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A person receives a state aid where it receives some benefit from state resources which could result in a distortion of competition. A state aid is unlawful unless authorised in advance by the European Commission. Only a government can apply for aid to be authorised. Where state aid is paid it is recoverable from the recipient by the government of the relevant member state.

State aids can take many forms and include transactions on a non-commercial basis, such as soft loans and guarantees, subsidies, the taking of shareholdings on terms where a private investor would not, sales of assets at an under-valuation and others. Some UK examples of state aid have included the tax sweeteners paid upon the sale of Rover; a sale of land at an under-valuation to Toyota by Derbyshire County Council to encourage them to build a factory there; and gap funding provided by English Partnerships in relation to an urban regeneration scheme outside of a regional assistance zone.

The nature of the benefit which is conferred by the state aid is one for which there is no real consideration (or thing of value passing). Where a benefit is given across an industry - for example a change in the tax laws this does not constitute aid. The essence of aid is that a particular undertaking or section of industry benefits and others do not.

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Geraldine Tickle
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geraldine.tickle@martjohn.com