‘We use economics to answer the big questions.’
In this Q&A, Oxera economic experts discuss the success stories and key issues our clients face in state aid.
What key issues do our clients face with state aid?
Enno Eilts Within the state aid context, we typically assist clients with state aid compliance, European Commission state aid investigations and private law actions.
James Kavanagh We ensure clients are compliant with state aid rules to avoid investigation by the European Commission. And if they’re not compliant, we often help them to implement measures that are in line with state aid rules.
Nicole Robins If a client is already facing a state aid investigation by the European Commission, we defend their position that either the measure does not constitute state aid, or that it is in line with state aid rules.
JK We also help clients facing litigation/arbitration as a result of state aid allegations. For example, we’ve provided expert testimony to defend the position that an agreement signed between the client and a state body did not constitute state aid.
So where does economics play an important role?
NR We use economics to answer the big questions asked by the Commission. Like did the measure in question constitute aid? Has the provider of a service of general economic interest (SGEI) been overcompensated? Were these costs in line with those incurred by an efficient undertaking?
EE The Commission wants to know how it can be argued that the aid is compatible and if there are market failures that justify it in the first place, what the appropriate remedies are in return for receiving aid, and the value of the transferred economic advantage.
JK These are all questions that need the expertise of economists with the experience that Oxera offers. In light of the Commission’s recent state aid investigations into fiscal aid measures, accounting firms may lack credibility.
EE In such cases, independent, expert economic analysis may provide more robust and reliable evidence where accounting cannot. In law, economic evidence supported by rigorous analysis can strengthen legal arguments in state aid, merger, or anti-trust cases.
Who are the main client groups Oxera works with?
EE Every client is different and every case is different, so we take great care to select the right team with the right skills every time.
NR In general, we work with three key groups: partners or senior associates at law firms; in-house legal counsel; and regulators, primarily at the European Commission.
JK We typically support lawyers in preparing economic and financial arguments to demonstrate the measure under investigation does not constitute state aid. Or we help them advise clients on how to ensure a particular measure is compliant with state aid rules.
NR With our corporate clients, we are typically instructed by senior staff, for example, the Director of Regulatory and Legal Affairs (in the case of Ryanair) or the Director of Regulation, Communications, and Strategy (in the case of Drax).
EE Working with regulators usually involves the Directorate General for Competition at the European Commission, relevant government departments dealing with state aid issues, or the state-owned entity implementing or overseeing a state aid measure (such as the Health Insurance Authority in Ireland, for example).
What are the most valuable benefits we provide our clients?
NR The most important benefits are either achieving clearance from or avoiding investigation by the European Commission and helping clients win private actions in court.
EE Our dedicated team can focus solely on state aid issues, drawing on the skills fundamental to state aid analysis and experience of state aid cases across a variety of sectors.
JK We save clients from lengthy investigations and punitive aid repayments. And we mitigate the risk of private damages claims from competitors.
EE For example, using economic and financial analysis, we demonstrated that Ryanair’s arrangements with many European airports did not involve state aid. This saved them huge sums in the form of aid recovery and avoided the need to renegotiate relationships with the airports concerned.
NR We’re expert in the technical skills essential to modernised state aid analysis—corporate finance, regulation, and competition. Our staff can also work in a variety of European languages, which is frequently essential for state aid analysis.