On 16 July 2018, European Commission has adopted a new Best Practices Code1 (furthermore as "the Code"), being new, more efficient and concise framework for controlling State Aid within the EU2 . The Code provides guidance for all parties - European Commission, Member States and also the end businesses in State Aid procedures, resulting in increased transparency, predictability and most importantly effectiveness.

State Aid in general is a subsidy provided by government and in legal sense more restrictively defined in Article 107 of the TFEU3 :

"Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market."

The article on State Aid originally appeared in the EU statute law after the Treaty of Rome4 , where it was defined as any state intervention that distorted competition law. This definition has been later updated, containing of both the description of an incompatible behavior (as quoted above) and the list of permitted exceptions, which are not considered forbidden state aid (such as aid having a social character or aid to make good the damage caused by natural disasters). 

There have been a long-term efforts to establish a well-functioning State Aid framework, these efforts have started in 2005, by the State Aid action plan - Less and better targeted state aid: a roadmap for state aid reform 2005-20095 , being the first important tool trying to focus on better business climate, innovation, human capital, services of general economic interest, less bureaucracy and shared responsibilities of Member States. This action plan has been on 8 May 2012 partially fulfilled by the State Aid Modernization (SAM) initiative6 , consisting of multiple Communications, Opinions and a Resolution of the European Parliament on SAM7 . The SAM initiative was huge, focusing on many sub-areas such as rescue and restructuring aid, regional aid, research & development, environmental and energy aid, risk finance, general block exemptions and also procedural8 and implementing9 regulations and had a great impact on the current state aid policy. 

The results of SAM initiative were (among others): 

1) adoption of the Notice of the Notion of State Aid (NoA), which clarifies the types of public support that do not involve state aid (for example investments in infrastructure, such as railways, motorways or water distributions systems, which do not compete with similar infrastructures);

2) adoption of the General Block Exemption Regulation (GBER), which is a tool allowing Member States to adopt various State Aid measures without the prior approval from the Commission (under the condition that these measures are unlikely to distort competition). It is clear from the statistics, that over 97 % of the newly implemented State Aid measures can be considered under GBER regime, which obviously speeds up and simplifies the process because such measures can be implemented without the prior approval from the Commission; and

3) a new Procedural State Aid Regulation, which includes rules on market information tools and complaint-handling mechanisms, effectively allowing to target the control of State Aid to those cases where there is the biggest chance for any competition distortion to actually occur. 

The recently issued Code is the next logical step, not coming at large with entirely new principles but summarizing and clarifying what has been deemed useful and being perceived as best practice in past years. 

The Code (among others) includes rules on:

  • contact between the Commission and authorities of Member States;
  • implementation of measures being unlikely to distort competition without formal notification to the Commission;
  • maintaining a network of special country day-to-day contact coordinators to provide immediate support in State Aid issues;
  • use of market information tools for the Commission to directly obtain the relevant information; or
  • evaluation, monitoring of State Aid measures and last but not least on how complaints about State Aid are handled by the Commission.

It is clear, that the Code is complex and has the ambition to cover the whole process and various kinds of State Aid, including both the substantive and procedural part.

As the State Aid framework is ever-evolving, there are already proposals and plans for the future in place, for example the Multiannual Financial Framework 2021-202710, in which the Commission has proposed a revision of the EU State Aid Enabling Regulation in order to better combine EU funding and conditions for Member States to support certain projects under EU structural and investment funds, that is however way beyond the scope of this article.