Article 107 TFEU

Article 107 TFEU
Name	Article 107 TFEU
Abbreviation	Art. 107
Legal basis	Treaty on the Functioning of the European Union
Adopted	1957 (Treaty of Rome), current wording consolidated 2009
Jurisdiction	European Union
Subject	State aid

Article 107 TFEU

Article 107 TFEU sets out the EU legal framework governing state aid, defining prohibited aid, enumerating exceptions, and allocating roles between the European Commission and Member States, shaping decisions in cases involving the European Commission, European Court of Justice, European Council, Council of the European Union, European Parliament, and national authorities such as the Bundesregierung or French Republic ministries.

Text and scope

The textual provision appears in the Treaty on the Functioning of the European Union as a central pillar of EU competition law and interacts with instruments adopted by institutions including the Court of Justice of the European Union, the European Commission's State aid modernisation package, and sectoral frameworks like the Common Agricultural Policy and rules applied to European Investment Bank operations. Its scope covers measures by Member States or through resources controlled by Member States, affecting undertakings such as national champions like Air France, Deutsche Bahn, or multinational corporations like Siemens and Airbus. The provision's reach extends to regional measures linked to cohesion policy administered with reference to the European Structural and Investment Funds and cross-border situations implicating entities from the United Kingdom (pre-Brexit decisions), Italy, Spain, and Poland.

Prohibited aid and legal elements

Article 107(1) establishes the prohibition core reflected in cases involving state support to firms including disputes around Iberia (airline), Alitalia, and port subsidies implicating authorities in Port of Rotterdam and Port of Antwerp. Legal elements identified by the Court of Justice of the European Union and the General Court (European Union) include: (a) intervention by a Member State or through State resources, (b) selectivity vis-à-vis undertakings such as Volkswagen or Renault, (c) distortion of competition affecting trade between Member States exemplified by cross-border cases involving the European single market, and (d) advantage to recipients compared to market operators. Jurisprudence references decisions involving the European Commission's findings against Google in competition contexts, while classic examples include aid to shipbuilding in France and coal sector measures related to Silesia.

Exceptions and compatibility criteria

Article 107(2) and 107(3) provide exceptions and compatibility grounds invoked in approved schemes such as rescue and restructuring aid for firms like Olympic Airlines and regional aid frameworks for areas comparable to Mezzogiorno or Galicia (Spain). Compatibility criteria encompass objectives like regional development, horizontal policies for Research and Development tied to programmes involving Horizon 2020 and Horizon Europe, environmental protection linked to European Green Deal, and services of general economic interest (SGEI) as interpreted with reference to Poste Italiane and decisions on public service compensation for operators such as Deutsche Post. Temporary exceptional regimes, notably during the COVID-19 pandemic and crises affecting Ukraine or energy markets, relied on Article 107(3)(b) and 107(3)(c) frameworks and the Temporary Framework for State aid measures adopted by the European Commission.

Notification and implementation procedure

The procedural structure assigns ex ante assessment and clearance powers to the European Commission under the Treaty on the Functioning of the European Union, requiring Member States to notify proposed measures, as reflected in procedural guidance from the Directorate-General for Competition (European Commission). The Commission's decision-making interacts with committees such as the Committee of Permanent Representatives (COREPER) and uses instruments including State aid decisions and block exemptions; contested decisions can be brought before the General Court (European Union) and appealed to the Court of Justice of the European Union. Non-notified measures have led to recovery orders and rulings in proceedings involving national administrations like the Polish Government and regional authorities in Catalonia.

Case law and key Commission decisions

Prominent judgments shaping interpretation include rulings in cases brought by stakeholders like Belgium and corporations analogous to Intel Corporation and Microsoft Corporation before the Court of Justice of the European Union and the General Court (European Union)]. Key Commission decisions invoking Article 107 concern aid to Airbus, restructuring support to Banks in the aftermath of the 2008 financial crisis (including measures affecting Banco Santander and Deutsche Bank), and approval of schemes for renewable energy promotion tied to Member States such as Germany and Denmark. Landmark cases on selectivity and market economy investor tests reference disputes involving Ryanair and state holdings exemplified by Staatsbanken.

Economic and policy implications

Article 107 influences EU policy instruments like the Cohesion Fund, competition policy shaping industrial policy for sectors including automotive industry actors such as PSA Peugeot Citroën and Jaguar Land Rover, and responses to asymmetric shocks like the Eurozone crisis. Its application affects investment decisions by multinational firms such as BP and TotalEnergies, informs national choices in fiscal stimulus during episodes comparable to the Great Recession, and interacts with trade policy overseen by the World Trade Organization when state support alters competitive conditions for exporters in regions like Bavaria or Normandy.

Relation to other EU provisions and state obligations

Article 107 operates alongside provisions in the TFEU such as Article 101 (antitrust) and Article 106 (public undertakings), and interfaces with obligations under instruments like the Charter of Fundamental Rights of the European Union when public service missions are at stake. It must be read with external commitments under treaties administered by the World Trade Organization and with principles applied by bodies like the European Court of Human Rights where state measures raise human rights considerations; it also interacts with budgetary rules under the Stability and Growth Pact when Member States design aid packages.

Category:European Union law