General consideration

 

Romania’s accession to the EU requires, among others, the improvement of its state aid policy in order to make the internal competition environment compatible with the common market.

 

In performing its obligations under the Accession Treaty in the state aid area, Romania has adopted the following main categories of measures:

(i)             alignment of the regulation in the state aid area with the European specific regulation;

(ii)           severe limitation of granting new state aids;

(iii)          assessment of the already granted state aids, irrespective of their having been authorised or not by the Romanian competent authority in the past;

(iv)          alteration of the already authorised state aids for the purpose of their compliance with the EU competition environment;

(v)           pre-consultation of the European Commission before authorising a state aid, through the pre-consultation mechanism.

 

The Competition Council is the Romanian authority in charge with the monitoring and control of the state aids until accession, when those attributions shall be taken over by the European Commission. However, its authority is limited from the post-accession perspective, since the European Commission has considered that the implementation of the state aid legislation has not reached a satisfactory level and it has not recognised the Romanian Competition Council as a state aid monitoring authority.

 

Conformation measures

 

As briefly presented above, Romania has made considerable efforts to conform to the requirements of the Accession Treaty. The recent Monitoring Report of the European Commission, dated 25.10.2005, mentions that Romania has completely aligned its legislation in the state aid sector to the European standards and made progress in the state aid monitoring area.

 

In 2005, the Competition Council has initiated a large number of investigations regarding several state aids granted. For example, in the period March – June 2005, 1,848 enterprises have been checked with respect to state aids for deprived areas. Following the monitoring activity, the Competition Council scheduled a list of the enterprises allowed to benefit of the state aids, in order to avoid the exceeding of the state aid level. The Competition Council has investigated the financial measures granted over the level, assessing the necessity to decide the recovery of state aids. It has also begun to analyse the measures granted to the beneficiaries of utilities. In such case, the provider is bound to notify the state aids exceeding RON 400,000. In the field of regional aids, the principle “less and better targeted” would be applied.

 

In order to make the monitoring process more effective, a pre-consultation mechanism was created in September 2004. The pre-consultation mechanism allows the Competition Council to acknowledge the European Commission’s position regarding a decision it intends to make, by keeping a daily informal contact. However, the comments made by the European Commission within this cooperation-frame may not be qualified as its final position; consequently, a favourable assessment of the European Commission does not definitely eliminate the risk that it subsequently adopt a counter-position regarding the same state aid measure.

 

However, the European Commission assessed that it is necessary to continue such efforts until the implementation of the state aid regulations reaches a satisfactory level. One of the most important “pressures” is related to the capacity of Romanian authorities to apply effective methods for the recovery of illegal state aids.

 

Risks for the state aids beneficiaries

 

Pre-accession risks

 

The unprecedent pro-activity of the Competition Council results in risks for both the beneficiaries of state aids already authorised by the Competition Council, as well as of granted state aids, which have not yet made the object of an investigation by the Competition Council.

 

Following the current intensive monitoring activity, the Competition Council might assess that a granted state aid significantly affects the normal competition environment or the trade between Romania and the EU State Members. In such hypothesis, the Competition Council shall require that the provider of the state aid proceed to eliminate the incompatibility with the common market. For eliminating the identified incompatibility, the Competition Council may require the alteration or even the cancellation of a continuous state aid.

 

The previous inadequate state aid regulation allowed Romanian State to grant state aids without the prior authorisation of the Competition Council. Moreover, there are certain measures which had not been qualified by the issuer as state aids by the time of their granting, but which are potential state aids. Pursuant to the present investigations launched by the Competition Council, it may conclude that those measures are incompatible with a normal competition environment and dispose their recovering.

 

Post-accession risks

 

The authorisation of a state aid by the Competition Council does not represent a guarantee that, following the accession, the European Commission will not initiate an investigation with respect thereof and declare it incompatible with the common market and order its recovery by the Romanian State.

 

After the accession, as a rule, the European Commission shall reassess only those state aids still applicable after the accession. As an exception, in Romania’s case, the European Commission may also reassess any state aid which has been granted between September 1^st, 2004 and the date when the European Commission will consider Romania to have reached a satisfactory level of the state aid policy (a date previous to the accession date).

 

As we already mentioned above, the pre-consultation mechanism is presently applicable, which involves that any decision the Competition Council intends to take is previously submitted to the European Commission for comments. A favourable comment of the European Commission is not binding and, consequently, does not definitely eliminate the aforementioned risk. However, the pre-consultation mechanism might substantially mitigate such risk.

 

Conclusion

 

As also confirmed by the latest European Commission’s report regarding Romania, great progress has been made in adapting the state aid policy to the EU requirements. Part of this progress is due to the intensive activity deployed by the Competition Council to analyse and re-analyse the state aids and to its efforts to make the granted measures compatible with a normal competition environment. Nonetheless, the European Commission considers that Romania still has not reached a satisfactory level in implementing the regulations in this area.

 

The intensification of the Competition Council’s activity involves, on the other hand, risks for the beneficiaries of state aids in the pre-accession period. The accession will bring separate risks for the state aids beneficiaries, taking in consideration the will of the European Commission not to import incompatible state aids in the common market.

 

 

Contributed by Raluca Marian ( raluca.marian@rps.ro ) and Cristina Dinu ( cristina.dinu@rps.ro ), attorneys-at-law, associates with Racoti-Predoiu law firm