EC law and policy on state aids and the possible effects on the Maltese legal position

Abstract

The granting of State assistance to industry is considered as anti-competitive practice by the European Community. However, the decision-making practice of the European Commission shows that it does not condemn them dogmatically in advance as they can have positive effects. In addition, the Commission doles out quite a few subsidies of its own under its structural and cohesion funds. Articles 92 to 94 of the Treaty of Rome regulate the granting of State Aids. While Article 92(1) prohibits the granting of State assistance which distorts or threatens to distort competition in so far as these effect trade between Member States, Article 92(2) sets out a list of permissible aids. Article 92(3) then lists a number of assistance schemes which could be considered as compaUble with the European Community. Article 93 vests the Commission with the task of vetting State assistance and of disciplining defaulting Member States while Article 94 deals with the power of the Council to make regulations for the application of the former two articles. Maltese general (horizontc:il) schemes of assistance which might need amendment include the Industrial Development Act, 1988, the Malta Financial Services Act, 1988, and the Malta Freeport Act, 1989. The clear discrimination in favour of Maltese-registered companies in the Industrial Development Act will certainly have to go. However, the fact that most Maltese companies qualify for the special exemptions granted by the Community for Small and Medium-sized Enterprises is a point in our favour. So is the fact that ¥alta will be classified as an 0.bjective I Region should it join the European Union. This means that it will benefit both from assistance granted by the Community itself as well as from exemptions from the general rules on State assistance granted under Articles 92(3)(a) and (c). Another area which will require amendment will be the policy of the Maltese government towards the shipbuilding and ship-repair industry especially in the light of the new agreement reached by the Organisation for Economic Co-operation and Development.