2.3.6. Compatible State Aids and Mandatory Requirements

The wider objectives of the law of deployment involve interests of an economic nature.

At first sight, these would not be available to Member States in order to justify obstacles

to trade in the sense of the freedoms. However, could it not be argued that in the light

of the law on state aids, which holds that resulting distortions of competitions maybe

compatible with the common market, these interests should not be excluded from

the Court's list of mandatory requirements? An affirmative answer may appear

appropriate as, according to the Court, Article 28 and 87 EC share a common purpose:

the free movement of goods under normal conditions of competition. The case law

on the relationship between the provisions on free movement and state aid is however

less straightforward. The Court infers from the shared purpose that the fact that a

measure might be regarded as aid within the meaning of Article 87 EC is not a

sufficient reason to exempt it from the prohibition contained in Article 28 EC.1"1 Not

only is it of no avail that an interest may justify state aids - it remains an economic

interest not capable of justifying obstacles to trade - but it would also appear that even

where measures form part of justified state aids, they may still be rendered unlawful

under the freedoms.

In Campus Oil and Evans Medical the survival of a company could justify measures

resulting in obstacles to trade because they touched on the interests of public security

and health and the life of humans."" One should however contrast these cases with

the judgment in / ) ; / Pont de Nemours, concerning an Italian measure for the aid of

the region of the Mezzogiornof"" Public bodies and authorities were obliged by law

to obtain at least thirty per cent of their requirements from businesses established in

the Mezzogiorno. This measure was challenged as an obstacle to the free movement

of goods. The Italian court referred three questions to the Court of Justice: did the

measure constitute an obstacle to trade; did it result in state aid; and, finally, did

Article 88 EC confer power to determine whether aid is permissible exclusively on the

Commission or also on the national court?

The Court held the measure to be restrictive of the free movement of goods. The

question of whether the measure might constitute aid in the sense of Article 87 EC was irrelevant in this regard. According to the Court, Article 87 EC 'may in no case

be used to frustrate the rules of the Treaty on the free movement of goods'. It therefore

replied to the Italian court that there was no need to consider whether the rule was

in the nature of aid since 'the fact that national rules might be regarded as aid within

the meaning of Article 87 cannot exempt them from the prohibition set out in

Article 28 EC'.1"" As a result, the third question became 'otiose' because national courts

must ensure the full application of Article 28 E C ' " " In other words, national courts

do not need any power to decide on the lawfulness of a measure as state aid in the

context of the free movement of goods, as the (tin - ) lawfulness as state aid is without

consequence for the application of Article 28 E C . ""

This left the question of whether the measures could be justified as being necessary

for the protection of mandatory requirements of the public interest, in casu regional

development. The Court held the Italian preferential scheme to be discriminatory in

nature. Therefore, only the interests expressly provided for in Article 30 were available.

As these do not include regional development, the measure could not be justified. 1

Advocate-General Lenz observed in this regard that, as may be inferred from

Article 8 7 ( 3 ) ( a ) EC and 158 EC, regional development is an objective recognised by

the Treaty. However, it could not justify an obstacle to trade as 'it is a well-established

principle that a Member State may not rely on mandatory requirements in order such as the soundness of economic infrastructure or employment, may not justify

obstacles to trade.

Adjusting the relative entitlements of creditors may support the goal of maximisation

of the aggregate value of the estate for the benefit of the creditors. For instance, the

paritas creditorum is redistributive in nature, as it levels out positional advantages

creditors may have under non-insolvency law. Quite apart from the normative appeal

of equality and fairness, the paritas can be said to be efficient (reduction of costs) in

that it replaces what would otherwise be a highly complex task ot mimicking the exact

relative position of creditors under non-insolvency law in the insolvency forum.

The application of the paritas will typically not result in an obstacle to trade and require

justification under the freedoms, but a similar rationale of efficiency and

expediency may be relevant in respect of security rights. Under German insolvency

law the Administrator is entitled to realise movables encumbered with a security right

when they are in his or her possession.1 1"' T h e secured creditor must be paid out of the

proceeds, after deduction of the costs of appreciation and liquidation, according to

the priority s/he is entitled to. However, rather than calculating the actual costs in

respect of each i ndi vidual asset, the costs are fixed by law at 4% and 5% of t he proceeds

respectively."''

Conversely, interests such as the maintenance of employment or sound economic

infrastructure cannot justify obstacles to trade resulting from redistribution in insolvency.

French insolvency law, for instance, facilitates reorganisation by granting, in

case oi cession or continuation, post-petition claims arising in the continuation of

business a priority over pre-insolvency claims, including those ot secured creditors.1

The decision whether to liquidate or to reorganise (and whether through cession or

continuation) is however not so much informed by value maximisation for the benefit

of creditors but rather by 'the survival of the undertaking and the maintenance ot

employment'."" protect its domestic economy'. | J In other words, economic interests such as regional

development, although they may justify aids as being compatible with the common

market, are not capable of justifying obstacles to trade.