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State Aid Control in South-East Europe: Waiting for a Wake-up Call

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Abstract

The South-East European (SEE) countries, having signed Stabilisation and Association Agreements with the European Union, are required to establish an operationally independent state aid monitoring authority, to harmonise their legislative framework with that of the EU, and to demonstrate a credible enforcement record. This paper analyses whether these requirements for EU accession have been achieved so far. The authors conducted a comparative cross-country analysis and tried to identify common problems and enforcement trends. As the paper elucidates, the SEE countries have largely met the EU requirements by harmonising their national state aid acts and corresponding by-laws with EU law. However, these rules are applied in a different socio-economic context and by national authorities of dubious independence from the government, which results in a modest enforcement record. As may be derived from the pre-accession experience of the countries of Central and Eastern Europe, the effectiveness of state aid control mechanisms is conditioned by the credibility of the country’s EU perspective. And the South-East European countries have only just started their European journey.

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Notes

  1. In this paper, the term ‘South-East Europe (SEE)’ is used to designate Balkan countries that are candidates or potential candidates for accession to the European Union: Serbia, Bosnia-Herzegovina, Albania, Montenegro, Former Yugoslav Republic of Macedonia and Kosovo. Kosovo declared independence from Serbia in 2008. Although its independence is not recognised by all EU Member States, Kosovo signed the Stabilisation and Association Agreement with the European Union.

  2. Albania signed the SAA in 2006 and was granted EU candidate status in 2014. Bosnia-Herzegovina signed the SAA in 2008 and submitted its application to join the EU in 2016. The FYR Macedonia signed the SAA in 2001 and was granted EU candidate status in 2005. Kosovo signed the SAA in 2014 and the EU has been facilitating high-level dialogue between Kosovo and Serbia since 2012. Montenegro signed the SAA in 2007 and was granted EU candidate status in 2010. Serbia signed the SAA in 2008 and was granted EU candidate status in 2012.

  3. On the enforcement of state aid rules in CEECs during the pre-accession period, see Evans (2004), Botta and Schwellnus (2015), Mintas Hodak et al. (2011), Cremona (2003), Blauberger (2009), Schütterle (2003) and Nicolaides (1999).

  4. See Tatham (2009), at pp 112–115; Geradin (2004), at pp 44–46.

  5. Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, Official Journal of the European Community L83/1, 27.3.1999.

  6. European Commission, State Aid Action Plan: less and better targeted state aid – a roadmap for state aid reform 2005–2009, COM(2005) 107 final. For the European Commission’s most recent policy statement on state aid, see Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union, Official Journal of the European Union C262/1, 19.7.2016.

  7. The SAAs concluded with the South-East European countries also specify certain tasks that need to be accomplished by the national state aid authorities. By 4 years from the entry into force of the SAA, each national state aid authority needs to complete a comprehensive inventory of aid schemes. By the end of the period of transition of 4 or 5 years, national state aid authorities should draft a state aid regional map for the country, indicating the maximum aid intensity per region of the country on the basis of the data concerning the GDP per capita in each region. In certain SEE countries, like Bosnia-Herzegovina, for example, the national state aid authority failed to draft the state aid regional map within the timeframe set by the SAA, due to disagreement among the country’s entities on the results of the population census. For further analysis of the situation in Bosnia-Herzegovina, see Bulić and Ćilimković (2015), at pp 54–55.

  8. CEFTA is a free trade agreement concluded among countries of South-East and Eastern Europe. Once a participating country joins the European Union, its CEFTA membership ends. CEFTA includes a general prohibition on state aid and a duty for member states to assess aid schemes under the conditions laid down by Art. 107 TFEU. See Dangerfield (2006).

  9. The Treaty establishing the Energy Community brings together the European Union, on the one hand, and countries of South-East Europe and the Black Sea region, on the other hand. The Treaty prohibits any aid granted to the energy sector. See also Karova (2010).

  10. See SAA with Bosnia-Herzegovina, Art. 71(1); SAA with Serbia, Art. 73(1)(iii); SAA with the FYR Macedonia, Art. 69(1)(iii); SAA with Albania, Art. 71(1)(iii); SAA with Montenegro, Art. 73(1)(iii); SAA with Kosovo, Art. 75(1).

  11. In the Stabilisation and Association Agreement concluded with the FYR Macedonia, the part ‘… and interpretative instruments adopted by the Community institutions’ has been omitted. See SAA with the FYR Macedonia, Art. 69(2).

  12. See SAA with Bosnia-Herzegovina, Art. 71(2); SAA with Serbia, Art. 73(2); SAA with Albania, Art. 71(2); SAA with Montenegro, Art. 73(2); SAA with Kosovo, Art 75(2).

  13. This interpretation was explicitly articulated in certain decisions adopted by the Association Councils established in the pre-accession period in the CEECs. See Decision No 4/2000 of the EU-Romania Association Council of 10 April 2001 adopting the implementing rules for the application of the provisions on State aid referred to in Articles 64(1)(iii) and (2) pursuant to Article 64(3) of the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and Romania, of the other part, and in Article 9(1)(iii) and (2) of Protocol 2 on European Coal and Steel Community (ECSC) products to that Agreement, Art. 2(1); Decision No 1/2002, EU-Estonia Association Council of 15 January 2002, adopting the implementing rules for the application of the provisions on State aid referred to in Articles 63(1)(iii) and (2) pursuant to Article 63(3) of the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Estonia, of the other part, Art. 2.

  14. Schütterle (2002).

  15. Ibid., at p 582.

  16. Montenegro, Act on Control of State Aid, Official Journal of the Republic of Montenegro No 74/09 and 57/11, Art. 6.

  17. TFEU, Art. 107(2).

  18. Serbia, Regulation on rules for the granting of state aid, Official Journal of the Republic of Serbia No 13/2010, 100/2011, 91/2012, 37/2013, 97/2013 and 119/14.

  19. See Serbia 2013 Progress Report, at p 26; Serbia 2014 Progress Report, at p 27; Serbia 2015 Progress Report, at p 36.

  20. See Case C-414/97 Commission v. Spain [1999] ECR I-5585; Case C-273/97 Sirdor v. The Army Board [1999] ECR I-7403; Case C-285/98 Kreil v. Bundesrepublik Deutschland [2000] ECR I-69; Case C-186/01 Dory v. Germany [2003] ECR I-2479.

  21. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Towards a more competitive and efficient defence and security sector, COM(2013) 542 final, 24.7.2013, Section 2.2.

  22. Kosovo, Act on State Aid, No 04/L-024, Official Journal 13/2011, Art. 5(2).

  23. Koenig and Wetzel (2007).

  24. Montenegro, Act on Control of State Aid, Art. 5.

  25. According to the World Bank Open Data portal, at http://data.worldbank.org/.

  26. Commission Regulation (EU) No 651/2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty (hereinafter: GBER), Official Journal of the European Union L187/1, 26.6.2014. See also Commission Recommendation 2003/361/EC concerning the definition of micro, small and medium-sized enterprises, Official Journal of the European Union L124/36, 20.5.2003.

  27. Similar conclusions were reached by Botta (2013), at p 93.

  28. Commission Regulation (EU) No 1407/2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, Official Journal of the European Union L352/1, 24.12.2013.

  29. EUR 100,000 to undertakings performing road freight transport for hire or reward.

  30. See, for example, the Stabilisation and Association Agreement between the European Communities and their Member States of the one part, and the Republic of Serbia, of the other part, Art. 73, paras. 3–4. Similar provisions may be found in the SAAs concluded with other SEE countries.

  31. The FYR Macedonia followed the same model up until 2006.

  32. Official Journal of the Republic of Serbia No 51/2009.

  33. Serbia, Act on Control of State Aid, Art. 6(4).

  34. Ibid., Art. 21(2).

  35. See Serbia 2015 Progress Report, SWD(2015) 211 final, at p 36.

  36. Serbia, Act on Control of State Aid, Art. 6(7).

  37. The ambiguous legal nature of the Commission for the Control of State Aid was also criticised by ‘Transparency International’. See Transparency Serbia 2015, at pp 27–28.

  38. See Montenegro 2015 Progress Report, SWD(2015) 210 final, at p 36.

  39. Montenegro, Act on Control of State Aid, Official Journal of the Republic of Montenegro No 74/09 and 57/11, Art. 11.

  40. See Montenegro 2015 Progress Report, SWD(2015) 210 final, at p 36.

  41. Bosnia-Herzegovina, Act on the system of state aid in Bosnia and Herzegovina, Official Journal of Bosnia-Herzegovina No. 10/12, Art. 7.

  42. The constituency of peoples as a collective political right of ethnic communities in Bosnia-Herzegovina was provided as a constitutional category by the Washington and Dayton Peace Agreements which ended the war in 1995. However, in the case Sejdić and Finci v. Bosnia-Herzegovina (27996/06 and 34836/06) the European Court of Human Rights found the BH Constitution to be self-contradictory, because while one part prohibits any form of discrimination among the constituent peoples, the other part precludes BH citizens who do not belong to any of the constituent peoples from running for a particular government office.

  43. See Bosnia-Herzegovina 2015 Progress Report, SWD(2015) 214 final, at pp 41–42.

  44. Albania, Act No 9374 on State Aid, 21 April 2005, Official Journal No 36, at p 1311.

  45. Albania, Government Decision No 182, 21 March 2006, Official Journal No 0, at p 30.

  46. Albania, Act on State Aid, as amended by Act No 21/2016, 10 March 2016, Official Journal No 47, 3140, Art. 16(2).

  47. Ibid., Art. 16(2).

  48. Ibid., Art. 16(3–4).

  49. Ibid., Art. 18.

  50. Kosovo, Act on State Aid, No 04/L-024, Official Journal 13/2011.

  51. Kosovo, Government Decision No 11/93 § 2, 4 October 2012, available at http://www.kryeministri-ks.net/repository/docs/Vendimet_e_mbledhjes_se_93-te_te_Qeverise_2012.pdf.

  52. Kosovo, Government Decision No 06/30 § 2, 20 May 2015, available at http://www.kryeministri-ks.net/repository/docs/Vendimet_e_Mbledhjes_se_30te_te_Qeverise_se_Republikes_se_Kosoves_2015.pdf.

  53. Regarding the indexes of formal independence, see Gilardi (2002), Gilardi and Maggetti (2011) and Hanretty and Koop (2013).

  54. It should also be noted that the national state aid acts exempted from the duty to notify all aids granted to the agricultural and fisheries sectors.

  55. According to the authority’s annual reports, published on its website.

  56. Albania, Supreme State Audit, Bulletin No 4/2015, available at http://www.klsh.org.al/web/pub/buletini_4_2015_copy_2_2366_1.pdf.

  57. See Montenegro 2015 Progress Report, SWD(2015) 210 final, at p 36.

  58. In Kosovo, the state aid authority does not publish the integral version of its decisions on the official website (as of July 2016).

  59. Serbia, Commission for the Control of State Aid, Etihad Airways/Jat Airways (Air Serbia), Decision No 142/2/2013-38, 21 February 2014.

  60. According to the authority’s annual reports, published on its website.

  61. Ibid.

  62. Montenegro, Commission for the Control of State Aid, Kombinat aluminijuma Podgorica (KAP), Decision No 01-33/1, 1 June 2012.

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Authors and Affiliations

  1. Associate Professor, Faculty of Law, University of Belgrade, Belgrade, Serbia

    Dušan V. Popović

  2. Assistant Professor, Faculty of Law, University of Tirana, Tirana, Albania

    Fjoralba Caka

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  1. Dušan V. Popović
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  2. Fjoralba Caka
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Correspondence to Dušan V. Popović.

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Dušan V. Popović : PhD (Paris Nanterre), MA (Nancy), BA (Belgrade).

Fjoralba Caka : LLM (San Diego), BA (Tirana).

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Popović, D.V., Caka, F. State Aid Control in South-East Europe: Waiting for a Wake-up Call. Eur Bus Org Law Rev 18, 333–349 (2017). https://doi.org/10.1007/s40804-017-0069-z

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