Transcending territoriality: expanding EU state aid control through consensus and coercion

Abstract:

This paper tells the story of how the EU legal system has managed to transcend its territorial scope of application of its disciplines on subsidies. State aid control can only apply to state aid granted by EU Member States. Financial support granted elsewhere is, by definition, beyond the jurisdiction of the EU. But, in a globalized economy, what happens in other jurisdictions and markets can have repercussions on the EU internal market and its operators.

As known, the EU is unique among various international and domestic systems in controlling subsidies. EU stakeholders that are subject to this unique discipline have thus increasingly raised claims of unfair competition and lack of level playing field vis-à-vis their competitors based in jurisdictions where the public financing to economic activities is not kept in check. Complaints have raised new heights in the context of a phase in international relations where multilateralism, and, in particular, its ability to generate global norms, is in crisis.

Responsive to these competitiveness concerns, the EU has taken action at two different levels. The first involves the negotiation and conclusion of rules that incorporate subsidy disciplines either multilaterally or preferentially, the second paves the way to the unilateral imposition of remedies on imports or companies that do not abide by certain disciplines. Through this double-level action – this is the argument of this paper - the EU has transcended the ‘territoriality defect’ of its system of State aid control.

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