looking respectively at the definition of state aid under Article 107(1) TFEU, at the scope of the derogations under Articles 107(2) and 107(3) TFEU and at the secondary legislation adopted for their implementation.

Keywords

state aidsocial policysocial justiceundertakingselectivityderogationsGeneral Block Exemption Regulation (GBER)
Type
Articles
Information
Cambridge Yearbook of European Legal Studies , Volume 21 , December 2019 , pp. 75 - 100
Copyright
Copyright © Centre for European Legal Studies, Faculty of Law, University of Cambridge

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Footnotes

*

This article is the product of a joint reflection. However, Parts I, II, III.A, and IV have been written by Delia Ferri, while Parts III.B, III.C, and III.D have been written by Juan Jorge Piernas López. Section V has been written jointly. We would like to thank Professor KA Armstrong and the anonymous reviewers for their comments on the earlier drafts. The usual disclaimers apply. This article builds upon and develops the chapter D Ferri and JJ Piernas Lopez, ‘State Aid Law in a Social Market Economy’ in D Ferri and F Cortese, The EU Social Market Economy and the Law: Theoretical Perspectives and Practical Challenges for the EU (Routledge, 2018).

References

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2 These socially driven interpretative clauses are well-rooted in the Treaties. The Treaty Establishing the European Economic Community (‘EEC Treaty’), for example, already mentioned social goals, such as: ‘to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the States belonging to it’, and ‘to promote improved working conditions and an improved standard of living for workers, so as to make possible their harmonization while the improvement is being maintained’. Both the Treaty of Maastricht and the Treaty of Amsterdam extended these social ideals even further, without enhancing the quite modest EU social policy. On this issue, see O'Sullivan, CE, ‘The EU between Market State Ideals and Social Market Economy Objectives: Placing the Social Market Economy within the Union's Constitutional History’ in Ferri, D and Cortese, F, The EU Social Market Economy and the Law (Routledge, 2018), p 17Google Scholar.

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10 Commission Regulation (EU) 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty Text with EEA relevance. [2014] OJ L187/1.

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13 For a summary of the main case law concerning the criteria of Article 107(1) TFEU, see European Commission, ‘Notice on the Notion of State Aid as Referred to in Article 107(1) of the Treaty on the Functioning of the European Union’, [2016] OJ C262/1.

14 Inter alia Spain v Commission, C-409/00, EU:C:2003:92.

15 Altmark, C-280/00, EU:C:2003:415, para 75.

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17 Among others, Philip Morris, 730/79, EU:C:1980:209.

18 Council Regulation (EC) 994/98 [1998] OJ L142/1. This regulation was repealed by Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal state aid. OJ L248, 24.9.2015, pp 1–8. A new proposal to amend the latter regulation has been presented by the Commission in June 2018 (COM (2018) 398 final).

19 Commission Regulation (EC) 1407/2013 [2013] OJ L352/1.

20 Commission Regulations (EC) 68/2001 [2001] OJ L10/20, 70/2001 [2001] OJ L10/33, 2204/2001 [2002] OJ L337/3, and 1628/2006 [2006] OJ L32/29.

21 Commission Regulation (EC) 800/2008 [2008] OJ L214/3, amended by Commission Regulation (EU) 1224/2013 [2013] OJ L320/2.

22 Commission Regulation (EU) 651/2014 [2014] OJ L187/1.

23 Scharpf, F, ‘The Asymmetry of European Integration, or Why the EU Cannot Be a “Social Market Economy”’ (2010) 8(2) Socio-economic Review 211CrossRefGoogle Scholar.

24 In this respect, see Armstrong, K, Governing Social Inclusion: Europeanization through Policy Coordination (Oxford University Press, 2011), pp 196Google Scholar et seq.

25 Among others, see Enirisorse, C-237/04, EU:C:2006:197, paras 27–28. There is, however, a third ‘lieu’ where the ordinary application of the state aid rules has been excluded under Article 106(2) TFEU: Services of General Economic Interest (SGEI). The CJEU has been sensible with regard to financial measures that compensate for the provision of a public service, and which may well be a social service. On this aspect see JJ Piernas López, ‘Services of General Economic Interest and Social Considerations’ in Ferri and Cortese, note 2 above, p 166.

26 The CJEU has consistently held that any activity consisting of offering goods and services on a market is an economic activity, and that an entity carrying out such an activity is an undertaking for the purpose of application of EU competition law (including state aid rules). See Klaus Höfner and Fritz Elser v Macrotron GmbH, C-41/90, EU:C:1991:161.

27 European Commission, ‘Notice on the Notion of State Aid as Referred to in Article 107(1) of the Treaty on the Functioning of the European Union’ [2016] OJ C262/1; Sauter, W, ‘The Notion of Undertaking’ in Hofmann, H and Micheau, C (eds), State Aid Law of the European Union (Oxford University Press, 2017), p 74Google Scholar.

28 Mengozzi, P, ‘Le attività culturali e la comunicazione della Commissione del 19 luglio 2016 sulla nozione di aiuto di Stato’ (2016) Il Diritto dell'Unione Europea 741Google Scholar.

29 Ferri, D, ‘Cultural Diversity and State Aids to the Cultural Sector’ in Psychogiopoulou, E (ed), Cultural Governance and the European Union. Protecting and Promoting Cultural Diversity in Europe (Palgrave, 2015), p 119Google Scholar.

30 This also sits well with the relevant role that culture and cultural diversity have in the Treaties. See Article 3(3) TEU, which provides that the EU shall ‘respect its rich cultural and linguistic diversity, and shall ensure that Europe's cultural heritage is safeguarded and enhanced’, and Article 167 TFEU.

31 Commission v Germany, C-318/05, EU:C:2007:495, para 68.

32 Congregación de Escuelas Pías Provincia Betania v Ayuntamiento de Getafe, C-74/16, EU:C:2017:496.

33 Administrative Court of Madrid, Section 4, Case 247/2014.

34 On the case, see Biondi, A, ‘Congregación de Escuelas Pías Provincia de Betania (Congregación), A Tax Exemption for the Catholic Church in Spain Constitutes State Aid if it Concerns Education Services Provided on a Commercial Basis’ (2018) 9(2) Journal of European Competition Law & Practice 110–12CrossRefGoogle Scholar.

35 See Sauter, note 27 above, p 83.

36 France v Ladbroke Racing and Commission, C-83/98 P, EU:C:2000:248, para 25.

37 Italian Textiles, 173/73, EU:C:1974:71, para 13.

38 Belgium v Commission (‘Maribel’), C-75/97, EU:C:1999:311.

39 Ibid, para 17.

40 European Commission Notice, ‘The Monitoring of State Aid and Reduction of Labour Costs’, 97/C 1/05 [1997] OJ C1, p 10.

41 In the decision, the Commission argued: ‘To differentiate between state aid and general measures the Treaty provides the Commission only with the criterion of specificity, aid being defined in Article 92 of the Treaty as measures “favouring certain undertakings or the production of certain goods”. A comparison should therefore be made, within one and the same Member State, between the treatment of companies benefiting from the measure in question and the general system applied to companies which are in the same objective position’ (Commission Decision of 13 March 1996 concerning fiscal aid given to German airlines in the form of a depreciation facility, 96/369/EC).

42 Maribel, note 38 above, para 32.

43 The measure excluded some industrial sectors where manual labour was high (therefore sectors in an objectively similar position in the sense of the argument put forward by Belgium) and included other non-industrial such as horticulture and forestry in which manual labour was low. The Commission had shown in its decision that the only 47% of manual workers were employed in the sectors benefiting from the measure whereas 53% of them were working in sectors excluded from the measure (Commission decision of 4 December 1996 concerning aid granted by Belgium under the Maribel bis/ter scheme (97/239/EC), [1996] OJ L95/25).

44 In this regard, the Commission emphasised in its pleadings that the ‘justification for the measures to reduce the burden of social security costs adopted under the Maribel bis/ter scheme should be sought in the internal logic of the general social welfare system existing in Belgium and not in the specific purpose of the scheme’. Maribel, note 38 above, para 18. The Commission's position was in fact coherent with the test that it had included in its notice on direct business taxation and state aid, published while this case was pending. European Commission Notice, ‘The Application of the State Aid Rules to Measures Relating to Direct Business Taxation’ [1999] OJ C384/3.

45 Maribel, note 38 above, para 36.

46 Ibid, para 37.

47 Ibid, paras 38–39.

48 Armstrong, note 24 above, p 204.

49 Paint Graphos and Others, C-78/08, EU:C:2011:550, paras 54, 64.

50 Sierra, JL Buendía, ‘Finding Selectivity or the Art of Comparison’ (2018) 17 European State Aid Law Quarterly 85–92Google Scholar.

51 ANGED v Catalonia, C-233/16, EU:C:2018:280.

52 Ibid.

53 Opinion of the Advocate General Saugmandsgaard Øe, Finanzamt B v A-Brauerei, C-374/17, EU:C:2018:741, para 159. See also paras 150 and 151 in which the Advocate General questions the traditional difference between intrinsic and extrinsic objectives for the identification of comparable undertakings under the selectivity analysis in fiscal measures.

54 Colomo, P Ibañez, ‘State Aid Litigation before EU Courts (2004–2012): A Statistical Overview’ (2013) 4(6) Journal of European Competition Law and Practice 469Google Scholar.

55 Corsica Ferries, T-565/08, EU:T:2012:415. The ‘social market economy’ was also mentioned by the General Court in another case concerning state aid and environmental protection, namely, Castelnou Energía, T-57/11, EU:T:2014:1021.

56 Ibid, para 82.

57 European Commission ‘Notice on the Notion of State Aid as Referred to in Article 107(1) of the Treaty on the Functioning of the European Union’ [2016] OJ C262/1.

58 S Civitarese Matteucci, ‘Social Rights, Social Market Economy and the European Social Model. Tracing Conceptual Boundaries’ in Ferri and Cortese, note 2 above, p 59.

59 A notable example in this respect is the Dutch scheme for conservation and restoration of protected historical monuments. State Aid – N 606/2009 – The Netherlands ‘National framework for conservation and restoration of protected historical monuments’. See also State Aid N-SA. 33433– Czech Republic ‘Green Knowledge Centre/ Open-air museum, Town of Bystřice nad Pernštejnem’.

60 European Commission ‘Notice on the Notion of State Aid as Referred to in Article 107(1) of the Treaty on the Functioning of the European Union’ [2016] OJ C262/1, pp 196–97, and the Commission's press releases of 29 April 2015 (IP/15/4889) and 21 September 2016 (IP/16/3141).

61 See in this regard the Commission's press release of 12 May 2017, at https://ec.europa.eu/futurium/en/content/no-cross-border-effect-aid-measure-no-state-aid.

62 Eventech v The Parking Adjudicator, C-518/13, EU:C:2015:9, para 65.

63 European Commission, ‘Statement of President Juncker on the Proclamation of the European Pillar of Social Rights’ (2017), at http://europa.eu/rapid/press-release_STATEMENT-17-4706_en.htm. Garben, S, ‘The European Pillar of Social Rights: An Assessment of its Meaning and Significance’ (2019) 21 Cambridge Yearbook of European Legal StudiesGoogle Scholar.

64 MF Orzan, ‘De Jure Compatible Aid under Article 107(2) TFEU’ in Hofmann and Micheau, note 27 above, p 234.

65 Article 107(2)(b) TFEU lists aid that ‘makes good the damage caused by natural disasters or exceptional occurrences’. This provision also mentions at letter (c): ‘aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division’. This exemption is of limited practical relevance, and is now ex lege repealed.

66 State Aid decision C 52/05, Subsidy to digital decoders, [2007] OJ L147/1. See also the subsequent CJEU decisions: Mediaset v Commission, T-177/07, EU:T:2010:233; Mediaset SpA v Commission, C-403/10 P, EU:C:2011:533.

67 Ibid.

68 Faull, J and Nickpay, A, The EU Law of Competition (Oxford University Press, 2014), p 1966Google Scholar.

69 A block exemption of aid for residents of remote regions was introduced through Commission Regulation (EU) 651/2014, Art 51. See also: Commission Decision, Case SA-33966, Aide à caractère social au bénéfice des résidents des îles de la Guadeloupe, 3/5/EU [2012] OJ C128/2; Commission Decision, Case SA-32888, Befreiung von der Luftverkehrsteuer hinsichtlich Abflügen von Inselbewohnern und in anderen Fällen, 8/3/EU [2001] OJ C70/3.

70 State Aid 27/2008 – United Kingdom. Aid of a social character Air Services in the Highlands and the Islands of Scotland, dated 14 November 2008 C(2008)685.

71 In 2010, the Commission approved an aid measure for the purchase of set of digital boxes for socially vulnerable people in Slovakia (SA.32566). In 2012, the Commission approved aid measures for the purchase of digital decoders by socially disadvantaged households in Hungary (SA.34901). In 2011, a similar measure aimed at the distribution of digital decoders to persons with visual disabilities in Spain was approved (SA.31982).

72 SA.45004 (2016/N) – Cyprus State Grant Scheme to Borrowers and Micro-companies.

73 COM (2010) 2020 final, A European Strategy for Smart, Sustainable and Inclusive Growth.

74 COM (2010) 758 final, The European Platform against Poverty and Social Exclusion: A European Framework for Social and Territorial Cohesion.

75 Among many others, Philip Morris, C-730/79, EU:C:1980:209.

76 Regional aid concerns all sectors of economic activity, apart from the fisheries and aquaculture, agricultural, and the transport sector, which are subject to special rules (European Commission, ‘Guidelines on Regional State Aid for 2014–2020’, [2013] OJ C209/1, paras 10, 30).

77 Germany v Commission, C-248/84, EU:C:1987:437. In particular, the CJEU has consistently held that the use of the words ‘abnormally’ and ‘serious’ in Article (107)(3)(a) shows that the exemption concerns only areas where the economic situation is extremely unfavourable in relation to the EU as a whole.

78 See note 76 above.

79 Ibid.

80 Ibid.

81 See European Commission, ‘Social Scoreboard’, https://composite-indicators.jrc.ec.europa.eu/social-scoreboard/#socialdimensions.

82 H Friederiszick and M Merola, Regional State Aid Control in Europe: A Legal and Economic Assessment (European School of Management and Technology, 2015) Working Paper No 15-05.

83 Breslin, J, Banking Law (Thomson Round Hall, 2013), p 8Google Scholar.

84 Koenig, C, ‘“Instant State Aid Law” in a Financial Crisis, State of Emergency or Turmoil: Five Essential and Reasonable Requirements under the Rule of Law’ (2008) European State Aid Law Quarterly 629Google Scholar.

85 Freistaat Sachsen and Volkswagen AG Commission, Joined Cases T-132/96 and T-143/96, EU:T:1999:326, para 167.

86 Crédit Lyonnais, C-47/1996, [1998] OJ L221/28, para 10.1.

87 Communication from the European Commission, ‘The Application of State Aid Rules to Measures Taken in Relation to Financial Institutions in the Context of the Current Global Financial Crisis’, [2008] OJ C270/8. A new Banking Communications was issued in 2013 to replace the existing 2008 Communication (Communication from the European Commission, ‘Application of State Aid Rules to Support Measures in Favour of Banks in the Context of the Financial Crisis’, [2013] OJ C216/1).

88 A Bomhoff, A Jarosz-Friis, and N Pesaresi, ‘Restructuring Banks in Crisis—Overview of Applicable State Aid Rules’ (2009) Competition Policy Newsletter 3.

89 Communication from the European Commission, ‘Temporary Framework for State Aid Measures to Support Access to Finance in the Current Financial and Economic Crisis’, [2011] OJ C6/5.

90 Gilliams, H, ‘Stress Testing the Regulator: Review of the State Aid to Financial Institutions after the Collapse of Lehman’ (2011) European Law Review 3Google Scholar.

91 See, in this regard, the speech by H Ungerer, Deputy Director General of DG Competition with Special Responsibility for State Aids, at the EU State Aid Summit State Aid Policy, Procedure and Enforcement through the Economic Crisis and Beyond C5 Business Information in a Global Context, Brussels, p 13. It is available at: http://ec.europa.eu/competition/speeches/text/sp2009_11_en.pdf. He referred to Article 107(3)(b) as a ‘nuclear option’ of state aid law. See also in this regard the Business and Advisory Committee (BIAC) to the OECD: ‘An aggressive enforcement of subsidies bans would also have put into danger the very existence of State aid rules, given the strong political and economic reasons for granting aid’. Global Forum on Competition, Roundtable on competition, state aids and subsidies (DAF/COMP/GF(2010)5), p 228.

92 R Ianus and M Orzan, ‘Aid Subject to Discretionary Assessment under Article 107(3) TFEU’ in Hofmann and Micheau, note 27 above, 240, p 275.

93 See Iglesias Gutiérrez, C- 352/14, EU:C:2015:691.

94 An example can be found in the approval of the Polish state aid scheme N 519/2007 for operators employing persons held in detention, and of its renewed version in 2017. This aid scheme was aimed at providing aid to undertakings employing persons in detention to prepare them for work in the open labour market, after their release from prison. The Commission, in its assessment, found that ‘the positive effects of the scheme, namely the promotion of inclusion of vulnerable and marginalised group’ outweighed its negative effects. State Aid No SA.46134(2016/N) – Poland State Aid Scheme for Operators Employing Persons Held in Detention (amendment to the aid scheme SA.33608 (2011/N)).

95 Communication from the European Commission, ‘Criteria for the Compatibility Analysis of State Aid to Disadvantaged and Disabled Workers Subject to Individual Notification’, [2009] OJ C188/6.

96 Ferri, D and Marquis, M, ‘Inroads to Social Inclusion in Europe's Social Market Economy: The Case of State Aid Supporting Employment of Workers with Disabilities’ (2011) European Journal of Legal Studies 4Google Scholar.

97 SEC (2010) 1324 final, ‘European Disability Strategy 2010–2020: A Renewed Commitment to a Barrier-Free Europe’.

98 Communication from the European Commission, ‘Guidelines on State Aid for Rescuing and Restructuring Non-financial Undertakings in Difficulty’, [2014] OJ C249/1.

99 After the first guidelines adopted in 1994 and their revised version passed in 1999, the Commission adopted new guidelines in 2004 (European Commission, ‘Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty’, [2004] OJ C244/2), the validity of which was extended until their replacement by new 2014 rules.

100 C(2017) 4984 final, State Aid SA.47595 (2017/N) – Spain Restructuring Aid Scheme for SMEs ‘BIDERATU Berria’.

101 See note 11 above.

102 COM(2012) 0209 final, ‘EU State Aid Modernisation (SAM)’. For a discussion of the SAM, see Quigley, C, ‘The European Commission's Programme for State Aid Modernization’ (2013) Maastricht Journal of European and Comparative Law 35CrossRefGoogle Scholar.

103 Council Regulation (EC) 994/98 of 7 May 1998 on the application of Articles 92 and 93 EC [now Articles 107 and 108 TFEU respectively] to certain categories of horizontal state aid [1998] OJ L142/1. Repealed by Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal state aid, OJ L248, 24.9.2015, pp 1–8.

104 As its predecessor (Commission Regulation (EC) 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty – General Block Exemption Regulation [2008] OJ L214/3 (amended by Commission Regulation (EU) 1224/2013 of 29 November 2013 amending Regulation (EC) 800/2008 as regards its period of application [2013] OJ L320/2), the GBER sets out the categories of aid and the conditions under which aid measures can benefit of an exemption from notification, define the eligible beneficiaries, the maximum proportion of the eligible costs that can benefit from state aid and eligible expenses. However, the new GBER significantly extends the possibilities for Member States to grant aid.

105 Ferri, D, ‘The New General Block Exemption Regulation and the Rights of Persons with Disabilities: Smoke without Fire?’ (2015) 14 European State Aid Law Quarterly 465Google Scholar.

106 Among many others, SA.40525 Polish Scheme on Wage Subsidies for Workers with Disabilities (2015); SA.40612 Belgian Scheme ‘Professionele integratie Personen met een handicap’ (2015); SA.39104 Skills Development Scotland Support for Training, the Employment of Disadvantaged/Disabled Workers and Consultancy 2014–2020 (2014).

107 Commission Regulation (EU) 651/2014, Preamble Rec 74.

108 Ibid, Preamble Rec 40.

109 Ibid, Preamble Rec 45.

110 Ibid, Preamble Rec 67. More generally, State aid rules ‘play a key role in meeting the EU's ambitious energy and climate targets’, as highlighted by COM(2018) 482 final, Report on Competition Policy 2017, p 13.

111 Commission Regulation (EU) 651/2014, Preamble Rec 71.

112 COM(2018) 482 final, Report on Competition Policy 2017, p 9. The Report also highlights that, in 2017, the Directorate-General for Competition of the Commission actively contributed with its expertise on competition law, in particular State aid rules, to the new European Network of Broadband Competence Offices and the Toolkit for Rural Broadband. This also makes evident the European interest in the development of the broadband and the European dimension that state aid in this field has.

113 Article 6(5) GBER.

114 Article 9 GBER.

115 Article 10 et seq GBER.

116 M Blauberger, From Negative to Positive Integration. European State Aid Control through Soft and Hard Law (paper to be presented at EUSA Eleventh Biennial International Conference, 2009), http://aei.pitt.edu/33031/1/blauberger._michael.pdf.

117 Delors outlined the main tenets of the EU Social Dimension in his famous address to the Trade Union Congress in Bournemouth, 8 September 1988.