State aid is a European Commission term which refers to forms of assistance from a public body, or publicly-funded body, given to businesses on a discretionary basis, with the potential to distort competition and affect trade between member states of the European Union.
Because of its oil funds and investments in sectors which other local authorities would not normally be involved in, Shetland Islands Council is unique in being subject to state aid complaints, which are still formally made against the member state in question, i.e. the UK.
State aid has been a thorn in the side of the council with numerous complaints made in recent years.
Although the majority of complaints have been rejected, the SIC decided in November to launch a £250,000 appeal against a state aid ruling which demanded that payments made to those in the fishing industry should be paid back to the council. The SIC is seeking clear guidelines on what investments it can legitimately spend its reserves on.
According to the UK government department DBERR (department for business, enterprise and regulatory reform) there are four key criteria under Article 87(1) of the European Community treaty which need to be considered in order to establish whether a measure constitutes state aid. Where all of the characteristics are met, state aid is involved and state aid rules apply, but where one or more of the criteria appears not to be met then funding is unlikely to constitute state aid.
The de minimis regulation sets a threshold below which Article 87(1) does not apply, and allows grant aid (or grant equivalent in the case of loans) up to a total of 200,000 Euros over a three-year period within sectors including agriculture, fisheries and aquaculture. The four criteria are:
• Is the measure granted by the state or through state resources?
• Does it confer advantage to a certain undertaking or production of certain goods?
• Does it distort, or threaten to distort, competition?
• Is the activity tradable between member states?