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