Ten years after the introduction of state aid control to the Serbian legal system, Serbia has adopted a new Law on State Aid Control. What are the five things to note about the new legislation?

1) Application of state aid legislation limited to the Serbia-EU context?

When defining the notion of state aid, the new law on state aid control adds the cross-border dimension of the aid as a necessary requirement for something to be considered as state aid. Specifically, the law requires that the benefit which an undertaking receives distorts competition and affects trade between Serbia and the EU. There was no such requirement in the old law.

As a reminder, Serbia and the EU are parties to a Stabilization and Association Agreement (SAA), which was signed in 2008 and entered into force in 2013. Inter alia, the SAA has a state aid provision, which is triggered when there is a potential effect on trade between Serbia and the EU.

Just by looking at the notion of the aid, one could conclude that aid which does not have a Serbia-EU dimension would fall outside the scope of the law. Also, the new law is even stricter than the SAA when it comes to the required effect on trade between Serbia and the EU – potential effect does not seem to be sufficient. It remains to be seen how this will be applied in practice.

2) State aid watchdog gains more independence

One of the main perceived deficiencies of the old law on state aid control is Serbia was a lack of institutional independence of the state aid watchdog – the Commission for State Aid Control. The Commission had five members, all of whom were appointed by the Government upon proposal by various ministries. What is more, the Commission was practically part of the Ministry of Finance.

Whether due to such institutional setup or for some other reason, substantial state aid control in Serbia never really picked up under the old law. For instance, during an entire decade of state aid enforcement in Serbia, the country’s state aid watchdog has not in a single instance found an aid incompatible or ordered that such aid be recovered.

The new law changes the organizational structure of Serbia’s state aid authority – the number of state aid commissioners remains five, but they are no longer appointed by the Government, but by the Parliament, upon proposal of the competent parliamentary committee. At least theoretically, this could give the watchdog more independence in its work.

3) Complainant is not a party to the proceedings

Under the old state aid legislation, an interested party (complainant) was able to turn to the Commission for State Aid Control with a request for an ex post control of an awarded aid. Based on this, the complainant had the status of a party to the proceedings – at least on paper, since there are no published cases where the Commission has indeed initiated such proceedings.

In the new law, a complainant is no longer a party to the proceedings – it can only submit a complaint to the Commission, not a request for initiation of proceedings. It remains to be seen whether this change would bring any change in real life – what matters for complainants is not their status in the proceedings, but whether these proceedings can lead to the recovery of unlawful aid.

4) Parties can offer commitments in state aid investigations

The new law introduces the concept of commitments, which a party to a state aid probe can offer to the Commission which may lead the Commission to stop the probe. This is a well-known institute in other areas of competition law in Serbia (antitrust and merger control) – it remains to be seen how it will function in the context of state aid enforcement.

5) State aid watchdog can perform on-site inspections

Another institute which the new law takes over from Serbia’s antitrust legislation is the state aid’s authority to perform on-site inspections. The Commission could perform such inspections if it would reasonably assume that the examined aid is incompatible despite the grantor’s claim of compatibility, or, as the case may be, if the grantor delivered inaccurate or incomplete data.

In essence, such an inspection appears like a dawn raid, only that the state aid watchdog must announce it to the party at least three days in advance. It remains to be seen whether the Commission will actually use this power in practice.

Key takeaway

When it comes to the text of the new law, it certainly brings an improvement compared to the old state aid legislation in Serbia. It remains to be seen whether this will also lead to an upgrade in enforcement.