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This piece focuses on the second aspect of the fourth criterion for a measure to qualify as aid pursuant to Article 107(1) TFEU, namely whether a respective measure has an effect on trade between Member States or rather qualifies as purely local in nature. It will be demonstrated that the Commission’s existing guidance on the effect on trade criterion in its Notion of Aid Notice and its package of recent Commission decisions provide two main criteria which have to be considered when assessing whether or not a measure is local. Therefore, these packages, along with further guidance of the Commission on the effect on trade criterion in its Notion of Aid Notice, do provide a framework for identifying local measures, however, the framework provided does not pursue a ‘safe harbour’ approach like, for example, the Commission’s General Block Exemption Regulation or the De Minimis Regulation. This article provides a critical analysis of the existing legal framework and the Commission’s guidance in this respect, and concludes by suggesting a novel policy approach.  Keywords: Effect on Trade; Competition; Distortion; Notion of Aid.

The ‘Effect on Trade’ Criterion in European Union State Aid Law: A Critical Approach