director - Ministarstvo finansija

State aid
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
During the last meeting of the EC
Enhanced Permanent Dialogue with the
representatives of Montenegro, the
Commission positively marked progress
achieved in the area of state aid, noting
that the Ministry of Finance of Montenegro
did a lot within a short 10 month
period of time.
LEGAL REGULATIONS
CONCERNING THE STATE AID
CONTROL IN THE EU
The state aid system in the European
Union is defined under the Articles 87
and 88 of the Treaty Establishing the European
Community (hereinafter referred
to as the Treaty).
Pursuant to relevant EU regulations,
state aid means any aid in terms of benefit
or advantage granted by a state, or
from state resources through a public,
state authority, which favours certain
companies or products (selection principle)
or distorts or may distort level playing
field in market
According to Article 87, paragraph 1
of the Treaty, the following shall be deemed
state aid:
1. any aid granted through State resources;
2. any aid which favours certain undertakings,
sector or region
3. any aid which is selective because
it distorts the market competition by favouring
certain undertakings, sector or
region;
4. any aid which affects competition
and trade between Member States.
Types of state aids are as follows: horizontal
state aid (intended for all economic
entities participating in the market),
sectoral state aid (intended for
economic entities within specific economic
and non-economic activities) and
regional state aid (intended for less
developed areas).
State aid may include: subventions,
tax allowances or any other form of
Danijela Jauković
non-payment of state fees; exemptions
from payment of social contributions;
granting interest rates/loans/guarantees/real
estate under conditions which
are more favourable then market ones;
approving allowances for incurred business
losses; export aid or regressive export
crediting; establishing funds for
development/housing construction;
providing income and price support;
providing goods or services which are
not part of the public services; approving
more favourable treatment in the
public procurement, etc.
Certain categories of the horizontal,
sectoral and regional state aid may be
allowed under conditions set forth under
the EU by-laws.
According to regulations and methodology
of the EU, the following shall not
be considered state aid: aid for beneficiaries
which are not economic entities
(households, handicapped persons, aid
for infrastructure, educational institutions,
hospitals, public housing, vocational
training centers); general economic
policy measures (quotas, public procurement,
technical standards, general VAT
reduction); aid granted by national and
multinational organizations, EU funds,
government functions (defense, public
works).
Article 88 of the Treaty defines procedure
related to applying for and control
of state aid, which is under the
competence of a separate European
Commission established to this end. The
European Commission, together with
Member States, constantly monitors all
systems of aid existing within Member
States and requires appropriate measures
required for gradual development
and action. Such authorization enables
the Commission to indicate a change in
state of affairs (by monitoring progressive
development or functioning of
common market) and accordingly
launch examination of the existing state
aid.
If the European Commission finds
that an aid granted by a Member State
or through State resources is not in
compliance with acquis communitarie
or with common market or such aid is
being misused, it shall decide that the
State concerned shall abolish or alter
such aid within a period of time to be
determined by the Commission. If the
State concerned does not comply with
this decision within the prescribed time,
the Commission may refer the matter to
the Court of Justice
On application by a Member State,
the EU Council (hereinafter referred to
as the Council) may decide that aid
which that State is granting or intends
to grant shall be considered to be compatible
with the common market, if
such a decision is justified by exceptional
circumstances If, however, the Council
has not made its attitude known within
three months of the said application
being made, the European Commission
shall give its decision on the case.
Regulations governing state aid by
the WTO and those in the European
Union are compatible particularly with
respect to definitions and practical purposes.
ADVISOR TO THE MINISTER
On co-operation with the EU
and international
financial institutions
DANIJELA JAUKOVIĆ,
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