How do I spot when State Aid is present?

There is a logical process to identifying State Aid in public projects.

1. Who benefits?

List all the organisations which may benefit from a measure. You will need to go through the test for each beneficiary that you have listed.

2. Is the measure funded by the State or through the State’s resources?

The State will be considered to fund a measure within the remit of State Aid law where it acts directly or the funding is provided by an organisation acting in accordance with instructions from the State.

The rules apply not only to grants but all measures which have the equivalent effect. For example a tax exemption, loan, guarantee, the delivery of services or the transfer of an asset at an undervalue could all be seen to confer the same advantage as a State grant.

3. Does the measure favour certain undertakings?

An undertaking is any organisation which carries out activities which could be traded. European Commission case law shows that an organisation which carries out tradable activities will be viewed as an undertaking even where it is State owned (for example a council of a University), it has charitable status or is not making a profit. Individuals are usually not considered to be undertakings.

State Aid will not be present where a measure does not favour certain undertakings, for example the support is made available to all businesses.

Where a measure does not create an advantage there is no State Aid. Therefore if a public body transfers land for its real value, there is no State Aid. However if a public body transfers land at less than its true value there is State Aid.

4. Does the measure have the potential to distort competition within the beneficiary’s business market?

To apply this test it is necessary to look a the beneficiary's market. This test will be satisfied where the beneficiary has the potential to be advantaged in comparison with its business competitors as a result of the aid. The European Commission does not assess whether any distortion has occurred – the opportunity for a distortion to have occurred is enough to meet this test.

The potential for market distortion does not occur where it can be demonstrated that a market value has been achieved through an open competitive process. For example, where the suppliers of goods and services are selected through an open tender process advertised through OJEU there will be no distortion of the market, in the selection of the supplier.

5. Could the measure affect trade in more than one European Union state?

Intra-community trade will be affected where the market in which the organisation sells its products or services includes businesses based abroad.

Where each of tests 2 to 5 are met there will be State Aid within the definition set out in Article 107(1) of the TFEU