Summary

According to the principle of Article 107 (1) of The Treaty on the Functioning of the European Union, European Union Member States are prohibited from providing undertakings with assistance in any form from state assets, which corresponds to the characteristic of state aid. In certain situations providing aid to an undertaking may be necessary, for example, if a market based on free competition no longer functions or if the failure to provide aid would be accompanied by severe consequences for the economic development of the region. For this reason exceptions are prescribed in Article 107 (3) of the Treaty on the Functioning of the European Union, which grant the European Commission the competence to approve state aid meeting certain criteria.

The efficient functioning of the common market to a significant extent depends on whether the state aid provided by Member States and approved by the Commission excessively distorts the competition between undertakings. Aid that excessively distorts the market is considered to be support for undertakings that have encountered economic difficulties, which has been committed by Estonia in its provision of aid to the national air carrier Estonian Air. The goal of this article is to determine the legal framework for providing aid to undertakings experiencing difficulties. The article analyses whether the existing regulatory framework for evaluating state aid allows for avoiding market distortions, the accompanying damage of which is disproportionately large for the common market in comparison to the societal benefit of state aid.