State Aid in Sport
Updated: Jun 17, 2020
Sport represents a phenomenal tool for cultural integration and for the strengthening of communities. States may intervene to ensure that these aspects are protected, by financing local facilities or multifunctional arenas. However, the intervention of the state might create a distortion on the market. When the State finances sporting infrastructures, it provides support to clubs, private associations, and other private companies, thereby favouring them over their competitors.
The rules on State Aid, which are applied within the EU and the European Economic Area, aim to ensure that the intervention of the state does not distort competition to an excessive extent. These rules apply to any measure, regardless of the form it takes, or the body that administers it, through which a Member State selectively grants a private operator a treatment more favourable than what is offered on the market. Under Article 107 TFEU, Member States are therefore prohibited from granting loans, tax reliefs, guarantees that are not in line with market conditions.
A series of exceptions to this rule exist, allowing States to grant subsidies when facing emergencies and to ensure the economic development of some regions. Furthermore, the EU Commission has exempted measures aiming to fund projects that benefit the public at large, such as the construction of multifunctional arenas (Uppsala, Jena, Erfurt, Brussels), capable of hosting different cultural events, or the improvement of facilities and the sport sector to a level that could ensure the participation of citizens in sport. These investments are considered part of the remit of the state in its public role, and they are justified when the need cannot be satisfied by the market, even when they involve professional clubs, such as in France.
However, a different approach is taken with regards to subsidies immediately benefiting professional clubs. In exempting the measures supporting clubs in financial difficulties in the Netherlands, the Commission argued that the State did behave as a private market operator, and the measures were justified as limited to what was their objective and the restriction they created.
This requires a more analytical approach, where the market conditions are considered in the context of the economic assessment of the measures. The Commission attempted to adopt such an approach in the case involving Spanish Clubs, concerning namely the tax scheme granting F.C. Barcelona, Real Madrid C.F., Osasuna and Athletic Bilbao a preferential tax rate, a series of bank guarantees and loans granted to Valencia F.C., Elche and Hercules C.F., and a transfer of land between Real Madrid C.F. and the local municipality. These measures were originally considered as providing unjustified advantage to the recipients, and they were exceeding market conditions. Ultimately, the decisions of the Commission were overturned by the Court of Justice, which held that the Commission failed in its duty to demonstrate that such a thorough economic analysis was undertaken, and that to justify that an unfair advantage was granted to the clubs.
Dr Andrea Cattaneo
Edge Hill University