What’s up with blurred lines: State aid and competition law

What’s up with blurred lines: State aid and competition law

The district court of Amsterdam has ruled that the municipality of Amsterdam, by concluding a guarantee agreement, could in theory have violated both competition and State aid law. Can we blur these lines?

It is a truth universally acknowledged, if I may take a quote grossly out of context, that national judges in the EU must, where relevant, apply EU law. Interestingly (and obviously), judges are often faced with cases for which no very clear EU solution has yet been presented. Or maybe the solution exists, but it is simply not known to the judge ruling on the case or the researcher studying it. In any case, what makes national ‘EU’ case law so interesting is that it can challenge the validity of some perceived certainties, precisely because reality (and clever lawyers) presents us with seemingly infinite variations of facts and potential legal arguments.

So much for the philosophical part, now a case to demonstrate this point. It concerns a recently published case before the district court of Amsterdam. The municipality of Amsterdam has entered into a guarantee agreement with a bank on behalf of the corporation that develops the ‘music-makers centre’ MuzyQ, in which musicians can rent practice studios. Because of the guarantee, the foundation could receive a loan of around € 26 million. This has led the applicants in this case, who also rent out practice studios to musicians, to initiate proceedings before the district court. They argue, among other things, that the municipality has, by agreeing to the guarantee and thereby presenting the foundation with an economic advantage, violated State aid law and the cartel prohibition.

This is a strange juxtaposition. The cartel prohibition is aimed at undertakings; the prohibition to grant State aid without prior Commission approval is aimed at Member States. For a municipality to be both seems schizophrenic (I should probably say dissociative). Nevertheless, the district court saw no reason in this case not to rule on the validity of both alleged violations. In the end, it rejected both the cartel claim and the State aid claim, but for other reasons than that the municipality of Amsterdam could not be both an undertaking and a State entity.

Was the court wrong? I’m not so sure. Counter-intuitive, yes, for the reason I mentioned above. On the other hand, the European Courts’ definitions of State and of undertaking have always been functional. The concept of an undertaking covers any entity engaged in an economic activity, i.e. the offering of goods and services in a given market, regardless of its legal status and the way in which it is financed. State aid, meanwhile, may be granted by the State but also by a public or private body designated or established by the State. Thus, an entity can be considered an undertaking in one case and a part of the State in the next. The question is whether an entity can have both statuses in one and the same case, concerning a single activity. If this were so, the State aid and cartel prohibition would become muddled. Being two sides of the same coin, it should be one or the other.

1 Comment

Edward Bogaart

Thanks, Alke, for the interesting statements in your "Blurred lines" article about state aid and competition rules. Your question and statement about both statuses of an entity (undertaking ánd State), as possibly the municipality Amsterdam in the MuzyQ-case, seems theoretical to me. Municipalities are entities which practice private law and can often - if they like it or not - be qualified as undertakings regarding to EU-competition rules. Why should these entities/municipalities be one or the other? Only because the state aid and cartel prohibition would become muddled? It seems to me that (EU) law should provide more clarity in those "muddled" cases. More important I guess is the awareness of the people who represent these entities about the differences between the entities in their different roles as an undertaking and/or (!) public entity (municipality).

Kind regards,
Edward van den Bogaart

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