HOW PRESSURE GROUPS LIKE GREENPEACE USE STATE AID LAW TO THEIR ADVANTAGE

State Aid is a little known area of European Competition law that is set out in Article 107(1) of the Treaty of the Functioning of the European Union. The State Aid rules are designed to ensure that public money does not adversely affect competition between businesses based in different countries within the Union. It is a particularly powerful set of rules and sophisticated pressure groups are learning to use State Aid law to shape governmental policies. 

The State Aid rules are designed to protect open competition between the Member States of the European Union. As open competition is a value at the very heart of the European Union, where a Member State's actions jeopardise the operation of the common market, the European Commission is permitted to take decisive action.

This decisive action usually involves stopping a public funded project and making an order to claw back the funding at a very high rate of interest. The European Commission will chase payment in cases of unlawful State Aid even where it leads to the insolvency of the aid recipient. There is also developing case-law which suggests that the recipient may be entitled to claim for damages against the funding organisation where unlawful aid is provided.  

The environmental pressure group, Greenpeace has developed a strong understanding of this complex subject with a view to using the rules to stop public funding for businesses, initiatives and infrastructure projects which damage the ecology of the planet.

The first time State Aid law was used by Greenpeace to attack a government's policy was in 2004 when Paul Lasok QC was engaged to fight a parliamentary bill in the United Kingdom which would have advantaged nuclear power generating companies. This year Greenpeace has shown greater initiative by making formal complaints under Article 107(1) of the TFEU against power stations in Bulgaria and Romania. Other pressure groups are beginning to see the opportunity in making State Aid complaints. ClientEarth recently petitioned the Spanish government under the State Aid rules to prevent measures favouring the coal industry.

State Aid law is becoming a key part of any sophisticated pressure group’s arsenal. As the media wakes up to the potential of State Aid law, we can expect to see more challenges, greater clawback and legal action for damages brought against public bodies who apply the rules incorrectly.

For more updates on State Aid law, you can follow StateAidLaw on Twitter. 

WHY STATE AID LAW IS IMPORTANT TO YOU.

The State Aid rules are important European Competition provisions which apply to all funding decisions made by public bodies in the European Union. The rules are important to every tax payer and business because funding which fails to meet the strict requirements of State Aid law risks being clawed back by the European Commission.

A finding of unlawful State Aid will stop a public funded project from going ahead. Any unlawful payments already made will be clawed back at the instruction of the European Commission even where the recipient of the State Aid is made insolvent. The European Commission applies a very steep rate of interest and public bodies which apply the rules incorrectly may be subject to legal actions for damages. 

In 2008 the European Commission ruled that the Polish authorities had breached State Aid law when supporting the shipyards of Gydnia and Szczecin. The Commission demanded the repayment of €3bn (BBC article). This case demonstrated that the Commission will act to enforce the State Aid rules even where robust action affects the prosperity of an area.

Given the serious consequences of unlawful aid, it is imperative that all organisations which are involved in the administration of public funds have the right expertise in State Aid law to ensure their investments are delivered safely. It is also important for recipients of public funding to take responsibility for ensuring all support they receive meets the requirements of State Aid law, so they do not have to face an order for repayment in the future. 

Conclusion: State Aid law is of great importance. These rules have had a low profile yet affect every citizen in the European Union. In the coming years we expect State Aid law will gain greater prominence in the United Kingdom as the European Commission takes stronger steps to ensure the rules are enforced. Organisations which act now to ensure they have the resources and expertise to handle State Aid will be fine. Those that do not will suffer from missed opportunities (for example, missing out under the Regional Growth Fund), financial hardship (from clawback) and reputational damage. 

For further information, follow @StateAidlaw on Twitter

GETTING STATE AID RIGHT IN REGIONAL GROWTH FUND BIDS

The Regional Growth Fund is offering £1.4 billion to support private sector led initiatives in England. The fund shall operate as an open competition where applicants bid in and are judged against five key criteria. These are location, additionality,  sustainable jobs, vfm and State Aid. Of these, the ability to comply with State Aid law is causing the most difficulty for interested parties. 


In this article we draw upon our own experience of instructing many State Aid experts and provide our top tips to find your perfect State Aid adviser.

1)   Choose what kind of adviser you want at the outset

Before making contact with potential advisers, decide exactly what service your organisation will require from your State Aid adviser. 

Key considerations are cost, location and how involved you expect your adviser to be with the process of making an application. If you work within a particular sector it may be preferable to select an adviser who has demonstrable experience of working in a particular area. 


Once you have identified these requirements, we recommend that you write down all the criteria that you feel your perfect State Aid adviser will deliver. 

Engage articulate and commercially minded State Aid advisers

2)   Ask potential advisers to pitch

Any good State Aid adviser will be willing to provide a half page explanation of their expertise in relation to your particular piece of work. 

Use the web, legal search engines and referrals to narrow down your search to three or four advisers and then ask each to set out why they should be instructed. Some people are reluctant to make such a request - there is no reason for this; your organisation is purchasing an expensive service and this process will help you find the right adviser.

Assess the email against your criteria for the perfect State Aid adviser. Look for examples of the adviser having been involved in similar work to that required for your Regional Growth Fund bid. Whilst sector specific work is useful make sure it is directly relevant to the piece of work you are asking the adviser to undertake. 

Check the responses for evidence of a clear understanding of State Aid. A good adviser should be capable of explaining complex issues in a clear manner. Look out for evidence of out of date understanding. Those with out of date knowledge often still refer to Article 87 (which was replaced in December 2009 by Article 107). Those with a weak understanding of the rules are also inclined to be over optimistic when considering whether the measure will affect trade between Member States. 


Finally, feel free to ask the adviser to set out a cost schedule for the work at the pitching stage. It is your right to understand how much you will pay for this specialist advice.

Getting the right team together at the start is an integral part of winning in this competition. 

3)   Size doesn't matter

When you engage a State Aid expert you are taking on an individual with a specific set of skills - it is therefore important to focus upon the person who will be providing the advice. 

Many organisations make the mistake of selecting a State Aid adviser based upon the general reputation or the size of the law firm. Such considerations can be important when selecting general advice (where your work is likely to be carried out by different members of a team) but have no place with State Aid law.  

A similar mistake is to bundle the State Aid advice in with the general work required for the project. This can happen where State Aid advice is included with general legal advice or as part of the selection criteria for a project manager. This is a common error. Although it can be tempting to adopt such an approach to save costs, it is a false economy if the advice is sub-standard. 

4)   Ask advisers in the public sector for a steer on who to select.

The public sector has been handling State Aid in projects for years and will have experience of instructing independent experts for advice upon State Aid. 

Many legal departments in public sector organisations will be happy to provide a few names who have provided good work in the past. 

5)   Only select an adviser who trusts their own advice

A good adviser trusts their own advice. Any adviser who seeks to caveat their advice does not trust their judgement on State Aid law. 

Before you select an adviser ask to see their engagement letter. Likewise do not accept any advice document which shifts all the responsibility for decision making on to you. Given that you are paying for their judgement on State Aid law, you are entitled to challenge any caveat which seeks to prevent you relying on their advice. A skillful State Aid adviser will give you clear advice which you can rely upon. 

For more updates on State Aid law, you can follow @StateAidLaw on Twitter.