January 2018
Changes to State aid rules and practices are frequent and swift and continuously affect the legal situation of regulatory authorities and businesses. In this edition of Insight, we will highlight what you particularly need to look out for, and we will provide recommendations for the handling of State aid challenges. Finally, we will give you an overview of the vast body of rules governing the area.

Many businesses and regulatory authorities handle matters and processes that are subject to the State aid rules. It is therefore important to recognise situations that might pose State aid issues, which is not always easy if you do not know the rules intimately. 


In Denmark, there are two sets of State aid rules:


  1. The Danish Competition Act, Part 3a, Sections 11a-c (the “Danish Rules”).
  2. The Treaty on the Functioning of the European Union (TFEU), Articles 107-109 (the “EU Rules”).

The EU Rules have also spawned a host of regulations and ‘soft-law’ instruments governing the area. State aid regulation is highly sector-specific: What goes in one sector will not necessarily go in another. 

Sectors with specific State aid regulation include:


  • Financial services
  • Agriculture
  • Broadband
  • Public service broadcasting (radio and television)
  • The coal industry
  • Electricity
  • Fisheries and aquaculture
  • Postal services
  • Shipbuilding
  • Steel
  • Motor vehicles
  • Transportation (air, sea, rail, road)

Some sectors will also have explicit exemptions from State aid rules. The exemptions have priority over the general State aid rules. There are also one or two general exceptions, which we will explain at the end of this Insight.

In terms of deciding if the Danish or the EU Rules apply, what matters is whether the aid can be said to affect trade between EU Member States. When will this be the case? Well, case law adopts a rather broad interpretation of the concept. It generally takes very little for measures to be considered to affect trade, thus falling under the EU Rules. In the vast majority of cases, therefore, the EU Rules will apply.

EU Rules 

Under EU Rules, aid measures must be notified and approved before they can be lawfully adopted and granted. There are exceptions to the rule, however. These will be described later. Where the EU Rules apply, therefore, the general starting point is that there can be no aid except with the prior approval of the European Commission. The authority granting the aid is responsible for reporting it and obtaining approval. The EU Rules are enforced by the European Commission.

Once an aid measure is notified, the Commission will consider it to see if it is compatible with the internal market. The assessment of compatibility is crucial, as it will decide whether the aid is compatible and thus allowed or if it is incompatible and therefore prohibited.

Approval is usually given on a case-by-case basis, but measures may also be authorised as an overall aid scheme. In such case, the approval will list a set of criteria which future, concrete grants of aid under scheme must meet in order to be considered lawful.

The notification procedure is usually initiated by a so-called ‘pre-notification phase’ (typically lasting up to two months). After the notification is filed, there will be a preliminary examination phase (also typically lasting up to two months). If the European Commission then decides to open a formal investigation procedure, that phase may generally last up to 18 months, but has been known on occasion to extend even longer than that. The time periods are indicative, and if complaints are filed, the procedure may take even longer to conclude.

If an authority grants aid without reporting it to the Commission and obtaining approval, the aid will be illegal State aid. Note the difference here between illegal State aid (where aid is granted without the requisite notification and approval) and incompatible State aid (where notified aid is found to be incompatible with the market and thus cannot be authorised). These two terms, although by no means the same, are often confused and used interchangeably.

Timeline of typical process under the EU Rules 

Danish Rules

Unlike the EU Rules, the Danish Rules do not require prior approval of aid. The Danish Competition and Consumer Authority may, however, subsequently order the discontinuation of an aid measure, possibly requesting repayment. The body enforcing the Danish Rules is the Danish Competition and Consumer Authority.

Since the EU Rules apply to the majority of all aid measures, the Danish Rules have a very limited scope of application. In matters governed by the Danish Rules, it is possible to file a voluntary notification, requesting from the Authority a so-called ‘declaration of non-intervention’. The issuing of such a declaration would be proof that a particular measure is not deemed to have an anti-competitive purpose or effect and that therefore no order will be issued against it. To avoid the risk of an order being issued, therefore, the authority may want to request such a declaration before the aid is granted.



… a granting authority

Early assessment and compliance with State aid rules
It is important to sort out early on in the political grant process if an aid measure qualifies as State aid, and subsequently if there is a duty of notification. Once these questions are answered, it is important also to do a compatibility assessment so as to avoid, for example, prematurely confirming the grant in public.

A practical example could be to see if the terms of making publicly-owned premises available or guaranteeing a loan are better than the recipient would be able to achieve in a functioning market. If yes, the measure may constitute State aid. It might also be relevant to examine if the measure could adversely affect some of the recipient’s competitors or serve to restrict competition generally.

The Danish Ministry of Economic and Business Affairs has published a State aid Handbook (in Danish), offering useful guidance on managing the many processes and assessments involved in grants of State aid. Importantly, the granting authority is responsible for notifying the aid measure. To do so requires a certain degree of insight into the Commission’s notification system.

Municipalities and regions may have a conflict of interest in relation to the State 
Under the Danish Rules, any claim for repayment accrues to the State, so it is important to keep in mind, as a municipal or regional granting authority, that you will have to some extent a conflict of interest in relation to the State if an order to repay an aid measure is made.

A relatively recent addition, the rule that repayment must be made to the State is intended to avoid the granting of municipal and regional aid without a proper compatibility assessment and in non-compliance with State aid rules. Thus, the legislature was motivated by a desire to create an economic incentive for all granting authorities to be compliant. 

The express and implied authority for municipal activities
The Danish Competition and Consumer Authority cannot order the discontinuation of aid which is covered by the Danish Rules and which is considered lawful under the express and implied authority for municipal activities. In practice, therefore, municipalities and regions will often advise the State Administration about contemplated aid measures, requesting a statement on the lawfulness and compatibility of such measures, including - if the granting authority is a municipality - in relation to the express and implied authority for municipal authorities.

The situation may be different if the EU Rules apply, though.

... a recipient

Risk of repayment
For the recipient, a demand for repayment of State aid may be very burdensome. Not least in situations where aid was granted indirectly (e.g. by making premises available), since in such instances there would be a substantial strain on liquidity and no direct cash grant from which to ‘cover’ the repayment. In the worst of cases, a claim for repayment, with interest and compound interest, could prove fatal to an undertaking. 

Therefore, it is very much in the interest of recipients to make sure that any offer of grants complies with the State aid rules. This may be achieved both by consulting and checking with the granting authority and by undertaking an independent legal and financial assessment of the circumstances in the same way as every granting authority ought to do.

While the new rules on repayment do to some extent reduce the risk of the recipient being held responsible, there remains a genuine risk, which ought to be duly clarified.

In many instances, potential recipients may want to consider the prospect of publicity before accepting or applying for aid. While there is, of course, nothing wrong with receiving legal and compatible aid, media coverage may take unexpected turns, and the best approach will often be to take steps to handle the situation as early on as possible. It is a different story, of course, if complaints are made or, worse still, a claim for repayment is made. But also in such cases, it is important to adopt a well-considered approach to managing public attention, not least the press.

Early and political handling
Beneficiaries will often be wise to try to influence the political process early on, the better to tailor-make the aid and mitigate the risk of complaints.

... a complainant

Investigations before filing your complaint
Typically, an enterprise will consider filing a complaint if it is - or expects to be - adversely affected by aid granted to another enterprise. Before filing, it is recommendable to consider how to best document the complaint, by means of, for example, an analysis of the concrete, financial impact and a legal assessment of the circumstances and the overall basis underlying the complaint.

In practical terms, the financial analysis could focus on demonstrating the way in which the aid measure would adversely affect the complainant’s business (and the business of others, if relevant), restricting competition and leading to, for example, a reduced product range, increased prices, slower product development, and fewer businesses on the market, all of which may adversely affect consumers. 

Early and political handling
Often, a complainant will do well to handle a State aid issue as early on as possible. By influencing the political process in the early stages, uncertainties about the lawfulness and compatibility of a measure can be dealt with and potentially anti-competitive effects avoided.


… granting authorities


  1. Consider if existing schemes may be comprised by State aid regulations.
  2. Check to see if aid can be granted under the exemptions.
  3. Be mindful that any claim for repayment of aid granted might accrue to the State rather than the granting authority.

... recipients


  1. Do an independent investigation to ascertain whether an aid measure is comprised by the State aid rules, and consider engaging in a dialogue with the granting authority about the best way to design the aid.
  2. Note that you may face a claim for repayment. You may have to complete a project even if the aid is withdrawn.
  3. Think about your media handling should you receive unfavourable publicity.

... complainants


  1. Consider if you want to contact one or more authorities about the measure.
  2. Make sure you have comprehensive documentation for the effect of the measure on your business and others’, including economically, and consider requesting access to documents.
  3. Be mindful that a complaints procedure may be a protracted affair.



Rules and practice on State aid issues are developing fast, and keeping track of the current state of affairs can be a challenge. We offer regular newsletters on State aid issues, describing new rules, case law, trends, etc., of particular relevance to a Danish or Danish-oriented audience. The newsletter is released in Danish and English versions. Click here to subscribe: www.kromannreumert.com/Tilmeld.


Kromann Reumert employs some of the leading legal specialists on State aid in the country. We have extensive experience representing both granting authorities, recipients, and complainants from a range of different sectors. We are also experienced in the political sphere and in handling the PR-related aspects of a given case. If you have any questions in relation to the issues dealt with in this issue of Insight or in relation to a particular aid scheme, we are always available for a talk – please contact partner Bart A. Creve, Attorney Sonny Gaarslev, or Attorney and PhD Michael Herbing.




State aid – what to be aware of

Changes to State aid rules and practices are frequent and swift and continuously affect the legal situation of regulatory authorities and businesses. In this edition of Insight, we will highlight what you particularly need to look out for, and we will provide recommendations for the handling of State aid challenges. Finally, we will give you an overview of the vast body of rules governing the area.