Government support of business: how and why it works

Historically, the state of Affairs in the sphere of state support can be described in one word — chaos. With the entry into force on 2 August the law on state aid and the process of restoring order in this sphere needs to finally begin.

The law on state aid regulates the granting of state aid and control over its use. Unfortunately, today not everyone is ready for full operation of a new legal concept: not adopted some important regulations, the law is not in compliance with the new law, the portal of state aid at least formally launched, but objectively empty.

At this stage it is too early to say that the Law fully earned: notifications on state aid obtained by the AMC, shall be calculated only in tens, they have a huge number of observations, and the corresponding Department of the AMC is busy, above all, the provision of explanations to the authorities on the application of legislation in the field of state aid.

Despite this, soon the business will feel a greater impact of this new regulation. Since the budget process for 2019 to budget requests involving the provision of state aid, the managers of these budgets will need to provide a copy of the relevant decision of the AMC about the planned state aid.

Often there are situations in which some local governments to attract to your region offer investors certain companies together with communications. Such actions are likely to be declared inadmissible state aid.

The state AIDS also aktualisierte and in the process of privatization: the investor is acquiring from the state a company must be sure that over time the state will not require the company to repay state aid. As the new legislation and its application will affect the scope of state aid and the economy of the country?

If the amount of state aid estimated at about 9% of GDP, in 2022, when the law on state aid will work in full — size of state aid in comparison to GDP will decrease to 2%. In other words, state aid in Ukraine will soon be much less.

Businesses should remember that in August 2017, a new state aid may be granted only after obtaining prior permission of the AMC. As for government assistance, effective on the date of entry into force of the law, then the AMC shall, in the course of the year to conduct its monitoring, and if such state aid will be invalid for the competition, the AMC will provide recommendations for amending the programme of state aid, the introduction of additional procedures of the program execution or the termination of such program. Business risks

If the provided state aid is recognized AMCU is not valid for the competition, the AMC takes a decision on termination of public assistance and return it. In addition, they will have to return not only the appropriate amount, but also on it will be charged interest for the use of (double NBU discount rate for the relevant period). However, this is not the worst: it is not necessary to exclude access for competitors to court with claims for damages.

With regard to the Ukrainian courts, their role, due to a lack of other influential actors (the EU, for example, a huge role in the field of state aid plays a supranational player, the European Commission) in the application of the legislation on state aid is difficult to overestimate. At this stage it is difficult to assess the readiness of the Ukrainian courts to a new type of business, and the practical application of article 264 of the Association Agreement EU-Ukraine, which establishes the obligation to take into account relevant legislation and EU practice in the process of interpretation of the rules on state aid.

In the EU over many years of established practice of application of legislation on state aid in different forms and in many areas. Despite the specificity of the regulation of state aid in the EU and some differences with the Ukrainian regulatory system, the European practice, of course, is a good help in the implementation and running of such an institution in Ukraine. Recommendations to public assistance recipients

For what it’s worth to pay attention to business?

The most conservative and secure way for businesses to ensure that the authority has notified the AMC of any planned state aid scheme before its implementation. Prior to the actual receipt of public assistance to the recipient to check whether the decision of the AMC about the permissibility of such aid on competition.

Despite the fact that the obligation to notify the AMCU of state aid lies with the authority, the business receiving state aid should fully contribute to the preparation of such notices.

To develop a new scheme of state aid is initially subject to the restrictions set forth in the rules of state aid (e.g. state aid equivalent of € 200,000 over 3 years is not subject to notice due to its insignificance).

And, of course, businesses should be sure that he is always aware of them received public assistance. At this stage, many companies simply don’t realize what kinds of public assistance they use and what is the size of such assistance.

If state aid after all procedures approved by the AMC, anyway do not relax, so as to use such assistance should be in strict accordance with its stated purpose. Recommendations to competitors of the recipients of state assistance

One of the basic principles of the new regulation is the prohibition of state aid for competition. Business, is not receiving public assistance, cannot compete with public assistance recipients. Accordingly, the issues of state aid, as a rule, are concerned not only recipients of public assistance, but competitors such recipients. When used properly, the Institute of public care provides an excellent opportunity to establish fair rules of the game in the market.

Competitors are encouraged to take a proactive stance and provide the AMC with all available information on illegal state aid granted to competitors. Also, do not be squeamish and an opportunity to inform the AMC about the misuse by competitors of state aid.