I. INTRODUCTION
The systemic nature of the crisis that threatened the future of the
world’s financial institutions in the autumn of 2008 posed a major
challenge for competition law enforcers at the Competition Directorate of
the European Commission as well as for many national Competition
Authorities around Europe. Section II of this paper examines the way in
which the European Commission responded to the challenge by adapting
its State aid laws and procedures. Section III examines actions of a
particular Member State, the United Kingdom, in meeting the immediate
threat to its banking sector and some of the challenges that now face the
UK competition authorities in minimising the longer-term effects of those
actions on competition in the UK market. Section IV contains a number of
concluding observations and reflections.
II. EU STATE AID REGIME AND THE FINANCIAL CRISIS
A. An Overview of the EU Regime
Article 87(1) of the EC Treaty prohibits, as incompatible with the
common market, the granting of any economic advantage through State
resources which distorts or threatens to distort competition and affects or
is likely to affect trade between Member States. The EC Treaty does not
provide any definition of State aid. However, the European Commission
(the “Commission”) and the case law of the European Court of Justice (the
“ECJ”) and the Court of First Instance (“CFI”) have interpreted the term
widely to include many different forms of State financial assistance or
economic advantage. Such aid may take the form of guarantees, research
and development subsidies, loans or tax rebates, among others.
