Kavanagh, James; Niels, Gunnar; Pilsbury, Simon --- "The Market Economy Investor: An Economic Role Model for Assessing State Aid" [2011] ELECD 701; in Szyszczak, Erika (ed), "Research Handbook on European State Aid Law" (Edward Elgar Publishing, 2011)

Book Title: Research Handbook on European State Aid Law

Editor(s): Szyszczak, Erika

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802741

Section: Chapter 5

Section Title: The Market Economy Investor: An Economic Role Model for Assessing State Aid

Author(s): Kavanagh, James; Niels, Gunnar; Pilsbury, Simon

Number of pages: 15

Extract:

5 The market economy investor: an
economic role model for assessing State
aid
James Kavanagh, Gunnar Niels and
Simon Pilsbury*


I. RELEVANCE OF THE MARKET ECONOMY
INVESTOR PRINCIPLE

Economic logic, and legal principles, dictate that State aid, as a `transfer
of State resources conferring a benefit or advantage', occurs only when the
State acts on terms that would not be acceptable to a private business. If
a public authority grants funding to a firm on terms which the same firm
could have obtained by going to a bank, or capital markets, then there
is no `advantage' conferred by State intervention. This is irrespective of
whether the recipient is a government-owned entity (for example, a State-
owned seaport or airport) or a private firm. A prime question in State aid
law is how to assess whether the terms of the State action are in fact com-
patible with those acceptable to a commercial investor. This is known as
the market economy investor principle: MEIP.
The MEIP is an interpretation of Article 107(1) TFEU and, more spe-
cifically, of the first and second criteria proposed for determining whether
government funding constitutes State aid. Any measure that satisfies the
MEIP is not considered State aid. In this case, the other two criteria for
State aid, selectivity, and (actual or potential) distortion of competition
and intra-community trade, no longer need to be assessed.
The MEIP was set out in the 1998 Van der Kooy case:
It is of the essence of ...