enterprise begins to feel the effects of competition in its regulated industry for the first time. This political impulse must be checked.

## i State Aids and EU Law

The competition provisions of the EC Treaty are founded on the principle that a competitive market, rather than a state-controlled market or one that allows private monopolies, are the best means of securing economic efficiency, in terms of both the allocation of resources and efficient production – to the benefit of businesses and consumers alike. They ensure that all undertakings operating in the EU compete on a level playing field, and that any non-competitive practices by companies or national authorities do not hinder healthy competition. The prime motivating reason for the EU’s competition disciplines are the history of state control and the urgent need to ensure that the “European project” was not thwarted because companies divided up markets and resurrected the borders the Treaty of Rome sought to reduce, using anticompetitive means.

State aids disrupt normal competitive forces, and therefore distort the competitive playing field. Neither the beneficiaries of state aid nor their competitors prosper in the long term. State aid distorts competition if it intervenes in an existing or developing competitive relationship between holdings or sectors of production and if the measure artificially modifies the conditions of competition among competitors.

The EU jurisprudence is useful as it sets out the basis for state aid regulation. Article 87 of the EC Treaty $ ^{14} $ prohibits any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favoring certain firms or the production of certain goods. The aid in question can take a variety of forms as, for instance: state grants; interest relief; tax relief; state guarantee or holding; or the provision by the state of goods and services on preferential terms. The decision as to whether or not aid granted by Member States is compatible with the Common Market can be made only by a supranational and independent authority, such as the European Commission. $ ^{15} $ The Commission's role is to monitor proposed and existing state aid measures by Member States to ensure that they are compatible with EU state aid legislation and do not distort intra-community competition. The Commission has the power to require that aid granted by Member States which is incompatible with the common market be repaid by recipients to the public authorities which granted it. $ ^{16} $ The Member State must recover the aid immediately in accordance with domestic procedures. The Commission has adopted a number of “guidelines” or “frameworks” to clarify its state aid policy in a number of areas: regions lagging behind in terms of development; research and development; employment; protection of the environment; rescue and restructuring of firms in difficulty. The Commission has also adopted a number of “block exemption” regulations for state aid to: small and medium-sized enterprises; aid for training; and aid for employment. Aid granted in conformity with all the conditions set out in these regulations is automatically considered compatible with the common market.