We're living in a strange world now

Jun 9 2009 by Neil Warwick, The Journal

WE live in strange times. Unprecedented political problems, global recession, local football teams relegated from the Premiership. However, you know that times are really strange when people start to find obscure and complicated legal points interesting!

Last week the Global Competition Review held a national conference on “State aid: Increased Challenges in the Global Economy”. State aid is effectively a sub-section of competition law to ensure the concept of free market economies operates as fairly as possible. State aid has been part of the Treaty of Rome since 1957. However, it was not until the 90s that it began to grow apace.

This year the BBC and Channel 4 attended as delegates, trying to gain a better understanding of this area of law because they have recognised its significance to the economy.

One of the most fascinating talks was given by Dr Michael Schutte on the use of Article 87(3)(b) rather than the use of Article 87(3)(c) to assist in the banking crisis. To the average person the mention of Article x, y and z means little, but in fact Schutte’s talk highlighted a huge shift in emphasis by the Member States of the European Union – a genuinely creative way of addressing the global economic crisis. Essentially 87(3)(c) was a little known and little used power to assist in the rescue and restructuring of companies by national governments. This was the power used to allow the UK Government to intervene in Northern Rock. Article 87(3)(b) had only ever been used twice before this economic crisis and is a power to intervene in order to remedy a serious disturbance of the whole economy of a Member State and is now the power that is more widely used.

There is speculation that we will see this legal tool used not just for banks but for other sectors too. This is not to say that the Commission has thrown out the rule book to assist with the economic crisis, but it has dusted off some of its strongest and least used powers to harness the might of the largest free economy in the world. Strange times indeed it would seem.

Neil Warwick is partner and head of the Kudos department at Dickinson Dees LLP.