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.
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