2.3.5. Suite Aids Compatible with the Common Market

State aids distorting competition and affecting interstate trade are not prohibited under

all circumstances. The law on state aids, like the law on the freedoms, recognises that

the objective of Article 3(g) EC of a common market with free competition does not

refer to the maximisation of competition on the market.'"' The objective is to be read

in conjunction with the broader aims of the Community outlined in Article 2 EC."

Accordingly, Article 8 7 ( 2 ) EC provides for particular state aids that are compatible

with the common market and Article 8 7 ( 3 ) EC provides for state aids that D M ; ' b e considered

compatible with the common market.

The most significant provision for the present purposes i s Article 87( 3 ) ( c ) I n accordance

with this provision, 'aid to facilitate certain economic activities or of certain economic

areas to the extent it does not adversely affect trading conditions to an extent

contrary to the common interest' may be considered compatible with the common

market. The Commission has further elaborated these principles in respect of aid to

firms in difficulty in a notice containing the 'Community Guidelines on State Aid for

Rescuing and Restructuring Firms in Difficulty'."' According to the Commission,

preventing the disappearance or the necessary restructuring of firms may prevent the

full benefits of the single market being felt for the Community as a whole.1"" On the

other hand, it continues, rescue or restructuring

may be justified, tor instance, by social or regional policy considerations, by the

need to take into account the beneficial role played by small and medium-sized

enterprises (SMEs) in the economy or, exceptionally, by the desirability of maintaining

a competitive market structure when the disappearance of firms could lead

to a monopoly or to a tight oligopolistic situation.1"'

The Commission will regard rescue and restructuring aid as benefiting the development

of e c o n o m i c activities and thus compatible with the common market where the

aid fulfils certain conditions. The basic (substantive) condition for restructuring aid

is that it must be shown that any 'distortion of competition will be offset by the benefits

flowing from the firm's survival'. The benefits in this equation include the net effect

of redundancies resulting from the firm going out of business, combined with the

effects on its suppliers, which would exacerbate local, regional or national employment

problems and a resulting monopoly or tight oligopolistic situation. "L In addition, aid

aimed at the mitigation of the social costs of restructuring, in particular relating to

unemployment, may also be justified as 'it brings economic benefits above and beyond

the interests of the firm concerned, facilitating structural change and reducing

hardship'.1 1"

The Commission's Guidelines on aid to firms in difficulty illustrate that interests such

as employment and national or regional economic infrastructure may justify distortions

of competition that would otherwise be incompatible with the common market.

This holds where state aids are granted in the course of insolvency proceedings. Consequently,

the wider objectives of the law of deployment cannot be said to be a prion

incompatible with the common market, even though such measures may distort competition.

However, it remains to be seen whether the same interests can therefore also

be recognised as mandatory requirements capable of justifying obstacles to trade under

the law of the freedoms.