Substantive rules: EEA Agreement – Part IV, Chapter 2

Article 61 – definition of state aid and categories of permissible aid

Article 61(1) defines state aid and prohibits it as being incompatible with the EEA Agreement:

“Save as otherwise provided in this Agreement, any aid granted by EC Member States, EFTA States or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Contracting Parties, be incompatible with the functioning of this Agreement.”

Articles 61(2) and (3) provide exceptions to the general rule. Article 61(2) provides that certain aid shall be compatible with the EEA Agreement:

“The following shall be compatible with the functioning of this Agreement:

(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; and

(b) aid to make good the damage caused by natural disasters or exceptional occurrences;…”

Article 61(3) provides that certain forms of aid may be compatible with the EEA Agreement:

“The following may be considered to be compatible with the functioning of this Agreement:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment;

(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of an EC Member State or an EFTA State;

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

(d) such other categories of aid as may be specified by the EEA Joint Committee in accordance with Part VII (of the EEA Agreement).”

Guidelines adopted by the Authority provide guidance on the Authority's interpretation of Article 61(3).

Article 49 – state aid and transport

Article 49 relates to transport and provides that state aid shall be compatible with the EEA Agreement if it meets the needs of co-ordination of transport or represents reimbursement for the discharge of certain obligations inherent in the concept of a public service.

Articles 7 and 63 and Annex XV – binding secondary legislation on state aid

Article 7 of the EEA Agreement provides that Acts referred to or contained in the Annexes to the Agreement shall be binding upon the EFTA States party to the Agreement and shall be made part of their domestic law. Annex XV to the Agreement (implemented by Article 63) contains the relevant EC legislation (European Council Regulations and European Commission Regulations and Decisions) applicable (with specified adaptations applicable to the participating EFTA States) in the field of state aid. Those provisions are legally binding and are set out below.

• Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings (OJ L 318, 17.11.2006, p.17).
• Commission Decision No 2496/96/ECSC of 18 December 1996 establishing Community rules for State aid to the steel industry (OJ No L 338, 28.12.1996, p.42 ).
• Council Regulation (EC) No 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding (OJ L 202, 18.7.1998, p. 1).
• Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding (OJ No L 332, 30.12.1995, p.1) (as amended).
• Council Regulation (EC) No 1177/2002 of 27 June 2002 concerning a temporary defensive mechanism to shipbuilding (OJ L 172, 2.7.2002, p1) (as amended)
• Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid (OJ L 379, 28.12.2006, p. 5).
• Commission Decision 2005/842/EC of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (OJ L 312, 29.11.2005, p. 67).
• Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (OJ L 214, 9.8.2008, p. 3).