State Aid for a Battery Gigafactory
A Member State notifies a EUR 900 million package for a new battery gigafactory in a region eligible for regional aid. The package consists of a EUR 360 million direct grant (40% of eligible investment costs), a 10-year exemption from corporate income tax worth EUR 300 million, and land transferred below market value worth EUR 240 million. The beneficiary is a non-EU company with plants in three Member States; it says it would otherwise build in a third country. The region has an unemployment rate of 14%, against an EU average of 6%, and is in a just transition territory. The Commission's regional aid guidelines allow up to 30% aid intensity in the region. The Member State argues the aid is necessary for cohesion and the green transition. A competitor complains that the aid will distort the internal market. The Commission must decide within six months.
1. Do the three measures constitute State aid under Article 107(1) TFEU? Which legal basis and notification route apply?
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Article 107(1) requires state resources, an undertaking, a selective advantage, distortion of competition, and effect on intra-EU trade. The direct grant is plainly state aid. The 10-year corporate tax exemption is a selective advantage because it relieves the beneficiary of charges normally borne from its budget; the below-market land transfer is also an advantage measured against market value. The beneficiary is an undertaking carrying on economic activity, and battery production is traded across borders, so trade is affected. The aid is selective because it favours one investor. The legal basis for compatibility is Article 107(3)(c) TFEU, assessed under the regional aid guidelines, not the GBER: the aid exceeds GBER thresholds and the aid intensity is too high. The Member State must notify under Article 108(3) and respect the standstill obligation; the competitor's complaint does not replace notification but may trigger a formal investigation.
2. How should the Commission assess compatibility? Focus on aid intensity, incentive effect, counterfactual and proportionality.
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The Commission must first define the eligible costs and verify the aid intensity. A 40% direct grant exceeds the 30% regional ceiling; the tax exemption and land must be added, so total aid is higher still. Any bonus for a just transition region must be legally available and cannot be invented ad hoc. The Member State must show a credible counterfactual: without the aid, the project would not be located in the region, not merely that it would be less profitable. The third-country alternative is relevant but must be evidenced, not asserted. The aid must have an incentive effect and be proportionate: the minimum necessary, with clawback if the project does not deliver, milestones, and a commitment not to relocate within the EU. The Commission may approve with conditions under Article 107(3)(c) or open the formal investigation procedure if doubts remain. Cohesion and green-transition benefits can justify aid but do not remove the need for proportionality.
3. What are the consequences if the Member State pays the grant before Commission approval, and what can the Commission and competitors do?
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Paying before approval breaches the standstill obligation in Article 108(3) TFEU. The aid is unlawful, not automatically incompatible, but the Commission can order recovery with interest and impose interim measures. The Commission may also require the Member State to suspend the aid and notify. Competitors can complain to the Commission and rely on the standstill obligation before national courts, which must protect their rights and may order recovery or damages. The beneficiary cannot rely on the aid's illegality to avoid recovery; legitimate expectations are generally not protected where the aid was not notified. The Commission's final decision may still approve the aid, but the period of illegality creates legal and financial risk. The Member State should not pay until the Commission has adopted a positive decision or the aid is covered by an exemption.