10 million euros aid to a global multinational challenged

Zoran Sretić and Miomir Stojković have been advising clients in IT sector challenging the unlawful and incompatible state aid in the amount of nearly EUR 10 M before the Commission for Stata Aid Control (the “Commission”) granted by the Government to a multinational corporation for establishment of a local R&D division in 2018. The aid was granted under an umbrella of a previously approved aid scheme by the Commission, which explicitly forbids any financial incentives to the IT sector, a soaring market with an unmatched demand for an expert workforce.

This legal matter is important because the financial advantage received from public resources is considerable and may likely cause substantial and irreparable harm to competitors since it unlawfully improves the beneficiary’s net financial position through an operational aid.  Furthermore, the Commission is under an obligation to assess compliance of aid measures with the EU law in accordance with the Stabilisation and Association Agreement (SAA). However, instead to step up the state aid control over the Government, the Commission recently introduced a de facto block-exemption from notification of individual aid measures granted under a regional aid scheme umbrella. The Commission’s practice changed soon after Sojković Attorneys succesfully assisted the clients in their efforts to halt EUR 1.6 M aid to another global IT company incompatible with the SAA. As a result, the level of the aid transparency decreased further as well as window to challenge individual aid to large companies by means of the EU rules.

However, as discovered by the Stojković Attorneys research of the facts of the case, the aid challenged  was, effectively, intended for establishing IT software development department of the multinational in Serbia, formally reregistered as an engineering company to bypass the limits of approved aid scheme, which explicitly excludes incentives to the IT sector. Furthermore, a search of state aid grantors’ documents discovered by our attorneys prooved that aid granted to a large undertaking lacked an incentive effect from the beginning  and does not target credibly identified market failure, conditions necessary for measure to be compatible with the SAA.

The case illustrates the difficult legal environment in which our cases are managed where the Commission operates as a de facto advisor to state grantors rather than a controller. For that reason, the European Commission warned that the Commission “cannot be considered as operationally independent” authority from aid grantors (European Commission, Serbia 2018 Report, Strasbourg, 17.4.2018 SWD (2018) 152 final, 60). Despite unfavorable environment, we shall, continue rasing state aid awareness, advocating legal changes in the state aid policy and to carry on with all available legal remedies and initiatives to open legal avenues for protecting our clients from these forms of market restrictions.