Chapter 5: The Market Economy Investor: An Economic Role Model for Assessing State Aid
James Kavanagh, Gunnar Niels and Simon Pilsbury* I. RELEVANCE OF THE MARKET ECONOMY INVESTOR PRINCIPLE Economic logic, and legal principles, dictate that State aid, as a ‘transfer of State resources conferring a benefit or advantage’, occurs only when the State acts on terms that would not be acceptable to a private business. If a public authority grants funding to a firm on terms which the same firm could have obtained by going to a bank, or capital markets, then there is no ‘advantage’ conferred by State intervention. This is irrespective of whether the recipient is a government-owned entity (for example, a Stateowned seaport or airport) or a private firm. A prime question in State aid law is how to assess whether the terms of the State action are in fact compatible with those acceptable to a commercial investor. This is known as the market economy investor principle: MEIP. The MEIP is an interpretation of Article 107(1) TFEU and, more specifically, of the first and second criteria proposed for determining whether government funding constitutes State aid. Any measure that satisfies the MEIP is not considered State aid. In this case, the other two criteria for State aid, selectivity, and (actual or potential) distortion of competition and intra-community trade, no longer need to be assessed. The MEIP was set out in the 1998 Van der Kooy case: It is of the essence of a State aid that it is non-commercial in the sense that the State steps in where the market...
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