Legal framework of functioning of state aid institute in Ukraine in the context of implementing EU-Ukraine association agreement

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Taras Shevchenko National University of Kyiv

Legal framework of functioning of state aid institute in ukraine in the context of implementing eu-ukraine association agreement

Fokina N., second year international law master student, Institute of International Relations

Kyiv, Ukraine

State aid control encourages states to strengthen budgetary discipline and improve the quality of public spending that prevents undue interference by public authorities and local self-government in the functioning of a market mechanism based on competition which improves the efficiency of taxpayers' money and public spending [1].

State aid in the EU acts as one of the mechanisms for achieving the programmatic goals of establishing and functioning of the internal market, enhancing pan-European competitiveness, economic development, creation and preservation of jobs, drawing on EU program documents [2].

Although Ukraine has certain obligations related to state aid under membership in WTO, EFTA, ECT, State aid in a comprehensive manner was introduced under obligations ensuing from the EU-Ukraine Association Agreement [3].

Unlike the WTO and ECT commitments, the EU-Ukraine Association Agreement contains a clear list of steps and timeframes for establishing a national system for monitoring and control of state aid. State aid obligations for Ukraine were directly set forth in the EU- Ukraine Association Agreement, an institution responsible for enforcing state aid was

determined, obligations to adopt national law framework for state aid institute was prescribe^^i* and obligation to adhere to acquis practices was laid down as well.

The scope of state aid rules in Ukraine to be aligned with EU law is comprehensive. The goals and scope of state aid control in EU is very complex and multidisciplinary, and the deadlines for Ukraine to fulfill its obligations under EU-Ukraine in the field of state aid are ambitious.

In Ukraine, the operationally independent authority which is given powers required the full application the EU-Ukraine Agreement in respect to state aid and domestic state aid rules is the Antimonopoly Committee of Ukraine. The powers of the AMCU cover, among other things, the powers to authorize state aid schemes and individual aid grants pursuant the criteria defined in regulatory framework as well as the powers to order the recovery of state aid that has been unlawfully granted [4]. The AMCU has authority to assess the measures and decide whether they fall within state aid measures and whether they are compatible with competition.

Such assessment is conducted not only on the basis of the Law on State Aid, but on the basis of EU Law and acquis. It is essential because the state aid institute is a new legal phenomenon for Ukraine and it has obligations to implement it under EU state aid standards.

These AMCU powers contribute to carrying out by Ukraine of obligations under EU- Ukraine Association Agreement and further developing domestic state aid institute in Ukraine since there is a need to adopt bylaws that would develop the effective and efficient functioning of state aid institute and induce economic growth and development.

In enforcement practice, giving clarifications, considering notifications and conducting investigation and rendering decisions, the AMCU uses domestic legislation of Ukraine on state aid as well as the EU law (primary and secondary legislation, guidelines, recommendations, framework provisions, best practices etc) and acquis.

The ground for application of EU Law is Article 264 of the EU-Ukraine Association Agreement. This is the so-called “bridge” for AMCU to apply EU Law and acquis. It is essential because the state aid institute is a new legal phenomenon for Ukraine and it has obligations to implement it under EU state aid standards. However, the regulatory gap in terms of state aid between EU and Ukraine is significant, therefore such legal ground for application of EU state aid law makes approximation process function in a relevant manner.

By-laws that are relevant to state aid are mostly those adopted by the AMCU pursuant to the Law on State Aid of Ukraine and CMU criteria for assessing the compatibility of state aid. The adoption of relevant and effective criteria for assessment of state aid compatibility is a vital issue as there is general prohibition on granting state aid both in EU-Ukraine Association Agreement and the domestic legislation of Ukraine as to state aid unless other provisions contained in Ukraine's regulatory acts that determine compatibility criteria. Therefore, all the stakeholders related to such economic activity must take effective steps to ensure the adoption and enforcement of the necessary sectoral compatibility criteria.

In two years of state aid institute functioning in Ukraine on domestic level guided by European standards, 3 decisions were taken by the AMCU on incompatibility and recovery of state aid. One of them was challenged in court and ruled in favor of the AMCU. Such practice by the AMCU is ambitious. Therefore, the state aid stakeholders should be encouraged to pre-notify measures to be implemented so that early engagement with the AMCU helped them carry out their policies and for the measure can be adjusted so as not to be ruled incompatible with competition and later recovered. It is more feasible to spend resources on preliminary consultations and adjustments rather than to be forced to challenge AMCU decisions in court. It would be useful to further trace the first recovery proceedings as to state aid in Ukraine and further cases which can be brought before Ukrainian courts regarding state aid.

State aid institute is beneficial for Ukraine as the compliance with state aid norms is on of prerequisites for Ukraine to participate in trade with the EU which, in turn, is advantageous for Ukraine. On the other hand, the obligations undertaken by Ukraine as to state aid are ambitious and deadlines are short, so it is necessary to ensure that formation and functioning of state aid institute are done with due quality. At the same time, it is crucial that Ukrainian background is taken into account and reforms and transformations are implemented in a gradual and well-designed manner so that to ensure progress and mitigate risks. It is vital to provide constructive dialogue between international and domestic stakeholders to avoid misperceptions and build up state aid institute in Ukraine at a pace that will contribute to progress, but, at the same time, will entail risks in different areas.

Therefore, the following steps were identified which should be taken to improve the effectiveness of state aid monitoring and control and enhancing enforcement of state aid rules:

To gradually develop regulatory framework insofar as it is brought into compliance with the requirements of the Association Agreement and the TEU, the acquis of the EU;

To amend the provisions of the Law of Ukraine on the Protection of Economic Competition and to add that the legislation on the protection of economic competition consists of the Law on State Aid and other legal acts adopted thereunder as well, as it will provide for systemic approach to economic competition protection.

To adopt and enforce in an efficient manner of by-laws that will ensure the proper functioning of the system of monitoring and control of state aid, for example, general and sectoral criteria for assessing the eligibility of state aid for competition, criteria for assessing the eligibility of state aid for the protection of the environment;

In developing strategic documents, along with the indication of the need for the development of competition, it is necessary to establish the need to adhere to the rules of state aid;

To improve internal business processes of the AMCU as regards state aid institute;

To ensure proper maintenance of the state aid register and its updating;

To raise awareness as to state aid institute by conducting events to this purpose for grantors of state aid;

To induce state aid grantors to pre-notify measures that may be considered to be state aid so that early engagement with the AMCU would contribute to formulate support measures to either avoid state aid or to make it compatible with competition to avoi ™ cumbersome procedures of case investigation and possible recovery of funds; self government state rule

To encourage major state aid grantors to notify potential state aid measures, as currently mostly notifications are received by the AMCU are from municipally-owned enterprises rather than from central authorities;

To discourage notifications for double-checking purposes when it is prima facie evident that measure is not state aid by working together with stakeholders involved;

To form working groups with stakeholders on state aid issues where needed to ensure dialogue and forming best practices;

To consider the possibility of forming separate structural subdivisions in state authorities and local self-government bodies that are grantors of state aid, where practicable, given the amount, complexity and patterns of potential state aid measures;

13.In order to protect the interests of national undertakings competing with economic operators of EU Member States, it is necessary to use the mechanisms of the state aid institution at the international level.

REFERENCES

1. EU State Aids. / by Leigh Hancher, Tom Ottervanger, Piet Jan Slot. - Sweet & Maxwell, 2012, p. 26.

2. The Politics of European Competition Regulation. / by Hubert Buch-Hansen & Angela Wigger, - Routledge, 2011. - 201 p.

3. Europe 2020 A strategy for smart, sustainable and inclusive growth questions // The European Commission website. - access date 1 November 2019

4. EU-Ukraine Association Agreement [electronic source] // The European Commission website. - access date 6 November 2019

5. Закон України «Про державну допомогу суб'єктам господарювання» // The Verkhovna Rada of Ukraine website.

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