In recent years, Ukraine has made significant progress towards establishing a national system of state aid control that would be in line with the EU acquis. The most important tasks for us now are winning the war and post-war reconstruction. A draft Recovery Plan for Ukraine already exists. It contains, among other things, numerous measures with signs of state aid. How can Ukraine effectively cope with two opposing tasks: to provide effective and rapid support for economic recovery while not violating the established norms on state aid in our country and in the EU? The issue is complicated by the lack of experience of the EU countries in supporting post-war recovery measures of the scale that Ukraine has faced. The AMCU has already asked the European Commission for clarification and is currently developing its own proposals on how to see this process.
State aid: tasks completed and processes in progress
Ukraine has reached the final stretch of its European integration process. The decision of the European Council to grant Ukraine the status of a candidate for accession to the European Union at the summit in Brussels on June 23, 2022 was a landmark event. At the same time, according to the European Commission's analytical report of February 1, 2023, our national legislation on state aid needs to be further harmonized with the EU acquis. In particular, the report emphasizes the need to adopt Draft Law No. 5648 "On Amendments to the Law of Ukraine "On State Aid to Economic Entities" and Other Legislative Acts of Ukraine on Improving Control and Monitoring of State Aid to Economic Entities" as the key to this process. Currently, the Antimonopoly Committee provides support in the relevant Committees of the Verkhovna Rada, provides data, conclusions, proposals and explanations necessary for the MPs' consideration.
Pursuant to part one of Article 267 of the Association Agreement, Ukraine has already established a national system of state aid control. In particular:
The Antimonopoly Committee is working on bringing the existing state aid schemes into compliance with the provisions of Article 262 (with the application of Article 264) of the Agreement. To this end, the necessary recommendations were provided to the Ministry of Strategic Industries of Ukraine, the Ministry of Social Policy of Ukraine, and the Ministry of Youth and Sports of Ukraine.
The Law of Ukraine "On State Aid to Economic Entities" was suspended for the duration of the war and for a year after its end. At the same time, the AMCU continues to develop draft criteria for the Government to assess the compatibility of certain categories of state aid to economic entities and is actively working on generalizing the practice of applying state aid legislation. For example, in 2022, clarifications were adopted in the following areas: heat supply, healthcare, water and maritime transport, local taxation, sports, household waste management, and passenger transportation by road.
Challenges of post-war reconstruction
Currently, the most important tasks for Ukraine are to win the war and overcome the consequences of aggression, including post-war reconstruction. A draft Recovery Plan has already been developed by the National Recovery Council of Ukraine. It envisages a number of measures that have signs of state aid and should be provided in accordance with the requirements of domestic and European legislation.
Thus, Ukraine is currently facing a challenge in terms of the need to fully harmonize its state aid legislation with the EU acquis, on the one hand, and to ensure effective and rapid economic recovery after the war, on the other hand.
The problem is that EU state aid legislation does not contain provisions that would define the conditions for the compatibility of state aid to compensate for the damage caused by the war. After all, it was introduced after the Second World War, and during this time, none of the EU member states has faced the experience of economic recovery after such large-scale destruction.
The EU legislation only regulates aid provided to compensate for losses caused by natural disasters or emergencies. This aid must meet the following conditions:
But, in our opinion, these rules cannot be applied to the post-war reconstruction of Ukraine, as there are risks that a significant number of cases in which it is not possible to establish a direct link between the damage and the hostilities may remain outside the scope of regulation and, therefore, without support. For example, in cases of construction of new, more technologically advanced and innovative industrial or other infrastructure in the destroyed regions, regardless of the destroyed facilities.
What the AMCU proposes
Taking into account the importance and sensitivity of this issue, the AMCU, as the Authorized Body for State Aid, has asked the European Commission to provide clarification on whether the war is an "emergency situation" within the meaning of EU state aid legislation.
At the same time, we believe that in such a situation it would be advisable to establish separate special approaches for such state aid in Ukraine. They would allow for more flexible and loyal approaches to the conditions of eligibility of state aid provided as part of the post-war reconstruction of the country.
For example, special conditions for the compatibility of state aid may be developed to address social and economic problems related to the military aggression of the russian federation, and in the future, conditions for exempting the providers of such state aid from the obligation to report it to the AMCU.
Such conditions of admissibility (and subsequently exemption) could include, in particular, the following:
- the direction of state aid to a clearly defined goal of solving social and economic problems related to the military aggression of the russian federation against Ukraine;
- clear justification by the provider of the need for state intervention;
- proportionality of state aid, i.e. limiting the amount of state aid to the minimum necessary to achieve the stated goal;
- transparency of state aid, in particular, information about it should be publicly available.
The AMCU, within the scope of its powers, is ready to initiate and ensure all necessary actions to facilitate Ukraine's speedy overcoming of the consequences of the war and at the same time to guarantee the fulfillment of the country's international obligations in the field of state aid.
Prepared by the Department for Monitoring and Control of State Aid of the Antimonopoly Committee of Ukraine