State Aid in Terms of Governmental Ownership during COVID-19

Sine Marie Bekke Meiling-Nielsen & Simone Louise Fersner Obling

Student thesis: Master thesis

Abstract

This thesis has been composed based on the Temporary Framework for State aid measures to support the economy during the current COVID-19 outbreak. The Temporary Framework enables the Member States to use the full flexibility under the State aid rules, in order to support distressed companies in the EU. The Member States have the possibility to grant state aid through equity investments and obtain ownership, in case they comply with the eligibility and entry conditions set out by the European Commission. However, when applying this type of state aid, the European Commission requires that the Member States sell their COVID-19 equity investments and exit the companies when the economy has stabilized, which is the problem addressed in this thesis.
The economic analysis addresses the problem of state aid in general through a trade-off analysis. This analysis suggests that the Temporary Framework for state aid does not sufficiently secure the total welfare of the EU, due to the negative effects that may follow the extraordinary allocation of state aid during COVID-19. These negative effects are also reinforced by the Prisoner’s Dilemma situation between the Member States when granting state aid.
The legal analysis examines whether the conditions regarding the sale of the COVID-19 equity investment and exit of the state in the Temporary Framework are incompatible with the principle of neutrality by the EU Treaties. The analysis shows that through these conditions the European Commission impacts property ownership in the Member States, which does not comply with the principle of neutrality. These conditions can only be exempted if the purpose of the intervention is to ensure other fundamental principles of the Treaty.
Based on normative considerations, the integrated part of this thesis seeks to solve the issues incurred by the economic and legal analysis. The European Commission is advised to implement a subsequent assessment in order to analyze the impact on competition and international trade in the EU. Evidence of distortion of the competition will thus justify interference with the property ownership of the Member States, in accordance with the principle of neutrality.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2021
Number of pages122
SupervisorsGrith Skovgaard Ølykke