Practical Considerations on the Notion of ‘Advantage’ and the Application of Market Economy Operator Test in the Context of Financial Instruments

This article focuses on the notion of ‘advantage’, as an element necessary for a national measure to be qualified as state aid. Behaving like a private economic operator implies that the state remains profitoriented and does not grant an advantage to a recipient undertaking (i.e., no aid). In order to determine that economic transactions carried out by public bodies do not confer an advantage on the recipient, the European courts have developed, as of the mid-1980s, a test which implies the comparison between the state and a private economic operator. This article focuses on a number of key issues arising when applying the ‘market economy operator test’ (MEOT) to Member States’ (MSs’) investments, especially in the area of financial instruments, e.g., equity or quasi-equity investments, loans or guarantees. The recent EU soft law indicates the forms that the MEOT may take and clarifies the state’s role in co-investments in financial instruments, together with private investors. The existing EU case-law may be useful for subtracting some principles to assist practitioners with designing financial products in line with the MEOT and avoid the negative effects of illegal aid recovery. We conclude that more proxies may be provided via soft law by the European Commission for designing financial products under the MEOT, in an effort to increase access to finance to European companies. state aid, MEOT, private investor, financial instruments, risk finance measures