State aid and Brexit: the institutional dimension_ Presentation at the second FCP Annual Conference, 20-21 October, Florence

1. State aid and Brexit: the
institutional dimension
Pablo Ibáñez Colomo
LSE and College of Europe
Chillin’ Competition

2. Summary
• State aid: a post-Brexit inevitability?
• The association agreement model
• The Swiss/EFTA/EEA model

3. State aid: a post-Brexit inevitability?
• It is in the interest of the EU and the UK to conclude a comprehensive
trade agreement once the latter leaves the bloc
• Given the economic features of the UK, one would expect the agreement to
comprise both trade in goods and services
• There are frequent references to the EEA and the CETA as models for a future
relationship (EEA- and CETA+)
• An open question relates to the enforcement mechanisms in the
trade agreement

4. State aid: a post-Brexit inevitability?
• An EU-UK agreement will most probably have provisions dealing
specifically with State aid
• State aid control looks like a necessary complement to provisions dealing with
tariffs, quotas, and measures having an equivalent effect
• The UK government has publicly manifested the need to ensure a level
playing field in trade relationships, including subsidies
• The problem with State aid is that enforcement strictly at the national level
may not be considered an acceptable solution

5. State aid: a post-Brexit inevitability?
• The enforcement of State aid rules is inevitably more complex than
the enforcement of other competition rules:
• A purely domestic authority may not be willing and/or able to go against the
interest of the government in power
• The domestic authority, even if independent, may have a relatively weak
status within the overall institutional structure and may be overruled
• To some extent, these problems are comparable to the decentralised
enforcement of telecoms regulation

6. Summary
• State aid: a post-Brexit inevitability?
• The association agreement model
• The Swiss/EFTA/EEA model

7. The association agreement model
• The model of the Association Agreement (Article 217 TFEU) has been
favoured by the European Parliament
• Association agreements concluded by the EU provide for a system of
State aid control
• Examples include the Ukraine Agreement and the Europe Agreement
with Romania
• Under the association agreement, the parties commit to respect the rules and
ensure transparency about any aid that they grant
• There are also institutional mechanisms to monitor and ensure compliance
with the rules

8. The association agreement model
• The Ukraine agreement is a good example of what a State aid regime
under an association agreement looks like:
• Article 262 transcribes, mutatis mutandis, the provisions of Article 107 TFEU
• Article 263 provides for transparency obligations
• Article 264 deals with the interpretation, which must be drawn from the
equivalent Treaty provisions
• Article 267 requires Ukraine to set up a domestic system of State aid control

9. The association agreement model
• Is the association agreement a valid model post-Brexit? Some
concerns may be identified:
• In the existing examples, ECJ case law and Commission administrative practice
are to be followed (George Peretz before the House of Lords)
• These agreements have also exposed the vulnerabilities of domestic systems
for the control of State aid

10. The association agreement model
• Micula: a case study in the limits of domestic State aid control
• The Europe Agreement between the EU and Romania provided for a State aid
regime comparable to that found in the Ukraine Agreement
• In 1999, the Romanian Competition Council was given powers in relation to
State aid
• In 2000, the Romanian Competition Council found some measures to be
contrary to the Agreement provisions on State aid…
• …but was unable to implement the decisions

11. Summary
• State aid: a post-Brexit inevitability?
• The association agreement model
• The Swiss/EFTA/EEA model

12. The Swiss/EFTA/EEA model
• The Swiss/EFTA/EEA models can be seen as choices within a
continuum of integration
• The Swiss model is characterised by bilateral agreements on distinct
areas and monitoring is entrusted with joint EU-Swiss committees
• There were provisions on State aid in the 1972 free trade agreement
concluded between the EU and Switzerland
• However, there is no supranational enforcement and, besides air transport,
no mechanisms for compliance at the national level
• The EEA model is a comprehensive agreement that provides for a
supranational authority and a court mechanism, including in State aid

13. The Swiss/EFTA/EEA model
Compliance mechanisms
Supranational
National
No mechanisms

14. The Swiss/EFTA/EEA model
Court mechanism
No Yes

15. The Swiss/EFTA/EEA model
Compliance
mechanisms
Court mechanism
Switzerland
EEA

16. The Swiss/EFTA/EEA model
• It would seem that the Swiss and EEA models are unlikely to be
followed post-Brexit, including in State aid
• The Swiss model is regarded as a historical accident from the early years by
the EU, which has signalled its distaste for the model
• The EEA model, on the other hand, appears to have been ruled out by the UK
government (e.g. ‘Florence speech’)
• Other halfway solutions have been presented
• The President of the EFTA court has floated the idea of docking: UK judges
may sit in the EFTA court where the matter relates to the UK agreement
• This model could be complemented with a system of compliance at the
national level

17. The Swiss/EFTA/EEA model
Compliance
mechanisms
Court mechanism
Switzerland
EEA
UK