State aid [Archived]

The following Local Government practice note provides comprehensive and up to date legal information covering:

  • State aid [Archived]
  • State aid—generally
  • Notification
  • General Block Exemption Regulation
  • The De minimus Regulation
  • Environmental protection
  • Regional aid and UK-assisted areas
  • Rescue and restructuring, RDI and risk capital
  • Sector-specific rules
  • Services of General Economic Interest Block Exemption (SGEI)
  • More...

State aid [Archived]

ARCHIVED: This Practice Note has been archived and is not maintained. For further reading on this subject, see: State aid—overview.

State aid—generally

The European Union Rules (EU rules) on state aid prohibit member states from granting aid or assistance which distorts or threatens to distort competition and inter-state trade. Therefore whenever a public body or publicly-funded body (such as a quango) provides financial support to an undertaking they need to consider carefully whether such support constitutes state aid, particularly given that the European Commission (the Commission) is obliged to claw back any illegally granted state aid (and relevant interest on such aid).

However the EU also recognises that state aid may be a necessary element of government policy where for example it wants to attract inward investment into underdeveloped regions (often known as 'assisted areas') or to encourage investment in high technology industries.

Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) contains the basic prohibition on the grant of state aid, whereas TFEU, art 7, paras (2), (3) describe the type of state aid that the EU may allow. For a measure to constitute state aid, it must:

  1. be a form of assistance by or through a public body or publicly funded body (such as a quango)

  2. confer an advantage on an undertaking (an undertaking is a

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