Of ‘Good’ and ‘Bad’ Subsidies: European State Aid Control through Soft and Hard Law

Abstract: European state aid control, a part of competition policy, typically follows the logic of negative integration. It constrains the potential for member states to distort competition by reducing their ability to subsidise industry. In addition, this paper argues, ambiguous Treaty rules and heterogeneous member state preferences have enabled the European Commission to act as a supranational entrepreneur, not only enforcing the prohibition of distortive state aid, but also developing its own vision of 'good' state aid policy. In order to prevent or to settle political conflict about individual decisions, the Commission has sought to establish more general criteria for the state aid that it still deems admissible. These criteria have been codified into a complex system of soft law and, more recently, hard state aid law. The Commission has thus created positive integration 'from above' and increasingly influences the objectives of national state aid policies.