Wednesday, February 25, 2009

The Concept of State Aid in Liberalised Sectors

Posted by D. Daniel Sokol

Thomas Von Danwitz, European Court of Justice addresses The Concept of State Aid in Liberalised Sectors.

ABSTRACT: The author highlights the balancing act both on the regulatory as well as on the institutional level between state aid control and the liberalization of public services. He focuses on partially liberalized markets and tackling cross-subsidisation where Member States infringe the competitive neutrality of the privatisation process by various funding schemes. These are all subject to three criteria linked to the private investor test. Once partially liberalized, sectors traditionally shaped by public service obligations are prone to state intervention owing to the special needs they fulfil. Starting from the premise that the concept of universal services is designed to combine public policy objectives with a fully competitive market, the author allocates the role of state aid control as both a specific mandate avoiding selective distortions through the granting of state resources imputable to the State and as a regulatory mandate to maintain a level playing field for all undertakings in the Internal Market. The jurisprudence of Community Courts - e.g. UFEX, Chronopost and Laboratoires Boiron - is faced with the demarcation of the European Commission's powers and the determination of the nature and extent of judicial review. Its analysis focuses on cost calculation and allocation in search of cross-subsidisation of liberalised market segments by using state resources originally designed to compensate for public service obligations. He closes with the assumption that, because of the narrow confines of aleatory references made to the Courts, preference should be given to a best practice approach to cost allocation standards.

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