Saturday 12 December 2009

State aid in EU Lisbon Treaty: Prohibition and derogations

The Treaty of Lisbon entered into force on 1 December 2009. According to Article 3(1)(b) of the Treaty on the Functioning of the European Union (TFEU), the EU has exclusive competence in the establishing of the competition rules necessary for the functioning of the internal market (OJEU 9.5.2008 C 115/51).

The rules on state aid ─ former Articles 87 to 89 of the Treaty establishing the European Community (TEC) ─ are now located in Part Three, Title VII, Chapter 1 Rules on competition, Section 2 Aid granted by states, Articles 107 to 109 TFEU (OJEU 9.5.2008 C 115/91-93).

Even if the amendments are minor, there is reason to present the provisions on state aid, as they stand in the consolidated (updated and readable) version of the Lisbon Treaty.

State aid prohibition and derogations

The substantive treaty provision is constructed as a blanket ban on state aid affecting the internal market, but with mandatory and discretionary derogations (exemptions) from the prohibition:


Article 107 TFEU
(ex Article 87 TEC)

1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

2. The following shall be compatible with the internal market:

(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;

(b) aid to make good the damage caused by natural disasters or exceptional occurrences;

(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.

3. The following may be considered to be compatible with the internal market:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;

(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

(d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;

(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.


A coming post will present the Lisbon Treaty provisions on state aid procedures and legislation.

Ralf Grahn

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