2.3.2. The Law on State Aids''

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Under Article 87( 1) EC 'any aid granted by a Member State or through State resources

in any form whatsoever which distorts or threatens to distort competition by favouring

certain undertakings or the production of certain goods shall, in so tar as it affects tradebetween

Member States, be incompatible with the common market'. Regulation of

state aid, like the law of the freedoms, follows a two-tiered model. In principle all state

aids which distort competition and affect trade between the Member States are prohibited.

However, state aids may be justified and escape the prohibition of Article 8 7 ( 1 )

E C . "

The concept of state aid is not defined by the Treaty, but is broadly interpreted by the

Court and Commission."' T h e essential element of state aid in the sense of Article 87

EC 'is the creation of an artificial advantage of whatever nature which costs the State

money'.' This essentially includes any artificial advantage at the State's expense, irrespective

of its objectives or form, which benefits a firm or a group ot firms by increasing

the resources thev would normally obtain or by decreasing the costs, including

taxes, which they would otherwise incur. * To be caught by the prohibition of Article 87

as state aid, a measure must further be specific and not of a general nature.'1