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Explain and discuss the effectiveness of the EC Treaty provisions concerning state aids in preventing distortions to the operation of the single market

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  1. Introduction.
  2. The effectiveness of the EC Treaty provisions concerning State aid.
    1. The necessity of State aid control.
    2. The scope of Articles 87 to 89 of the EC.
  3. The limits of State aid control.
    1. The procedural framework of State aid control and the separation of powers between the Commission and the national courts.
    2. The difficult enforcement of the Commission negative decisions.
  4. Conclusion.
  5. Bibliography.

As recognised by the EC Treaty, state aids are important and necessary policy instruments to achieve social and economic goals. However, depending on the way in which they are given, State aids can have a material impact on competition, leading to significant distortions to the common market. An unfairly given aid might for instance allow the recipient undertaking to increase its market share to a level at which it has enough power to behave independently of competitive pressures. The EC Treaty provisions concerning State aids seek to minimise these potential distortions of competition in Articles 87 to 89. As repeatedly emphasised by the European Commission, competition policy is 'essential for the completion of the single market'. State aid control therefore seeks to preserve the effective operation of the single market by promoting a 'level competitive playing field' between all undertakings in the European Union. This essay will explain the general prohibition of State aid and its exceptions in the EC Treaty. It will argue that the basic rules set out in the EC Treaty have allowed for the development of a comprehensive corpus of secondary legislation and case law, laying the foundations for a strict system of State aid control.

[...] pdf Case 120/73 Gebrüder Lorenz GmbH v Federal Republic of Germany et Land de Rhénanie-Palatinat [1973] ECR 1471, at para Notice on Cooperation between National Courts and the Commission in the State Aid Field (OJ C p.8, article 3. ?Study on the Enforcement of State aid Law at National Level?, March 2006, Jones Day, Lovells, Allen & Overy, available at ts.html. Struys, Michel, and Abbott, Henry,? The Role of National Courts in State Aid Litigation?, European Law Review 2003, 172-189, p.176. [...]

[...] Abbamonte, Giuseppe, ?Competitors' Rights to Challenge Illegally Granted Aid and the Problem of Conflicting Decisions in the Field of Competition E.C.L.R 87-93. Betws Anthracite Ltd v DSK Anthrazit Ibbenburen GmbH (2004) 1 All ER 1237 at para 75, cited in Ward, Tim and Smith, Kassie, Competition Litigation in the UK, p.319. Joined Cases C-6/90 and C-9/90 Francovich and Bonifaci v Italy [1991] ECR I-5357. Case C-39/94 Syndicat Francais de l'Express International and others v La Poste and others [1996] ECR I-3547, at para 74. [...]

[...] The CFI held that if an aid strengthens the recipient undertaking's market position in comparison with that of other competitors, a distortion of competition may be presumed.[66] However, third party competitors have a very limited standing[67] at both EC and national level and there is no specific procedural rule for the protection of their interests.[68] Competitors do not have standing with regards to an aid scheme, but only with regard to decisions on individual aid.[69] It is also established in the case law that competitors are entitled to bring an action for failure to act if they claim that the Commission failed to adopt a decision that would have concerned them ?individually and directly'.[70] This requirement has proven difficult to meet for third party competitors: so far, there have only been three successful actions at national level against State aid by competitors.[71] At EC level, the ECJ has re-affirmed the locus standi requirement for competitors[72], thereby perpetuating this complex hurdle for private parties to challenge State aids.[73] Private enforcement of EC State aid law has therefore been rightly described as still being its infancy'[74]. The diversity of Member States' procedural and substantive rules applicable to situations involving the grant of State aid and the absence of uniform procedures with a clear legal basis result in a lack of legal certainty, which undermines the effective use of Article 88(3). Arguably, this considerably weakens the effectiveness of the EC Treaty provisions concerning State aids in preventing distortions to the single market. [...]

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