State aid challenges on the rise as high-profile cases add to profile of the law, says expert

Euromat, the European Amusement and Gaming Federation, has filed a state aid compliant with the European Commission over Dutch government plans to impose a 20% rate of tax on online gambling operators and a 29% on high-street gambling companies. It follows a related complaint being filed with the Commission by the Dutch member of Euromat, according to a report by InterGame Online.

EU state aid rules are intended to prevent the distortion of competition when national governments grant advantages or incentives to particular companies. The European Commission is responsible for investigating those complaints. Under the rules, state aid, which can include applying different rates of tax on businesses, can be justified for general economic development reasons.

State aid expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-law.com, said the Dutch case "signifies a general shift towards more state aid litigation", including at EU level and at national level before the courts. An increasing awareness of state aid law by businesses is a factor in the rise, she said.

"State aid law used to be very abstract but now it is more common place in the commercial world, perhaps partly because the economic down-turn required more public sector financial assistance for businesses than before," Ramsay said.

The European Commission's own "aggressive investigations" on tax and state aid issues, including in its recently announced energy sector inquiry, has also resulted in increased media coverage of state aid law and its application, she said.

"In the last year or two we have had several high profile state aid investigations opened by the European Commission, including those involving Apple and Starbucks on the issue of tax breaks," Ramsay said.

Ramsay said there are a number of other state aid cases that have either been launched or determined by the Commission in the past year. Those cases stem from alleged state aid interventions across the EU, in countries including Belgium, Italy, Portugal and Sweden, and relate to land swap transactions, infrastructure projects and financing of airport and airlines, among other examples.

"The raised media profile and Commission focus on the issue, combined with increased powers for domestic challengers as a result of a 2013 ruling by the Court of Justice of the European Union (CJEU), is also prompting more state aid challenges," Ramsay said.

In its ruling, the CJEU said national courts have the ability to order repayment of alleged unlawful state aid before the Commission has reached a final conclusion to an investigation.

"We have seen industry challenges, including from the German energy industry against German rules on renewable energy subsidies and the Commission's investigation of the case," Ramsay said. "In the UK there have been a number of judicial review actions against public bodies by competitors of alleged aid recipients."

In April 2014, the European Commission published a new complaint form that businesses wishing to make a state aid complaint must use. The change was part of a number of other reforms to the state aid regime which the Commission said should help it address complaints faster.

Technology and gambling law expert Diane Mullenex of Pinsent Masons, the law firm behind Out-Law.com, said that the subject of state aid law is being talked about by national regulators across Europe. Mullenex chaired a debate on the topic at the International Bar Association's annual communications and competition conference in London at the end of April. The panel for the debate included representatives from the European Competition and telecoms regulatory authorities in Belgium and Italy.

"State aid law and the challenges to it, are an example of how business, regulation and enforcement collide," Mullenex said. "Businesses with particular interests, such as gambling operators, see state aid law, as a way of redressing what they see as a regulatory imbalance – as well as a financial one – and appear to be looking to the European Commission to redress the imbalance where regulation exists."

"It may be said that European regulators now have to balance the need for strong, competitive and dynamic environments in certain markets, such as telecoms, with reducing inconsistency of regulation, increasing regulatory intervention in the markets and EU countries where strong regulatory safeguards exist and 'levelling the playing field'," she said.

"The European Commission's focus has widened as we can see in recent challenges in Ireland, Italy, Luxemburg and now the Netherlands. In the context of gambling operators, we may see a greater number of similar challenges on the basis that potentially unlawful state aid is provided in certain EU countries. This remains to be seen but will be an interesting approach if taken," Mullenex said.