Government Funding – Beautification Project Completed
In practice, there are five conditions that must all be met for state aid to be considered incompatible:
- The aid is provided using state funds/public funds.
- The grant is awarded to a recipient who engages in economic activity or operates a business.
- The aid provides the recipients with a financial advantage.
- The aid is selective,
- The aid distorts or threatens to distort competition in the market.
A project in which the municipality covers the costs of beautifying the port’s grounds generally meets the requirements of point 1 (public funds), point 2 (the port as an economic enterprise), and point 4 (selective, since the port is the sole recipient other than the municipality).
However, it may seem more doubtful whether a municipal beautification of a port’s grounds and the establishment of a marketplace and playground provide the port, as a commercial port, with any economic benefit (point 3) or threaten to distort competition in the market (point 5).
The construction of a promenade, a playground, and a market square is unlikely to increase the value of the areas in question as port areas, since the port will thereby be restricted in the future from conducting its commercial port operations from these areas and using them for their statutory purpose of port-related activities, see Section 6(2) of the Port Act.
A municipality’s implementation of such a project would therefore immediately place a financial burden on the harbor in the form of restrictions on use, reduced land rent, and increased maintenance costs. The hypothetical benefit to the port in the form of potentially more visiting sailors, etc., does not appear—either now or in the future—to outweigh the financial disadvantages associated with the project from the port’s perspective. Thus, the key prerequisite of a financial benefit for the port does not appear to be met. At first glance, therefore, there is more to suggest that the port’s involvement will be “con amore” and without any prospect of achieving a financial benefit.
Furthermore, it is a requirement that the aid must distort competition in the market. In light of the port’s competition with other commercial ports and fishing ports, it must be assessed whether the project gives the port any competitive advantage. This does not appear to be the case here—quite the contrary. In relation to other landlessors, it may possibly be an advantage, but hardly one of any significant nature when the economic disadvantages are taken into account.
In this specific case, it was therefore initially determined that the port did not receive state aid in connection with a beautification project.
The above is a specific statement, and if specific decisions are to be made, the matter will need to be examined more closely.
