Under Art. 107(1) of the Treaty on the Functioning of the European Union, save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
4 defining characteristics of state aid
Based on the aforementioned definition, 4 basic criteria of state aid definition must be examined for state aid:
- aid is provided by the State or from public funds
- aid favours certain undertakings or certain business sectors and it is selective
- trade between Member States is affected, and
- competition is distorted or threatened to be distorted.
State aid is
generally prohibited. Its provision is possible only where a
legal title (exception) for its provision is found. Such exceptions include provision of aid in the form of de minimis aid, regional aid or compensation for the performance of public services in accordance with the relevant rules.
Why address state aid in the context of ex ante conditionalities:
Unpremeditated provision of state aid may lead to a threat to competition. For this reason, its provision is strictly regulated in the European Union. In the case of provision of state aid incompatible with the internal market, its provider and beneficiary are at risk of having to
return the aid. If the European Commission issues a negative decision in case of illegal aid, the provider shall enforce
refund of the state aid. The beneficiary shall refund the aid including interest. Moreover, provision of illegal state aid may
lead to the
invalidity of concluded contracts. Within the meaning of Act No. 215/2004 Sb., on Regulation of Relations in the Area of State Aid and on Amendment to the Act on the support of Research and Development, the Ministry shall, as the provider of aid, provide the Office for the Protection of Competition with information about state aid provided in the previous calendar year and on ongoing state aid programmes.