The New Serbian Act On State Aid Control: An Overhaul Of The Current System

The new Serbian Act on State Aid Control ("SAA")1 has entered into force. Its implementation, apart from the provisions on organisation of the Commission on State Aid Control ("Commission"), will begin on 1 January 2020.

The SAA significantly modifies the existing system and aims to (i) harmonise the applicable legal framework with the EU acquis, and (ii) align the specifics of the state aid control procedure with the recently adopted General Administrative Procedure Act. Its proponents, i.e. the Serbian government, also hope that the SAA will resolve ambiguities in the practical application of the "old" SAA and that the new SAA will help push forward the EU accession process and the opening of Negotiation Chapter 8 - competition policy.

What will new SAA bring to the private sector?

Serbian entities, including private entities as potential aid beneficiaries and their competitors, have so far not focused on compliance with the state aid rules. Most likely, this was simply due to lack of awareness about the system and its relatively lenient enforcement. This is expected to change with the adoption of the SAA, primarily because of the Commission's operational independence from the Government. This new setup should increase the awareness of all market players and, in turn, heighten enforcement of the SAA.

For the private sector, the overhauled state aid setup above all means particular caution in each transaction with state bodies (including other entities managing or disposing with public funds) should be exercised. Such transactions should be carefully assessed for (i) any signs of potential state aid measures; and (ii) if these are detected, their compatibility with SAA. The risk of failing to do a proper assessment is now significant, as the Commission can oblige the state aid grantor to undertake measures to recover from the beneficiary any incompatible aid within 10 years from the date on which such aid was granted.

Key novelties

Unsurprisingly, the SAA largely mirrors the pertinent EU legal framework and contains several important novelties:

A comprehensive definition of state aid, including exemptions and de minimis aid; The codification of the so-called "Altmark criteria" concerning compensation measures for services of general economic interest ("SGEI") and the introduction of the "private investor" test; Overhauled position of the Commission, i.e. above all its operative independence; Detailed regulation of proceedings before the...