Friday, 28 March 2008

EU TFEU: CAP competition rules and state aid

In principle, the common agricultural policy (CAP) is exempt from the rules on competition and state aid deemed beneficial for the internal market in general. The European Union’s Treaty of Lisbon extends the European Parliament’s power to co-legislate, but changes nothing in substance at the treaty level.

On the other hand, at the level of secondary legislation a more nuanced picture emerges regarding the role of competition and state aid in production of and trade in agricultural products.


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We arrive at Article 36 of the Treaty establishing the European Community (TEC). The intergovernmental conference (IGC 2007) actually mentions amendments to be made in what becomes the Treaty on the Functioning of the European Union (TFEU). Here is what the Treaty of Lisbon (ToL) has to say (OJ 17.12.2007 C 306/53):

48) Article 36 shall be amended as follows:

(a) in the first paragraph, the words ‘the European Parliament and’ shall be inserted before ‘the Council’ and the words ‘and (3)’ shall be deleted;

(b) in the second paragraph, the introductory sentence shall be replaced by the following:
‘The Council, on a proposal from the Commission, may authorise the granting of aid:’.

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Bringing the proposed amendments into context requires a trip to the current Article 36 TEC (found in the latest consolidated version of the existing treaties, OJ 29.12.2006 C 321 E/55):

Article 36 TEC

The provisions of the Chapter relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by the Council within the framework of Article 37(2) and (3) and in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 33.

The Council may, in particular, authorise the granting of aid:

(a) for the protection of enterprises handicapped by structural or natural conditions;

(b) within the framework of economic development programmes.

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The new Lisbon Treaty wording is achieved by inserting the express amendments, adding the context of the provision and taking note of the future renumbering of the Article in question and its referrals (OJ 17.12.2007 C 306/207). No horizontal amendments seem to apply, so the amended Article 36 should look like this:

Part Three Policies and internal actions of the Union

Title II (renumbered Title III) Agriculture and fisheries

Article 36 TFEU (ToL), renumbered Article 42 TFEU




The provisions of the Chapter relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by the European Parliament and the Council within the framework of Article 37(2) [ToL, renumbered Article 43(2) TFEU] and in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 33 [ToL, renumbered Article 39 TFEU].

The Council, on a proposal from the Commission, may authorise the granting of aid:

(a) for the protection of enterprises handicapped by structural or natural conditions;

(b) within the framework of economic development programmes.

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The European Convention presented its view in Article III-126 of the draft Treaty establishing a Constitution for Europe (OJ 18.7.2003 C 169/52):

Article III-126 Draft Constitution

1. The Section relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by European laws or framework laws in accordance with Article III-127(2), having regard to the objectives set out in Article III-123.

2. The Council of Ministers, on a proposal from the Commission, may adopt a European regulation or decision authorising the granting of aid:

(a) for the protection of enterprises handicapped by structural or natural conditions;

(b) within the framework of economic development programmes.

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European laws or framework laws meant the ordinary legislative procedure, where the Commission makes a proposal and the Council and the European Parliament acts as joint legislators. In the first paragraph the draft Constitution upgraded the European Parliament from being merely consulted.

The second paragraph added the mention that the Council authorises the granting of aid on a proposal from the Commission. But was this a real change, taking Article 37 TEC into account?

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Article III-230 of the Treaty establishing a Constitution for Europe was practically the same as the draft Constitution (OJ 16.12.2004 C 310/101).

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In principle, normal EC (EU) competition and state aid rules do not apply to agricultural production and trade within the context of the CAP. On the contrary, examples of state aid which can be authorised are mentioned.

A general search of EC competition policy can start from the Commission’s Competition web page:

http://ec.europa.eu/comm/competition/index_en.html

The reader who desires an introduction to state aid rules could take a look at the Commission’s web page ‘State Aid control – Overview’:

http://ec.europa.eu/comm/competition/state_aid/overview/index_en.cfm


‘Vademecum Community rules on state aid’, with a view to Structural Fund operations and last updated 15 February 2007:

http://ec.europa.eu/comm/competition/state_aid/studies_reports/vademecum_on_rules_2007_en.pdf

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In practice, the common agricultural policy (CAP) is less averse to the competition and state aid rules of European Community (European Union) than the main principle mentioned above would lead one to believe.

Take note of Council Regulation (EC) No 1184/2006 of 24 July 2006 applying certain rules of competition to the production of, and trade in, agricultural products (OJ 4.8.2006 L 214/7):

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:214:0007:0009:EN:PDF

A presentation of state aid rules is found on the Commission’s web page Agriculture and Rural Development ‘State Aid: introduction’:

http://ec.europa.eu/agriculture/stateaid/index_en.htm

The Scadplus pages offer an introduction to ‘State aid in the agricultural sector’:

http://europa.eu/scadplus/leg/en/lvb/l11082.htm


Ralf Grahn