How EU State Aid Rules Apply to Privatization of Public Enterprises

This paper examines the application of state aid rules to sale of public enterprises. Recent cases confirm the well-established principles that in order to exclude state aid from the sale of a public enterprise i) the selling authority must act as a private vendor who seeks to maximize revenue; and ii) the selling authority must disregard any public policy objective. In addition, recent case law and the Commission’s decisional practice reveal that i) sale through expert valuation, if properly done, can also ensure state aid-free sale; ii) the selling authority may take into account issues other than revenue maximization that would also concern a private vendor such as protecting its public image; iii) conditions which conform with normal business practices and seek to facilitate the sale do not result in the granting of state aid; and iii) debt write-off and restructuring prior to the sale may conform with the behavior of a private vendor if their cost is less than the extra revenue that is generated by the sale