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A case study that involved the development of state aid and the free movement of goods (art. 35 TFEU).
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SAMENVATTING European Union Law, ALLE ARRESTEN EN LITERATUUR samengevat (Cijfer: 8)
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Uitwerkingen European Union law
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Probleem 5
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Case study
Question 1.1: State aid
Issue
The Dutch government compensate the largest nitrogen polluting farmers, because
European Union rules required EU Member States to protect the most valuable and
threatened biodiversity in their regions.1 The Belgian, German and smaller Dutch
farmers are not offered compensation.
Rules
In this case there can be a violation of art. 107 TFEU. Art. 108(3) TFEU is also
relevant, because the Commission shall be informed of any plans to grant aid. 2
Application
The Commission shall be informed of any plans to grant aid on the ground of art.
108(3) TFEU. In this case it is about a new state aid, so the Commission needs to be
informed.
In this case there is a direct flow of money. The state gives compensation to the
largest Dutch famers, so it gives money in a direct flow. There is no relief of charges
normally borne by undertakings.
There are four conditions in art. 107(1) TFEU that determine whether there is a
state aid and if this is incompatible with the internal market, so if the state aid is
allowed or not.
Aid granted by the state or through state resources
The first condition is that it is an aid granted by the state or through state
resources. There is an aid because there is an economic advantage. The state gives
compensation for the largest nitrogen polluting farmers if they innovate, move or
stop farming. The Market Economy Operator TEST (MEOT) is relevant, it asks if the
state acts outside of its public capability, the Dutch government does this by
offering compensation. The second question is whether a prudent independent
operator acting under normal market conditions would have paid the same granted
aid as the state. In this case the state granted compensation of 120% value of the
farm to the largest polluting farmers. A prudent independent market operator would
not have paid the same aid, because it is not usual to offer 120% compensation
under normal market conditions. The MEOT test thus does not succeeds. There is
thus an aid.
1
Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural
habitats and of wild fauna and flora.
2
F. Amtenbrink & H. Vedder, European Union Law, Den Haag: Eleven International
Publishing 2021, p. 506-515.
, The measure must be granted by the state or can be assigned to the state and be
financed through state resources. 3 Here, the compensation is indirectly granted by
the state because it is through a public undertaking, ABN AMRO Bank, instead of the
state itself. It can be assigned to the state, because the Dutch government has for
57% of the shares in hands. Because of this high percentage, the state has a high
influence on the public undertaking, the decision to grant is thus imputable to the
State.4 Because the compensation is given by a public undertaking, which is mostly
in hands of the Dutch government and thus has a high influence, it is financed
through state resources.
There is thus an aid granted by the state or through state resources.
There is no operation of services of general economic benefit, because the
compensation is 120% and thus not beneficial to the state. Art. 106(2) TFEU is thus
not applicable.
Distortion of competition
The second condition is that there is a distortion of competition. There must be a
competitive link between the undertaking receiving the economic advantage and
the disadvantaged undertakings. In this case the largest Dutch farmers gets the
compensation, but the Belgian, German and smaller Dutch farmers not. The farmers
are in the same relevant market, because they are directly competing with each
other. They are in the same region and giving and providing the same products. 5
There is a competitive link between the undertakings, and this is distorted by the
compensation of the largest Dutch farmers.
Selectivity
The third condition is that there is selectivity. This means that a certain
undertaking/sector is favoured over others. Here the farmers are undertakings,
because they have a single economic entity and an economic activity. 6 The largest
Dutch farmers are the only one who gets compensation if they innovate, move or
stop farming. The Belgian, German and smaller Dutch farmers are not getting this
option, so there is a favouring of a certain undertaking. This favouring has not a
ground for an objective justification, because there is no good reason the largest
Dutch farmers are the only one who gets the option. There is thus a selectivity. 7
Negative effect on trade between the Member States
The fourth condition is that there is a negative effect on trade between the Member
States. Here, the trade is affected because the compensation from the state
strengthens the position of the largest Dutch farmers as compared to the Belgian,
3
HvJ EU 13 maart 2001, C-379/98, ECLI:EU:C:2001:160, para. 56-60
(PreussenElektra).
4
HvJ EU 16 mei 2002, C-482/99, ECLI:EU:C:2002:294, para. 52-57 (Stardust).
5
HvJ EU 14 februari 1978, C-27/76, ECLI:EU:C:1978:22, para. 10-11 (United Brands).
6
HvJ EU 23 april 1991, C-41/90, ECLI:EU:C:1991:161, para. 21 (Höfner and Elser).
7
HvJ EU 8 november 2001, C-143/99, ECLI:EU:C:2001:598, para. 41 (Adria-wien).
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