The principles and application of state aid rules in the field of risk capital

Abstract

This study was prompted by the fact that the European Commission faces an arduous task when attempting to balance the need to maintain tight State aid control throughout the European Union and satisfying the demand for risk capital investments of small businesses seeking to finance their growth and innovations. This study is therefore specifically concerned with the legal framework that formulates a response to this problem and the established parameters that guide Member State intervention. This thesis commences by defining ‘risk capital investments’ and ‘small and medium-sized enterprises’ that serve as a connecting thread throughout. It also establishes that there exists the need to intervene in risk capital markets but also ascertains why such intervention should be controlled. Article 107(1) TFEU contains a general prohibition of State aid measures; nevertheless not every form of State intervention is tantamount to illegal State aid. Therefore this study analyses State aid measures and also discusses the three levels at which State aid may be present in risk capital measure. The core of the study analyses the ‘3-stream system’ on which the new structure of State aid is founded. Hence risk capital State aid measures are discussed in the context of the General Block Exemption Regulation and the standard and detailed assessments found in the Risk Capital Guidelines. The Commission as part of the EU’s reaction to the global financial and economic crisis of 2008 widened the parameters within which States are permitted to intervene. The effects of the latter on the economy and State aid control are discussed with the benefit of hindsight. After addressing the various aspects of the application of State aid rules in the field of risk capital this study contemplates adopting proactive policy measures that go beyond simply determining parameters.