Sorting out European rules for state support

Law researcher Małgorzata A. Cyndecka has clarified the EU’s rules for government subsidy in a new book. Her work will be of great use for politicians and bureaucrats in their day-to-day work.

LEGAL RESEARCH: Postdoctoral fellow Małgorzata A. Cyndecka has recently published a book on state aid to private and public companies, based on her doctoral thesis.
Kim E. Andreassen

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State aid to companies that twist or alter the rules of competition and influence trade in the EU, is basically illegal. However, no rules are without exceptions.

States, counties or municipalities can invest in companies without falling into the category of state aid.

“Public bodies can invest in companies, but only if they act in the same way as a rational and profit-oriented investor  would have done in similar circumstances in the market,” explains Małgorzata A. Cyndecka from the Faculty of law at the University of Bergen (UiB).

The state can grant aid to itself

For example, as part-owner of the airline company SAS, Norway can give the company a guarantee for a loan in cases where a private actor would have regarded this act as rational. In such cases the investment is considered to be in line with the Market Economy Investor Principle (MEIP).

To see if any investment is adjusted to the MEIP, one can use the the Market Economy Investor Test in EU State Aid Law, which has been regarded as a legal instrument for establishing the presence of aid since 1986.

“Despite this framework, there are quite a few public bodies that misunderstand or misuse the investor test,” Cyndecka points out.

Clarifying doubts and misinterpretation

To clarify the use of the investor test and to avoid juridical pitfalls, Cyndecka has just published the book “The Market Economy Investor Test in EU State Aid Law: Applicability and Application”, based on her PhD thesis.

“The book analyses the use of MEIP for sorting out uncertainties and misinterpretations. Such a clarification is needed, due to the huge negative effects that may arise if the test is misused, in terms of waste of public money, “ Cyndecka warns.

“In addition, there is an on going process in the EU about opening up the market for even more competition, which will lead to more uncertainty between the private and the public sector,” says Cyndecka.

Accepting the test

The EU investor test is by many regarded as difficult and controversial. Its legitimacy and reliability has repeatedly been questioned.

Cyndecka’s analyses are, on the contrary, positive to the test. She concludes that the test implies a real economic assessment of the state acting as a market operator. By using the test, one avoids discretionary judgment with political undertones.

“The private investor test contributes, to a large degree, that the state support achieves its purpose, and presents equal conditions for all market actors,” states Małgorzata A. Cyndecka.