Chillin'Competition

One of the big events of the season is the launch of Philipp Werner’s and Vincent Verouden’s, EU State Aid Control. Law and Economics, which came out a few months ago. It is a remarkable achievement for which they should be congratulated. Together with a large team of authors, they have truly managed to blend legal and economic analysis. It would have been already impressive as a law book tout court, but this aspect makes it special.

I was honoured that they asked me to review the book for the European State Aid Law Quarterly. My review has just come out, and has done so in a special 15^th anniversary issue that matches the importance of the book (congratulations to the EStAL team, by the way: what they have achieved is wonderful too). When browsing through the review, I was proud to see an article co-authored by a former student of mine, Sylvain Petit, together with Adrien Giraud, a good friend of the blog.

Here’s the review:

For a long time, some thought – or assumed – that economic analysis had no role to play in EU State Aid Law. When the Commission launched its State Aid Action Plan in 2005, an ‘old guard’ of lawyers saw the move with scepticism. It was argued at the time that the field was different from Articles 101 and 102 TFEU and that any moves towards a ‘more economic approach’ to Article 107(1) TFEU failed to grasp the fundamental differences between the two sets of provisions.

It was already clear back then that this view did not reflect the reality of EU State Aid Law. There were some aspects of the discipline where the need for economic tools was obvious. For instance, the ‘market economy investor principle’ requires, by definition, the use of a benchmark to compare the behaviour of the public authority with that of a private operator. The Court ruling in Altmark, which explicitly introduced efficiency considerations, is another one clear example. If anything, all that was missing at the time was the systematic application of economic analysis to these issues.

Similarly, the assessment of the compatibility of State aid naturally invited the use of economic analysis. The principle laid down in Philip Morris, whereby compatible aid is no gratuitous advantage and that there must be a quid pro quo between the State and the recipient, can be developed and formalised by having recourse to mainstream concepts. This is in fact a significant part of the effort that the Commission has undertaken in the past decade, which has contributed to clarifying its approach towards the assessment of measures falling within the scope of Article 107(1) TFEU.

Against this background, the book edited by Philipp Werner and Vincent Verouden is a much needed addition to the literature. There have certainly been some efforts in the past few years to blend law and economics in academic work. However, no prior volume comes close to the scale and ambition of the treatise put together by the two editors, both of whom have extensive experience in the field. This volume became a classic as soon as it was published earlier this year. It will feature in the library of all practitioners and some chapters will be compulsory reading for graduate students in EU State aid law.

The book is divided in three parts – which follow a lengthy introduction to the topic by the editors. The first covers the notion of aid, the second one covers the compatibility assessment and the third and final focuses on the application of Article 107 TFEU to specific sectors and activities.

The most obvious virtue of the book is that it deals extensively and in depth with the analysis of EU State aid issues. In many respects, it is deeper and more comprehensive than prior treatises and monographs, which do not address all matters covered in the book equally extensively. This is the case, for instance, of the treatment of public infrastructure investments under Article 107 TFEU (chapter prepared by Penelope Papandropoulos and Elisabetta Righini), which has become particularly prominent. The same is true of the chapter devoted to privatisations (written by Andreas von Bonin and Elisabeth Haringer) and to risk finance (Isabel Taylor and Albert Bravo-Biosca). On the other hand, the editors have been careful to place ‘bigger picture’ chapters that give an overall sense of coherence and that help navigate more specific chapters.

A second virtue of the book is that it deals with some issues that are unlikely to be found in any other treatise or in academic articles. For instance, there is a useful and elegantly presented chapter that examines the ex post evaluation of aid (written by Xavier Boutin and Inkalotta Nuotio-Osazee) and that sets an agenda for further research by academics and public authorities.

Another virtue – and this is perhaps its most apparent selling point – is that it systematically integrates legal and economic analysis. Most chapters are jointly written by a lawyer and an economist. Economic insights are successfully introduced in a way that can be followed and understood by a non-economists. This exercise is not easy. In this regard, the treatise stands up there with O’Donoghue and Padilla’s Law and Economics of Article 102 TFEU.

For instance, the introductory chapter, written by the co-editors of the treatise, introduces some valuable notions that are helpful to make sense of the rationale behind State aid control and of its limited scope of application – why, for instance, it makes sense to capture selective, as opposed to general, measures. Another example of successful blending is the chapter devoted to the notion of advantage (written by Giuseppe Conte and James Kavanagh), in which the so-called market economy investor principle is discussed at length, combining concrete examples from the case law and administrative practice with economic approaches to the evaluation of the question.

This book will meet with immediate success and it is hoped that several editions will follow. In future editions, this reviewer (a lawyer by training) hopes that economic analysis will feature even more prominently than in the present edition. Economic analysis is a very powerful tool to avoid muddled thinking, streamline the analysis and expose the inconsistencies and implications of certain substantive choices. In this sense, it is still much needed in the field. It is anticipated that this treatise will contribute significantly to the clarification of some issues and the definition of meaningful boundaries to action under Article 107 TFEU.

For instance, Michael Honoré wrote a most insightful chapter on selectivity that will be widely cited and influential. At the same time, one cannot avoid the impression that economic analysis could have been used further to test, and make sense of, some concepts found in the case law. The definition of the ‘reference framework’, or the identification of firms that are in a ‘comparable factual and legal situation’ all call for the sort of formal analysis that economic tools can provide and that the EU courts are yet to introduce.

In any event, Philipp Werner, Vincent Verouden and the other authors should be commended for a remarkable achievement which, this reviewer is convinced, will only improve over time.